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EXHIBIT 1.1
2,500,000 Shares
MALLON RESOURCES CORPORATION
(a Colorado corporation)
Common Stock
(Par Value $.01 Per Share)
UNDERWRITING AGREEMENT
September __, 2000
MCDONALD INVESTMENTS INC.
as Representative of the Several Underwriters
c/o McDonald Investments Inc.
2100 McDonald Investment Center
Cleveland, Ohio 44114
Ladies and Gentlemen:
Mallon Resources Corporation, a Colorado corporation (the
"Company") confirms its agreement with McDonald Investments Inc. ("McDonald")
and each of the other underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom McDonald is acting as
representative (in such capacity, McDonald shall hereinafter be referred to as
the "Representative"), with respect to the sale by the Company of an aggregate
2,500,000 shares of common stock, par value $.01 per share of the Company (the
"Common Stock"), and the purchase by the Underwriters, acting severally and not
jointly, of the respective numbers of shares of Common Stock set forth in said
Schedule A, aggregating 2,500,000 shares of Common Stock, and with respect to
the grant by the Company of the option described in Section 2(b) hereof to
purchase all or any part of 375,000 shares of Common Stock, par value $.01 per
share, solely to cover over-allotments, in each case except as may otherwise be
provided in the Pricing Agreement, as hereinafter defined. The aforesaid
2,500,000 shares of Common Stock (the "Initial Securities") to be purchased by
the Underwriters and all or any part of the 375,000 shares of Common Stock
subject to the option described in Section 2(b) hereof (the "Option Securities")
are collectively hereinafter called the "Securities."
Prior to the purchase and public offering of the Securities by
the Underwriters, the Representative, acting on behalf of the several
Underwriters, shall enter into an agreement substantially in the form of Exhibit
A hereto (the "Pricing Agreement"). The Pricing Agreement may take the form of
an exchange of any standard form of written telecommunication between the
Company and the Representative and shall specify such applicable information as
is indicated in Exhibit A hereto. The offering of the Securities will be
governed by this Underwriting Agreement (this "Agreement"), as supplemented by
the Pricing Agreement. From and after the date of the execution and delivery of
the Pricing Agreement, this Agreement shall be deemed to incorporate the Pricing
Agreement.
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-2 (No.
333-_____) and a related preliminary prospectus for the registration of the
Securities under the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder (collectively, the "1933 Act"), and has
filed such amendments thereto, if any, and such amended preliminary prospectuses
as may have been required to the date hereof. Such registration statement (as
amended, if applicable) and the prospectus constituting a part thereof, as from
time to time amended or supplemented pursuant to the 1933 Act or otherwise, are
hereinafter referred to as the "Registration Statement" and the "Prospectus,"
respectively, except that if any revised prospectus shall be provided to the
Underwriters by the Company in connection with the offering of the
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Securities which differs from the Prospectus on file at the Commission at the
time the Registration Statement becomes effective (whether or not such revised
prospectus is required to be filed by the Company pursuant to Rule 424(b) of the
1933 Act), the term "Prospectus" shall refer to such revised Prospectus from and
after the time it is first provided to the Underwriters for such use. Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act is
hereinafter referred to as the "462(b) Registration Statement," and after such
filing the term Registration Statement shall include the 462(b) Registration
Statement. Any reference herein to the Prospectus shall be deemed to refer to
and include the documents incorporated by reference therein pursuant to Form S-2
of the 1933 Act (the "Incorporated Documents") as of the date of such
Prospectus.
The Company understands that the Underwriters propose to make
a public offering of the Securities as soon as the Representative deem advisable
after the Registration Statement and any 462(b) Registration Statement become
effective and the Pricing Agreement has been executed and delivered.
SECTION 1. Representations and Warranties of the Company. (a)
The Company represents and warrants to each Underwriter as of the date hereof
and as of the date of the Pricing Agreement (such latter date being hereinafter
referred to as the "Representation Date") as follows:
(i) At the time the Registration Statement and any
462(b) Registration Statement become effective and at the
Representation Date, the Registration Statement and the 462(b)
Registration Statement will comply in all material respects with the
requirements of the 1933 Act, and the Registration Statement and the
462(b) Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus, at the Representation Date (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 Securities
which differs from the Prospectus on file at the Commission at the time
the Registration Statement becomes effective, in which case at the time
it is first provided to the Underwriters for such use) and at the
Closing Time referred to in Section 2, will not include an untrue
statement of a material fact or omit to state a material fact necessary
in order 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 subsection
shall not apply to statements in or omissions from the Registration
Statement, the 462(b) Registration Statement or Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by any Underwriter through the Representative
expressly for use in the Registration Statement or Prospectus.
(ii) The accountants who certified the financial
statements and supporting schedules included in the Registration
Statement and Prospectus are independent public accountants as required
by the 1933 Act.
(iii) The financial statements included or
incorporated by reference in the Registration Statement and the
Prospectus comply in all material respects with the 1933 Act and
present fairly the financial position of the Company as of the dates
indicated and the results of their operations for the periods
specified. Except as otherwise stated in the Registration Statement and
Prospectus, said financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis and the supporting schedules in the Registration Statement and
Prospectus present fairly the information required to be stated
therein.
(iv) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
except as otherwise stated therein, (A) there has been no material
adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries, taken as a whole, whether or not arising in the ordinary
course of business, (B) there have been no transactions entered into by
the Company or its subsidiaries, other than those in the ordinary
course of business, which are material with respect to the Company or
its subsidiaries, (C) there has been no change in the capital stock, or
material increase in the short-term debt or long-term debt of the
Company or its subsidiaries, and (D) there has been no dividend or
distribution of any kind declared, paid or made by the Company or its
subsidiaries on any class of its capital stock.
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(v) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
Colorado with corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the
Registration Statement and Prospectus; and, except as otherwise set
forth in the Registration Statement and the Prospectus, the Company is
duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure to so qualify would
not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of
the Company and its subsidiaries, taken as a whole, (a "Material
Adverse Effect"). Except as disclosed in the Prospectus, the Company
has no obligation to acquire any debt or equity securities of any
corporation, partnership, limited liability company, joint venture or
other business enterprise.
(vi) Each of the Company's subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement
and Prospectus; and, except as otherwise set forth in the Registration
Statement and the Prospectus, each of the Company's subsidiaries is
duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure to so qualify would
not have a Material Adverse Effect. Except as described in the
Prospectus, all of the issued and outstanding shares of capital stock
of the Company's subsidiaries have been duly and validly authorized and
issued, are fully paid and non-assessable, and are owned by the
Company, free and clear of any security interest, claim, lien
encumbrance or adverse interest of any nature. Except as described in
the Prospectus, there are no outstanding subscriptions, rights,
warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock of any of the Company's
subsidiaries.
(vii) The Company has the authorized, issued and
outstanding capitalization set forth in the Prospectus; the shares of
issued and outstanding capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable;
the shares of Common Stock to be issued and sold by the Company have
been duly authorized for issuance and sale to the Underwriters pursuant
to this Agreement and, when issued and delivered by the Company in the
manner contemplated by this Agreement, will be validly issued and fully
paid and non-assessable; the issuance of shares of Common Stock
contemplated by this Agreement is not subject to preemptive or other
similar rights; the Common Stock conforms in all material respects to
all statements relating thereto contained in the Prospectus; the
certificates for the Securities are in due and proper form; and the
holders of the Securities will not be subject to personal liability by
reason of being such holders.
(viii) This Agreement has been duly authorized,
executed and delivered by the Company.
(ix) Neither the Company nor any of its subsidiaries
is in violation of its charter or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, loan agreement or note or in any
material contract, lease or other instrument to which it is a party or
by which it or any of them may be bound, or to which any of the
property or assets of the Company or any of its subsidiaries may be
bound, except for such defaults that would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect;
the consummation of the transactions contemplated herein and by the
Pricing Agreement has been duly authorized by the Company by all
necessary corporate action and the issuance, sale and delivery of the
shares of Common Stock to be issued and sold by the Company and the
execution, delivery and performance of this Agreement by the Company
will not conflict with or constitute a breach of, or default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries
pursuant to any contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound, or
to which any of the property or assets
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of the Company or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the charter or
by-laws of the Company or any of its subsidiaries or any applicable
law, administrative regulation or administrative or court decree,
except in each case, for such conflicts, defaults or violations that
would not, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(x) No labor dispute with the employees of the
Company or any of its subsidiaries exists or, to the knowledge of the
Company, is imminent; and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its principal
suppliers or distributors which might reasonably be expected to result
in any Material Adverse Effect.
(xi) There is no action, suit or proceeding before or
by any court or governmental agency or body, domestic or foreign, now
pending or, to the knowledge of the Company, threatened, against or
affecting the Company or any of its subsidiaries, which is required to
be disclosed in the Registration Statement and Prospectus (other than
as disclosed therein), or which, considered singly or in the aggregate,
may reasonably be expected to result in any material adverse change in
the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company or any of its
subsidiaries, taken as a whole, or which may reasonably be expected to
materially and adversely affect the properties or assets thereof or
which may materially or adversely affect the consummation of this
Agreement or the Pricing Agreement; all pending legal or governmental
proceedings to which the Company or any of its subsidiaries is a party
or of which any of their respective property or assets is the subject
which are not described in the Registration Statement and Prospectus,
including ordinary routine litigation incidental to the business, are,
considered in the aggregate, not material; and there are no contracts
or documents of the Company or any of its subsidiaries which are
required to be filed as exhibits to the Registration Statement by the
1933 Act which have not been so filed.
(xii) The Company and each of its subsidiaries own or
possess, or can acquire on reasonable terms, the patents, patent
rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks and trade names (collectively, "intellectual property") presently
employed by them in connection with the business now operated by them,
except where the failure to own or possess or have the ability to
acquire any such intellectual property would not reasonably be expected
to have a Material Adverse Effect. The Company and its subsidiaries,
taken as a whole, has not received any notice of infringement of or
conflict with asserted rights of others with respect to any of the
foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would reasonably be expected
to result in any Material Adverse Effect.
(xiii) No authorization, approval or consent of any
court or governmental authority or agency is necessary in connection
with the sale of the Securities hereunder, except such as may be
required under the 1933 Act, which qualification has been obtained, or
state and foreign securities laws.
(xiv) Except as otherwise set forth in the
Registration Statement and the Prospectus, the Company and each of its
subsidiaries possess such material certificates, authorizations or
permits issued by the appropriate state, federal or foreign regulatory
agencies or bodies necessary to conduct the business now operated by
them, and, except as set forth in the Registration Statement and the
Prospectus, neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would reasonably be expected to have a Material
Adverse Effect.
(xv) All United States federal income tax returns of
the Company required by law to be filed have been filed and all taxes
shown by the said returns or otherwise assessed which are due and
payable have been paid, except assessments against which appeals have
been or will be promptly taken. The United States federal income tax
returns of the Company through the fiscal year ended December 31, 1998
have been filed and, to the best of the Company's knowledge, no
assessment in connection therewith has been made against the Company,
and the United States federal income tax return for the fiscal year
ended December 31, 1999 will be filed on or before the date on which
such return is required by law to be filed or pursuant to any
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extension or extensions that may be granted thereon. The Company has
filed all other tax returns which are required to have been filed by it
pursuant to applicable state, local or other law except (i) with
respect to such taxes as are being contested in good faith and (ii)
insofar as the failure to file such returns individually and in the
aggregate would not reasonably be expected to have a Material Adverse
Effect, and have paid all taxes due pursuant to said returns or
pursuant to any assessment received by the Company, if any, as are
being contested in good faith and as to which adequate reserves have
been provided. The charges, accruals and reserves on the books of the
Company in respect of any income and corporation tax liability for any
years not finally determined are adequate to meet any assessments or
re-assessments for additional income tax for any years not finally
determined, except to the extent of any inadequacy which would not have
a Material Adverse Effect.
(xvi) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that
(A) transactions are executed in accordance with management's general
or specific authorization, (B) transactions are recorded as necessary
to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability
for assets, (C) access to assets is permitted only in accordance with
management's general or specific authorization, and (D) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(xvii) There are no holders of securities (debt or
equity) of the Company, or holders of rights, options or warrants to
obtain securities of the Company, who, by reason of the filing of the
Registration Statement under the 1933 Act, have the right to request
the Company to register the 1933 Act securities held by them; and the
Company complied in all material respects with all of the terms of any
of their outstanding agreements relating to the rights of any holder of
securities to have securities registered under the Registration
Statement. Except as described in the Prospectus, there are no
outstanding options, warrants or other rights calling for the issuance
of, and there are no commitments, plans or arrangements to issue, any
shares of Common Stock or any security convertible into or exchangeable
or exercisable for any shares of Common Stock.
(xviii) The Company and each of its subsidiaries have
good title to all properties owned by them, in each case free and clear
of all liens, encumbrances and defects except (A) as do not materially
interfere with the use made and proposed to be made of such properties,
(B) as referred to in the Registration Statement (including the notes
to the financial statements included therein) or (C) as could not
reasonably be expected to have a Material Adverse Effect.
(xix) Except as described in the Prospectus, as of
the date hereof, each of the Company and its subsidiaries has (A)
generally satisfactory or good and indefeasible title to all its
interests in its oil and gas properties, title investigations having
been carried out by or on behalf of such person in accordance with good
practice in the oil and gas industry in the areas in which the Company
and its subsidiaries operate and (B) good and indefeasible title to all
other real property and good and marketable title to all other material
properties and assets described in the Prospectus as owned by the
Company or such subsidiary and valid, subsisting and enforceable leases
for all of the properties and assets, real or personal, described in
the Prospectus as leased by them, in each case free and clear of any
security interests, mortgages, pledges, liens, encumbrances or charges
of any kind, other than those described in the Prospectus and those
that could not, individually or in the aggregate, have a Material
Adverse Effect.
(xx) Except as described in the Prospectus, as of the
date hereof, (A) all royalties, rentals, deposits and other amounts due
on the oil and gas properties of the Company and each of its
subsidiaries have been properly and timely paid, and no proceeds from
the sale or production attributable to the oil and gas properties of
the Company and its subsidiaries are currently being held in suspense
by any purchaser thereof, except where such amounts due could not,
singly or in the aggregate, have a Material Adverse Effect and (B)
there are no claims under take-or-pay contracts pursuant to which
natural gas purchasers have any make-up rights affecting the interest
of the Company or its subsidiaries in its oil and gas properties,
except where such claims could not, singly or in the aggregate, have a
Material Adverse Effect.
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(xxi) As of the date hereof, the aggregate
undiscounted monetary liability of the Company and its subsidiaries for
petroleum taken or received under any operating or gas balancing and
storage agreement relating to its oil and gas properties that permits
any person to receive cash or other payments to balance any
disproportionate allocation of petroleum could not, singly or in the
aggregate, have a Material Adverse Effect.
(xxii) Except as disclosed in the Registration
Statement and Prospectus, the Company and each of its subsidiaries are
in material compliance with all applicable existing federal, state and
local laws and regulations (including any laws or regulations relating
to Hazardous Material ("Environmental Laws")), except where such
noncompliance, singly or in the aggregate, would not have a material
and adverse effect on the condition, financial or otherwise, or the
earnings or business affairs of the Company and its subsidiaries, taken
as a whole. The term "Hazardous Material" means (A) any "hazardous
substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (B) any "hazardous
waste" as defined by the Resource Conservation and Recovery Act, as
amended, (C) any petroleum or petroleum product, (D) any
polychlorinated biphenyl and (E) any pollutant or contaminant or
hazardous, dangerous or toxic chemical, material, waste or substance
regulated under or within the meaning of any other Environmental Law.
(xxiii) There is no alleged liability, or to the best
knowledge and information of the Company, potential liability
(including, without limitation, alleged or potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or
penalties) of the Company or its subsidiaries arising out of, based on
or resulting from (A) the presence or release into the environment of
any Hazardous Material at any location at which the Company or any of
its subsidiaries has previously conducted or is currently conducting
any business (whether or not owned by the Company) or has previously
owned or currently owns any property, or (B) any violation or alleged
violation of any Environmental Law, (X) which alleged or potential
liability is required to be disclosed in the Registration Statement and
Prospectus, other than as disclosed therein, or (Y) which alleged or
potential liability, singly or in the aggregate, would have a Material
Adverse Effect.
(xxiv) In the ordinary course of its business, the
Company conducts a periodic review of the effect of Environmental Laws
on the business, operations and properties of the Company and its
subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws of any permit, license
or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such review,
the Company has reasonably concluded that such associated costs and
liabilities would not, singly or in the aggregate, have a Material
Adverse Effect.
(xxv) Reed W. Ferrill & Associates, Inc., whose
report appears in the Prospectus, was, as of the date of such report,
and is, as of the date hereof, an independent petroleum engineer with
respect to the Company.
(xxvi) The Company is not, and after giving effect to
the offering and sale of the Common Stock, will not be an "investment
company" or an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended.
(xxvii) The Company maintains reasonably adequate
insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by corporations of
established reputation engaged in the same or similar businesses and
similarly situated, of such types and in such amounts as are
customarily carried under similar circumstances by such other
corporations.
(xxviii) The shares of Common Stock to be issued and
sold by the Company pursuant to the Agreement will at the Closing Time
be duly authorized for listing on the Nasdaq National Market System
("Nasdaq"), subject only to official notice of issuance.
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(xxvix) The Company has furnished the Representative
letters from each of the executive officers and directors of the
Company and from Aquila Energy Capital Corporation, a shareholder of
the Company, pursuant to which such persons have agreed during a period
of 90 days from the date hereof that, without the prior written consent
of the Representative, such persons will not sell, offer to sell,
contract to sell, or otherwise dispose of, directly or indirectly, any
shares of Common Stock, any other equity security of the Company, or
any security convertible into or exchangeable or exercisable for shares
of Common Stock, beneficially owned by such person or with respect to
which such person has the power of disposition, other than as bona fide
gifts.
(xxx) The Commission has not issued any order
preventing or suspending the use of any preliminary prospectus, and
each preliminary prospectus complied in all material respects when so
filed with the requirements of the 1933 Act (except to the extent that,
in conformity with the 1933 Act, such preliminary prospectus is subject
to completion).
(xxxi) There is no contract or other document of a
character required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement
which is not described or filed as required.
(xxxii) All offers and sales of the Company's capital
stock prior to the date hereof were at all relevant times exempt from
the registration requirements of the 1933 Act and were duly registered
with, or the subject of an available exemption from, the registration
requirements of the applicable state securities or Blue Sky laws.
(xxxiii) The Company has not taken and will not take,
directly or indirectly, any action designed to cause or result in, or
that has constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company.
(xxxiv) Except as disclosed in the Registration
Statement and the Prospectus, no transaction has occurred between or
among the Company, on the one hand, and any of its officers or
directors or any affiliate or affiliates of any such officer or
director, on the other hand, that is required to be so disclosed,
including, but not limited to, any outstanding loans, advances or
guaranties of indebtedness by the Company to or for the benefit of any
affiliates of the Company, or any of the officers or directors of the
Company, or any family member of any of them.
(xxxv) The Company has not, directly or indirectly,
at any time (A) made any contributions to any candidate for foreign
political office, or if made, failed to disclose fully any such
contribution made in violation of law, or (B) made any payment to any
state, federal or foreign governmental officer or official, or other
person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The
company's internal accounting controls and procedures are sufficient to
cause the Company to comply in all material respects with the Foreign
Corrupt Practices Act of 1977, as amended.
(xxxvi) The Company is subject to and in full
compliance with the reporting requirements of Section 13 or Section
15(d) of the 1934 Act.
(c) Any certificate signed by an officer of the Company and
delivered to the Representative or to counsel for the Underwriters
shall be deemed a representation and warranty by the Company to each
Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing. (a) On
the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, the Company
agrees to issue and sell 2,500,000 shares of Common Stock to the
Underwriters, and each Underwriter, severally and not jointly, agrees
to purchase from the Company, at the price agreed upon by the
Representative and the
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Company as set forth in the Pricing Agreement, the number of shares of
Common Stock set forth in Schedule A opposite the name of such
Underwriter (except as otherwise provided in the Pricing Agreement).
Each Underwriter shall be obligated to purchase from the Company that
number of shares of the Common Stock which represents the same
proportion of the number of shares of the Common Stock to be sold by
the Company as the number of shares of the Common Stock set forth
opposite the name of such Underwriter in Schedule A represents of the
total number of shares of the Common Stock to be purchased by all of
the Underwriters pursuant to this Agreement. The respective purchase
obligations of the Underwriters with respect to the Common Stock shall
be rounded among the Underwriters to avoid fractional shares, as the
Representative may determine.
(i) If the Company has elected not to rely upon Rule
430A under the 1933 Act, the initial public offering price of the
Securities and the purchase price of the Securities to be paid by the
several Underwriters shall be agreed upon and set forth in the Pricing
Agreement, dated the date hereof, and an amendment to the Registration
Statement and the Prospectus will be filed before the Registration
Statement becomes effective.
(ii) If the Company has elected to rely upon Rule
430A under the 1933 Act, the initial public offering price of the
Securities and the purchase price of the Securities to be paid by the
several Underwriters shall be determined by agreement among the
Representative and the Company and set forth in the Pricing Agreement.
In the event that such prices have not been agreed upon and the Pricing
Agreement has not been executed and delivered by all parties thereto by
the close of business on the fourth business day following the date of
this Agreement, this Agreement shall terminate forthwith, without
liability of any party to any other party, unless otherwise agreed to
by the Company and the Representative.
(b) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Underwriters, severally and
not jointly, to purchase up to 375,000 shares of Common Stock at the price per
share set forth in the Pricing Agreement. The option hereby granted will expire
30 days after (i) the date the Registration Statement becomes effective, if the
Company has elected not to rely on Rule 430A of the 1933 Act or (ii) the date of
the Pricing Agreement, if the Company has elected to rely on Rule 430A under the
1933 Act, and may be exercised in whole or in part (not more than once) only for
the purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Initial Securities upon notice by the
Representative to the Company setting forth the number of Option Securities as
to which the several Underwriters are then exercising the option and the time
and date of payment and delivery for such Option Securities. Any such time and
date of payment (a "Date of Delivery") shall be determined by the
Representative, but shall not be later than seven full Business Days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined, unless otherwise agreed by the Representative and the
Company. If the option is exercised as to all or any portion of the Option
Securities, each of the Underwriters, acting severally and not jointly, will
purchase that proportion of the total number of Option Securities then being
purchased which the number of Initial Securities set forth in Schedule A
opposite the name of such Underwriters bears to the total number of Initial
Securities (except as otherwise provided in the Pricing Agreement), subject in
each case to such adjustments as the Representative in their discretion shall
make to eliminate any sales or purchases of fractional shares.
(c) Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
McDonald Investments Inc., McDonald Investment Center, Cleveland, Ohio or at
such other place as shall be agreed upon by the Representative and the Company,
at 10:00 A.M. on the third business day (unless postponed in accordance with the
provisions of Section 10) following the date the Registration Statement becomes
effective (or, if the Company has elected to rely upon Rule 430A, the third
business day after execution of the Pricing Agreement), or such other time not
later than 10 business days after such date as shall be agreed upon by the
Representative and the Company (such time and date of payment and delivery being
herein called the "Closing Time"); provided, however, that if the Registration
Statement becomes effective later than 4:30 p.m., Eastern Time, on any date,
then, subject to the foregoing, the Closing Time shall be the fourth business
day thereafter (or, if the Company has elected to rely upon Rule 430A, and the
Pricing Agreement is not executed until after 4:30 p.m., Eastern Time, on any
date, the fourth business day after execution of the Pricing Agreement). In
addition, in the event that any or all of the Option Securities are to be
purchased by the Underwriters, payment of the purchase price for, and delivery
of
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<PAGE> 9
certificates for, such Option Securities shall be made at the above-mentioned
offices of McDonald Investments Inc., or at such other place as shall be agreed
upon by the Representative and the Company on each Date of Delivery as specified
in the notice from the Representative to the Company. Payment shall be made to
the Company by wire transfer of immediately available funds to accounts
designated by the Company, against delivery of the Securities to the
Underwriters. The certificates representing Securities shall be in such
denominations and registered in such names as the Representative may request in
writing at least two business days before the Closing Time. It is understood
that each Underwriter has authorized the Representative, for their account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has agreed to purchase. The Representative may (but shall
not be obligated to) make payment of the purchase price for the Securities to be
purchased by any Underwriter whose check has not been received by the Closing
Time, but such payment shall not relieve such Underwriter from its obligations
hereunder. The Securities will be made available for examination and packaging
by the Underwriters not later than 10:00 A.M. on the last business day prior to
the Closing Time at such place as the Underwriters may designate in Cleveland,
Ohio.
SECTION 3. Covenants of the Company. The Company covenants
with each Underwriter as follows:
(a) The Company will notify the Underwriters immediately, and
confirm the notice in writing, (i) of the effectiveness of the Registration
Statement, the 462(b) Registration Statement and any amendments thereto
(including any post-effective amendments), (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any amendment to
the Registration Statement or any amendment or supplement to the Prospectus or
for additional information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose or the suspension of the
qualification of the Securities for offering or sale, in any jurisdiction, or
the threatening or initiation of any proceeding for that purpose. The Company
will make reasonable efforts to prevent the issuance of any stop order or any
order preventing or suspending the use of any preliminary prospectus or
suspending such qualification and, if any stop order or any order preventing or
suspending the use of any preliminary prospectus or suspending such
qualification is issued, to obtain the lifting thereof at the earliest possible
moment.
(b) The Company will give the Underwriters notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment), the 462(b) Registration Statement or
any amendment or supplement to the Prospectus (including any revised prospectus
which the Company proposes for use by the Underwriters in connection with the
offering of the Securities which differs from the prospectus on file at the
Commission at the time the Registration Statement becomes effective, whether or
not such revised prospectus is required to be filed pursuant to Rule 424(b) of
the 1933 Act), will furnish the Underwriters with copies of any such amendment
or supplement a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file any such amendment or supplement or use
any such prospectus to which counsel for the Underwriters and counsel for the
Company mutually agree shall not be filed or used.
(c) The Company will deliver to the Representative and Vinson
& Elkins L.L.P., counsel for the Underwriters, without charge, signed copies of
the Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein) and
will also deliver to the Underwriters conformed copies of the Registration
Statement as originally filed and of each amendment thereto (without exhibits).
(d) The Company will furnish to each Underwriter, from time to
time during the period when the Prospectus is required to be delivered of the
1933 Act or the 1934 Act, such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request for the purposes
contemplated by the 1933 Act and the 1934 Act.
(e) If any event shall occur as a result of which counsel for
the Company and counsel for the Underwriters mutually agree that it is necessary
to amend or supplement the Prospectus in order to make the Prospectus not
misleading in light of the circumstances existing at the time it is delivered to
a purchaser or if for any other reason it shall be necessary to amend or
supplement the Prospectus in order to comply with the 1933 Act and the 1934 Act,
the Company will forthwith amend or supplement the Prospectus (in form and
substance mutually satisfactory to counsel
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<PAGE> 10
for the Underwriters and counsel for the Company and in compliance with the 1933
Act so that, as so amended or supplemented, the Prospectus will not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances existing
at the time it is delivered to a purchaser, not misleading and will comply with
the 1933 Act and the 1934 Act), and the Company will furnish to the Underwriters
a reasonable number of copies of such amendment or supplement.
(f) The Company will endeavor, in cooperation with the
Underwriters, to qualify the Securities for offering and sale under the
applicable securities laws of such states and other jurisdictions of the United
States as the Representative may reasonably designate; provided, however, that
the Company shall not be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified. In each jurisdiction in which the
Securities have been so qualified, the Company will file such statements and
reports as may be required by the laws of such jurisdiction to continue such
qualification in effect, for a period of not less than one year from the
effective date of the Registration Statement.
(g) The Company will make generally available to its security
holders an earnings statement of the Company, which need not be audited,
covering a twelve-month period commencing after the effective date of the
Registration Statement and ending not later than 15 months thereafter, as soon
as practicable after the end of such period, which earnings statement shall
satisfy the provisions of Section 11(a) of the 1933 Act and the rules and
regulations of the Commission (including Rule 158).
(h) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance upon
Rule 430A under the 1933 Act, then immediately following the execution of the
Pricing Agreement, the Company will prepare, and file or transmit the filing
with the Commission in accordance with such Rule 430A and Rule 424(b) under the
1933 Act, copies of an amended Prospectus, or, if required by such Rule 430A, a
post-effective amendment to the Registration Statement (including an amended
Prospectus), containing all information so omitted.)
(i) If the Company elects to rely upon Rule 462(b), the
Company shall both file a 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) of the 1933 Act and pay the applicable fees in
accordance with Rule 111 of the 1933 Act by the time confirmations are sent or
given, as specified by Rule 462(b)(2).
(j) The Company, during the period when the Prospectus is
required to be delivered under the 1933 Act, will file all documents required to
be filed with the Commission pursuant to Sections 13, 14 or 15 of the 1934 Act
within the time periods required by the 1934 Act.
(k) The Company will effect the listing of the Common Stock
issued and sold pursuant to this Agreement on the Nasdaq.
(l) During a period of 90 days from the date hereof, the
Company will not, without the prior written consent of the Representative, (1)
sell, offer to sell, contract to sell, or otherwise dispose of, directly or
indirectly, any shares of Common Stock, any other equity security of the Company
or any security convertible into or exchangeable or exercisable for Common Stock
(except for shares of Common Stock issued pursuant to this Agreement and the
Pricing Agreement, the grant of options or the issuance of shares of Common
Stock upon the exercise of outstanding options under the Company's existing
stock option plans) or (2) make any demand for or exercise any right with
respect to the registration of any shares of Common Stock or other such
securities.
(m) The Company will use all commercially reasonable efforts
to do and perform all things required or necessary to be done and performed by
it under this Agreement prior to the Closing Time and will satisfy all
conditions precedent to the delivery of the Securities.
(n) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the 1934 Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.
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<PAGE> 11
SECTION 4. Payment of Expenses. The Company will pay, or
reimburse if paid by the Representative, whether or not the transactions
contemplated hereby are consummated or this Agreement is terminated, all
expenses incident to the performance of its obligations under this Agreement and
the Pricing Agreement, including (i) the printing and filing and delivery to the
Underwriters of copies of the Registration Statement as originally filed and of
each amendment thereto, during the period specified in Section 3(d) hereof
(excluding any fees, costs or expenses of counsel to the Underwriters), (ii) the
printing of this Agreement and the Pricing Agreement, (iii) the preparation,
issuance and delivery of the certificates for the Securities to the
Underwriters, (iv) the fees and disbursements of the Company's counsel and
accountants, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and
the fees and reasonable disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey, (vi) the review of the terms of the public offering of the Securities by
the NASD (including the filing fees paid to the NASD in connection therewith)
and the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith, (vii) the printing and delivery to the Underwriters of
copies of the Registration Statement as originally filed and each amendment
thereto, of the preliminary prospectuses, and of the Prospectus and any
amendments or supplements thereto, (viii) the printing and delivery to the
Underwriters of the Blue Sky Survey, (ix) the fees and expenses of the Company's
transfer agent, and (x) the fees and expenses incurred in connection with the
listing of the Securities on Nasdaq.
If this Agreement is terminated by the Representative in
accordance with the provisions of Section 5 or Section 9(a)(i), the Company
shall reimburse the Underwriters for all of their out-of-pocket expenses
relating to the transactions contemplated hereby, including the reasonable fees
and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The
obligations of the Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company herein contained, to the
performance by each of the Company of its obligations hereunder, and to the
following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M. on the date hereof, or with the consent of the
Representative, at a later time and date, not later, however, than 5:30 P.M. on
the first business day following the date hereof, or at such later time and date
as may be approved by the Underwriters; and at the Closing Time no stop order
suspending the effectiveness of the Registration Statement shall have been
issued of the 1933 Act or proceedings therefor initiated or threatened by the
Commission. If the Company has elected to rely upon Rule 430A of the 1933 Act,
the price of the Securities and any price related information previously omitted
from the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) of the
1933 Act within the prescribed time period, and prior to Closing Time the
Company shall have provided evidence satisfactory to the Representative of such
timely filing, or a post-effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the 1933 Act.
(b) At the Closing Time the Underwriters shall have received:
(i) An opinion, dated the Closing Time, of Holme
Roberts & Owen L.L.P., counsel for the Company, substantially in the
form set forth on Annex I attached hereto.
(ii) An opinion, dated the Closing Time, of Vinson &
Elkins L.L.P., counsel for the Underwriters, in form and substance
reasonably satisfactory to the Underwriters.
(iii) In giving their opinions required by
subsections (b)(i) and (ii), respectively, of this section, Holme
Roberts & Owen LLP and Vinson & Elkins L.L.P. shall each additionally
state that although such counsel has not undertaken to determine
independently the accuracy, completeness and fairness of the statements
contained in the Registration Statement or in the Prospectus and takes
no responsibility explicitly or implicitly therefor, such counsel has
(i) with respect to the opinion of Holme Roberts & Owens LLP,
participated in discussions and meetings with officers and other
representatives of the Company with respect to the information included
in the Registration Statement and Prospectus, and (ii) with respect to
the opinion of Vinson & Elkins L.L.P., participated in discussions and
meetings with officers and other representatives of the
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<PAGE> 12
Company and discussions with the auditors for the Company in connection
with the preparation of the Registration Statement and the Prospectus.
Nothing has come to such counsel's attention that has caused such
counsel to believe that (A) the Registration Statement, at the time it
became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, or
(B) the Prospectus, at the Closing Time, contained any untrue statement
of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that in each case
such counsel need not express any opinion or belief with respect to the
financial statements or other financial data contained in the
Registration Statement or the Prospectus.
(c) At the Closing Time, there shall not have been, since the
date hereof or since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company or any of its subsidiaries, whether or not
arising in the ordinary course of business, and the Underwriters shall have
received a certificate of the President of the Company and the chief financial
or chief accounting officer of the Company, dated as of the Closing Time, to the
effect that (A) there has been no such material adverse change, (B) the
representations and warranties in Section 1 are true and correct with the same
force and effect as though expressly made at and as of the Closing Time, (C) the
Company has complied in all material respects with all agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to the
Closing Time, and (D) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been initiated or threatened by the Commission.
(d) At the time of the execution of this Agreement, the
Underwriters shall have received from Arthur Andersen LLP, independent certified
public accountants, a letter dated such date, in each case in form and substance
previously approved by the Representative, with respect to the financial
statements and certain financial information contained or incorporated by
reference in the Registration Statement and the Prospectus.
(e) At the time of the execution of this Agreement and at the
Closing Time, the Underwriters shall have received from Reed W. Ferrill &
Associates, Inc., independent petroleum engineers for the Company, in each case
in form and substance previously approved by the Representative, stating, as of
the date of such letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified information with
respect to oil and gas reserves is given or incorporated in the Prospectus, as
of the date that is not more than five days prior to the date of such letter),
the conclusions and findings of such firm with respect to the Company's oil and
gas reserves.
(f) At the Closing Time, the Underwriters shall have received
from Arthur Andersen LLP, independent certified public accountants, a letter,
dated as of Closing Time, to the effect that it reaffirms the statements made in
the letter furnished pursuant to subsection (d) of this Section, except that the
specified date referred to shall be a date not more than five days prior to the
Closing Time.
(g) At the Closing Time, the Representative shall have been
furnished with such documents and opinions as it may reasonably require for the
purpose of enabling counsel for the Underwriters to pass upon the issuance and
sale of the Securities as herein contemplated and related proceedings, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be reasonably satisfactory in form and substance to
the Representative and counsel for the Underwriters.
(h) At the time of the execution of this Agreement, the
Representative shall have received from each of the executive officers and
directors of the Company and from Aquila Energy Capital Corporation a letter in
which each such person agrees during a period of 90 days from the date hereof,
that such person will not, without the prior written consent of the
Representative, (A) sell, offer to sell, contract to sell, or otherwise dispose
of, directly or indirectly, any shares of Common Stock, any other equity
security of the Company or any security convertible into or exchangeable or
exercisable for shares of Common Stock, beneficially owned by such person or
with respect to which such person has the power of disposition, other than as
bona fide gifts or (B) make any demand for or exercise any right with respect to
the registration of any shares of Common Stock or other such securities.
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<PAGE> 13
(i) In the event that the Underwriters exercise their option
provided in Section 2(b) hereof to purchase all or any portion of the Option
Securities, the representations and warranties of the Company contained herein
and the statements in any certificates furnished by the Company hereunder shall
be true and correct as of each Date of Delivery and, at the relevant Date of
Delivery, the Representative shall have received:
(i) A certificate, dated such Date of Delivery, of
the President of the Company and of the chief financial or chief
accounting officer of the Company confirming that the certificate
delivered at the Closing Time pursuant to Section 5(c) hereof remains
true and correct as of such Date of Delivery.
(ii) An opinion, dated such Date of Delivery, of
Holme Roberts & Owen L.L.P., counsel for the Company, substantially in
the form set forth on Annex I attached hereto.
(iii) An opinion, dated such Date of Delivery, of
Vinson & Elkins L.L.P., counsel for the Underwriters, in form and
substance reasonably satisfactory to the Underwriters.
(iv) A letter from Arthur Andersen LLP, in form and
substance satisfactory to the Representative and dated such Date of
Delivery, substantially the same in form and substance as the letter
furnished to the Underwriters pursuant to Section 5(f) hereof, except
that the "specified date" in the letter furnished pursuant to this
Section 5(i)(iv) shall be a date not more than five days prior to such
Date of Delivery.
(v) A letter from Reed W. Ferrill & Associates, Inc.,
in form and substance satisfactory to the Representative and dated such
Date of Delivery, substantially the same in form and substance as the
letter furnished to the Underwriters pursuant to Section 5(e) hereof,
except that the "specified date" in the letter furnished pursuant to
this Section 5(i)(v) shall be a date not more than five days prior to
such Date of Delivery.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Representative by notice to the Company at any time at or prior to
Closing Time, and such termination shall be without liability of any party to
any other party except as provided in Section 4. Notwithstanding any such
termination, the provisions of Sections 6 and 7 shall remain in effect.
SECTION 6. 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 1933 Act, and
each officer and director of each Underwriter and any such controlling person to
the extent and in the manner set forth as follows:
(i) against any and all loss, liability, claim,
damage, and expense, joint or several, whatsoever, as incurred, arising
out of any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or any amendment
thereto), including the information deemed to be part of the
Registration Statement pursuant to Rule 430A(b) of the 1933 Act, if
applicable, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation; or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon such
untrue statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company; and
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<PAGE> 14
(iii) against any and all expense whatsoever, as
incurred (including, subject to Section 6(d) hereof, the fees and
disbursements of counsel chosen by the Underwriters), reasonably
incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by a governmental agency
or body, commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply (A) to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through the Representative expressly for use in the
Registration Statement or Prospectus and (B) with respect to the Prospectus or
any preliminary prospectus to the extent that any loss, liability, claim, damage
or expense results from the fact that such Underwriter sold Securities to a
person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus (and any amendment or
supplement thereto) in any case where such delivery is required by the 1933 Act
if the Company previously furnished copies thereof to such Underwriter and the
loss, liability, claim, damage or expense results from an untrue statement or
omission of a material fact contained in the Prospectus or any preliminary
prospectus which was corrected in the Prospectus (or any amendment or supplement
thereto).
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representative expressly for use in the Registration Statement (or
any amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have otherwise than on account of this indemnity
agreement. An indemnifying party may participate at its own expense in the
defense of any such action. In no event shall the indemnifying parties be liable
for fees and expenses (which fees and expenses shall be reasonable) of more than
one counsel (in addition to any local counsel) separate from their own counsel
for all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances; provided, however, that if an indemnified
party shall have been advised in writing by counsel selected to represent the
indemnified parties that an actual or potential conflict of interest exists
between the position of that indemnified party and other indemnified parties,
the indemnified party in question shall have the right to select separate
counsel to participate in the defense of such action on behalf of such
indemnified party, and the indemnifying parties shall be responsible for the
reasonable fees and expenses of such separate counsel.
SECTION 7. Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in Section 6 is for any reason held to be unenforceable by the
indemnified parties although applicable in accordance with its terms, the
Company and the Underwriters shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement incurred by the Company and one or more Underwriters, as
incurred, in such proportions that the Underwriters are responsible for that
portion represented by the percentage that the underwriting discount appearing
on the cover page of the Prospectus bears to the initial public offering price
appearing thereon and the Company is responsible for the balance; provided,
however, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section, each person, if any, who controls an Underwriter within the
meaning of Section 15 of the 1933 Act, and each officer and director of any
Underwriter and of any such control
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<PAGE> 15
person, shall have the same rights to contribution as such Underwriter, and each
director of the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act shall have the same rights to contribution as the
Company.
SECTION 8. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement and the Pricing Agreement, or contained in certificates of
officers of the Company submitted pursuant hereto, shall remain operative and in
full force and effect, regardless of any investigation made by or on behalf of
any Underwriter or controlling person, or by or on behalf of the Company, and
shall survive delivery of the Securities to the Underwriters.
SECTION 9. Termination of the Agreement. (a) The
Representative may terminate this Agreement, by notice to the Company, at any
time at or prior to Closing Time (i) if there has been, since the date of this
Agreement or since the respective dates as of which information is given in the
Registration Statement, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Company, whether or not arising in the ordinary course of business, or (ii) if
there has occurred any material adverse change in the financial markets in the
United States, or any new outbreak of hostilities or material escalation thereof
or other calamity or crisis, the effect of which is such as to make it, in the
judgment of the Representative, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in the
Common Stock has been suspended by the Commission, or if trading generally on
the Nasdaq has been suspended, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities have been required, by
either of said Exchanges or by order of the Commission or any other governmental
authority, or if a banking moratorium has been declared by federal, Colorado,
New York or Ohio authorities.
(b) If this Agreement is terminated pursuant to this Section
9, such termination shall be without liability of any party to any other party
except as provided in Section 4. Notwithstanding any such termination, the
provisions of Sections 6 and 7 shall remain in effect.
SECTION 10. Default by One or More of the Underwriters. If one
or more of the Underwriters shall fail at Closing Time to purchase the Initial
Securities which it or they are obligated to purchase under this Agreement and
the Pricing Agreement (the "Defaulted Securities"), the Representative shall
have the right, within 24 hours thereafter, to make arrangements for one or more
of the non-defaulting Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the Representative
shall not have completed such arrangements with such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of Initial Securities, the non-defaulting Underwriters shall be
obligated to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Initial Securities, this Agreement shall terminate without liability
on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in the
termination of this Agreement, either the Representative or the Company shall
have the right to postpone the Closing Time for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements.
The Underwriters shall have the right to amend Schedule A
hereto by making such substitutions or corrections as indicated in the Pricing
Agreement.
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<PAGE> 16
SECTION 11. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunications. Notices to the
Underwriters shall be directed to the Representative, in care of McDonald
Investments Inc. at 2100 McDonald Investment Center, 800 Superior Avenue,
Cleveland, Ohio 44114, attention: Richard D. Weber, Managing Director, telecopy
number (216) 443-2993, and notices to the Company shall be directed to it at
Mallon Resources Corporation, 999 18th Street, Suite 1700, Denver, Colorado
80202, attention: George O. Mallon, Jr., President, telecopy number (801)
572-8225.
SECTION 12. Parties. This Agreement and the Pricing Agreement
shall each inure to the benefit of and be binding upon the Underwriters and the
Company and their respective successors. Nothing expressed or mentioned in this
Agreement or the Pricing Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Underwriters and the Company and
their respective successors and the controlling persons and officers and
directors referred to in Sections 6 and 7 and their heirs and legal
Representative, any legal or equitable right, remedy or claim under or in
respect of this Agreement or the Pricing Agreement or any provision herein and
therein contained. This Agreement and the Pricing Agreement and all conditions
and provisions hereof and thereof are intended to be for the sole and exclusive
benefit of the Underwriters and the Company and their respective successors, and
said controlling persons and officers and directors and their heirs and legal
Representative, and for the benefit of no other person, firm or corporation. No
Purchaser of Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
SECTION 13. Governing Laws and Time. This Agreement and the
Pricing Agreement shall be governed by and construed in accordance with the
internal laws of the State of Ohio without giving effect to principles of
conflict of laws. Specified times of day refer to Cleveland Time. As used
herein, the term "business day" means any day on which the Nasdaq is open for
business.
16
<PAGE> 17
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company in accordance with its terms.
Very truly yours,
MALLON RESOURCES CORPORATION
By:
------------------------------------
Name: George O. Mallon, Jr.
Title: President
CONFIRMED AND ACCEPTED as of the date first above written:
MCDONALD INVESTMENTS INC.
By:
----------------------------------
Name:
Title:
For itself and as Representative of the
other Underwriters in Schedule A hereto.
<PAGE> 18
SCHEDULE A
<TABLE>
<CAPTION>
Number
of Shares
Underwriters to be Purchased
------------ ---------------
<S> <C>
McDonald Investments Inc.
</TABLE>
