GMX RESOURCES INC. 2,000,000 Shares Common Stock ($.001 Par Value) PLACEMENT AGENCY AGREEMENT
EXHIBIT
1.1
EXECUTION
COPY
2,000,000
Shares
Common
Stock
($.001
Par Value)
February
1, 2007
▇.▇.
▇▇▇▇▇▇▇ & Sons, Inc.
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
The
undersigned, GMX Resources Inc., an Oklahoma corporation (the “Company”),
hereby addresses you (the “Placement
Agent”)
and
confirms its agreement with you as follows:
1. Description
of Securities. The
Company proposes, subject to the terms and conditions stated herein, to issue
and sell up to an aggregate of 2,000,000 shares (the “Shares”)
of the
Company’s common stock, $.001 par value per share (the “Common
Stock”),
to
certain investors (each an “Investor”
and,
collectively, the “Investors”),
in a
direct offering under its Registration Statement on Form S-3 (Registration
No.
333-134911). The Company desires to engage the Placement Agent as its placement
agent in connection with such issuance and sale. The Shares are more fully
described in the Prospectus hereinafter defined.
2. Agreement
to Act as Placement Agent; Delivery and Payment.
On
the
basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Placement Agent agrees
to act as the Company's exclusive placement agent to assist the Company, on
a
best efforts basis, in connection with the proposed issuance and sale by the
Company of the Shares to the Investors. The Company expressly acknowledges
and
agrees that this Agreement does not in any way constitute a commitment by the
Placement Agent to purchase any of the Shares and does not ensure successful
placement of the Shares or any portion thereof. The Company shall pay to the
Placement Agent concurrently with the Closing (as defined below) 4.0% of the
gross purchase price of the Shares (the “Placement
Fee”).
Upon
satisfaction of the conditions set forth in Section 5 hereof, the closing of
the
sale and issuance of the Shares (the “Closing”)
shall
occur at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ PC, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as may be agreed upon
between the Placement Agent and the Company (the “Place
of Closing”),
at
10:00 a.m., Eastern Standard Time, on February 7, 2007, or at such other time
and date as the
Placement
Agent and the Company may agree, such time and date of payment and delivery
being herein called the “Closing
Date.”
Concurrently
with the execution and delivery of this Agreement, the Company, the Placement
Agent and ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PC, as escrow agent (the “Escrow
Agent”),
shall
enter into an escrow agreement (the “Escrow
Agreement”),
pursuant to which an escrow account (the “Escrow
Account”)
will
be established for the benefit of the Company and the Investors to settle each
purchase of the Shares, with the Shares being settled through the facilities
of
The Depository Trust Company’s DWAC system. Prior to the Closing Date, each such
Investor shall deposit into the Escrow Account an amount equal to the product
of
(x) the number of Shares such Investor has agreed to purchase and (y) the
purchase price per share as set forth on the cover page of the Prospectus (the
“Purchase
Amount”).
The
aggregate of all such Purchase Amounts is herein referred to as the
“Escrow
Funds.”
On
the
Closing Date, upon satisfaction or waiver of all the conditions to Closing,
the
Escrow Agent will disburse the Escrow Funds from the Escrow Account to the
Company and the Placement Agent as provided in the Escrow Agreement, and the
Company shall cause the Shares to be delivered to the Investors, which shall
be
made through the facilities of The Depository Trust Company’s DWAC system.
The
Company acknowledges and agrees that the Placement Agent shall act as an
independent contractor, and not as a fiduciary, and any duties of the Placement
Agent with respect to investment banking services to the Company, including
the
offering of the Shares contemplated hereby (including in connection with
determining the terms of the offering), shall be contractual in nature, as
expressly set forth herein, and shall be owed solely to the Company. Each party
disclaims any intention to impose any fiduciary or similar duty on the
other.
Additionally, the Placement Agent has not advised, nor is advising, the Company
or any other person as to any legal, tax, investment, accounting or regulatory
matters in any jurisdiction with respect to the transactions contemplated
hereby. The Company shall consult with its own advisors concerning such matters
and shall be responsible for making its own independent investigation and
appraisal of the transactions contemplated hereby, and the Placement Agent
shall
have no responsibility or liability to the Company with respect thereto. Any
review by the Placement Agent of the Company, the transactions contemplated
hereby or other matters relating to such transactions has been and will be
performed solely for the benefit of the Placement Agent and has not been and
shall not be on behalf of the Company or any other person. It is understood
that
the Placement Agent has not and will not be rendering an opinion to the Company
as to the fairness of the terms of the offering. Notwithstanding anything in
this Agreement to the contrary, the Company acknowledges that the Placement
Agent may have financial interests in the success of the offering contemplated
hereby that are not limited to the Placement Fee. The Company hereby waives
and
releases, to the fullest extent permitted by law, any claims that the Company
may have against the Placement Agent with respect to any breach or alleged
breach of fiduciary duty.
It
is
understood that the Company proposes to offer the Shares to the Investors upon
the terms and conditions set forth in the Registration Statement (hereinafter
defined).
| 3. |
Representations,
Warranties and Agreements of the Company.
|
2
(a) The
Company represents and warrants to and agrees with the Placement Agent as of
the
date hereof and as of the Closing Date and any other date specified below,
that:
(i) At
the
time of filing the Registration Statement on Form S-3 (File No. 333-134911),
the
Company met the requirements for use of Form S-3 under the 1933 Act for a
primary offering. A Registration Statement on Form S-3 (Registration
No. 333-134911) with respect to the Shares, including a base prospectus
(the “Base
Prospectus”),
and
such amendments to such registration statement as may have been required to
the
date of this Agreement, has been carefully prepared by the Company pursuant
to
and in conformity with the requirements of the Securities Act of 1933, as
amended (the “1933
Act”),
and
the rules and regulations thereunder (the "1933
Act Rules and Regulations")
of the
Securities and Exchange Commission (the “SEC”)
and
has been filed with the SEC under the 1933 Act. Such registration statement
has
been declared effective by the SEC. Copies of such registration statement,
including any amendments thereto, each related preliminary prospectus (meeting
the requirements of Rule 430, 430A or 430B of the 1933 Act Rules and
Regulations) contained therein, and the exhibits, financial statements and
schedules thereto have heretofore been delivered by the Company to the Placement
Agent (it being understood among the parties hereto that any reference to
“delivery,” “furnishing” or similar words or phrases by the Company to the
Placement Agent of any information that is on file with the SEC will be deemed
to be so delivered in the absence of an express request from the Placement
Agent). A final prospectus supplement containing information permitted to be
omitted at the time of effectiveness by Rule 430A or 430B of the 1933 Act Rules
and Regulations will be filed promptly by the Company with the SEC in accordance
with Rule 424(b) of the 1933 Act Rules and Regulations. The term “Registration
Statement”
as
used
herein means the registration statement as amended at the time it became
effective by the SEC under the 1933 Act (the “Effective
Date”),
including financial statements, all exhibits and all documents incorporated
by
reference therein and, if applicable, the information deemed to be included
by
Rule 430A or 430B of the 1933 Act Rules and Regulations. If an abbreviated
registration statement is prepared and filed with the SEC in accordance with
Rule 462(b) under the 1933 Act (an “Abbreviated
Registration Statement”),
the
term “Registration
Statement”
as
used
in this Agreement includes the Abbreviated Registration Statement. The
term
“Prospectus”
as
used
herein means, together with the Base Prospectus, the final prospectus supplement
as first filed with the SEC in connection with the offering of the Shares
pursuant to Rule 424(b) of the 1933 Act Rules and Regulations, including the
documents incorporated by reference therein. The term “Preliminary
Prospectus”
as
used
herein shall mean a preliminary prospectus in connection with the offering
of
the Shares as contemplated by Rule 430, 430A or 430B of the 1933 Act Rules
and
Regulations included at any time in the Registration Statement, including the
Base Prospectus and any preliminary prospectus supplement in connection with
the
offering of the Shares, and including in each case the documents incorporated
by
reference therein. The term “Free
Writing Prospectus”
as
used
herein shall have the meaning set forth in Rule 405 of the 1933 Act. The term
“Issuer
Free Writing Prospectus”
as
used
herein shall have the meaning set forth in Rule 433 of the 1933 Act Rules and
Regulations. The term “Disclosure
Package”
as
used
herein shall mean the Preliminary Prospectus as most recently amended or
supplemented prior to the Initial Time of Sale (as defined below) together
with
the Issuer Free Writing Prospectuses identified in Schedule
I
hereto,
if any, and any other Free Writing
3
Prospectus
that the parties hereto shall hereafter expressly agree to treat as part of
the
Disclosure Package. The
Preliminary Prospectus, and, if any, any Issuer Free Writing Prospectus required
to be filed pursuant to Rule 433(d) of the 1933 Act Rules and Regulations and
the Prospectus delivered to the Placement Agent for use in connection with
the
offering of the Shares have been and will be identical to the respective
versions thereof transmitted to the SEC for filing via the Electronic Data
Gathering Analysis and Retrieval System (“▇▇▇▇▇”),
except to the extent permitted by Regulation S-T.
For
purposes of this Agreement, the words “amend,” “amendment,” “amended,”
“supplement” or “supplemented” with respect to the Registration Statement, the
Prospectus, any Free Writing Prospectus or the Disclosure Package shall mean
amendments or supplements to the Registration Statement, the Prospectus, any
Free Writing Prospectus or the Disclosure Package, as the case may be, as well
as documents filed after the date of this Agreement and prior to the completion
of the distribution of the Shares and incorporated by reference therein as
described above.
(ii) Neither
the SEC nor any state or other jurisdiction or other regulatory body has issued,
and neither is, to the knowledge of the Company, threatening to issue, any
stop
order under the 1933 Act or other order suspending the effectiveness of the
Registration Statement (as amended or supplemented) or preventing or suspending
the use of any Preliminary Prospectus, Issuer Free Writing Prospectus, the
Disclosure Package or the Prospectus or suspending the qualification or
registration of the Shares for offering or sale in any jurisdiction nor
instituted or, to the knowledge of the Company, threatened to institute
proceedings for any such purpose. The Preliminary Prospectus at its date of
issue and as of 5:00 p.m. Eastern Standard Time on the date hereof (the
“Initial
Time of Sale”),
the
Registration Statement at each effective date and the Initial Time of Sale,
and
the Prospectus and any amendments or supplements thereto or to the Registration
Statement when they are filed with the SEC or become effective, as the case
may
be, contain or will contain, as the case may be, all statements that are
required to be stated therein by, and in all material respects conform or will
conform, as the case may be, to the requirements of, the 1933 Act and the 1933
Act Rules and Regulations. Neither the Registration Statement nor any amendment
thereto, as of the applicable effective date, contains or will contain, as
the
case may be, any untrue statement of a material fact or omits or will omit
to
state any material fact required to be stated therein or necessary to make
the
statements therein, not misleading. Neither the Preliminary Prospectus, the
Prospectus nor any supplement thereto contains or will contain, as the case
may
be, any untrue statement of a material fact or omits or will 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. Neither the Disclosure Package nor any supplement thereto, at the
Initial Time of Sale, contains or will contain, as the case may be, any untrue
statement of a material fact or omits or will 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.
Notwithstanding the foregoing, the Company makes no representation or warranty
as to information contained in or omitted from the Registration Statement,
the
Disclosure Package or the Prospectus, or any such amendment or supplement,
in
reliance upon, and in conformity with, written information furnished to the
Company relating to the Placement Agent by or on behalf of the Placement Agent
expressly for use in the
4
preparation
thereof (as provided in Section 12 hereof). There is no contract, agreement,
understanding or arrangement, whether written or oral, or document required
to
be described in the Registration Statement, Disclosure Package or Prospectus
or
to be filed as an exhibit to the Registration Statement that is not described
or
filed as required. The documents incorporated by reference in the Disclosure
Package or the Prospectus at the time they were filed with the SEC, complied
in
all material respects with the requirements of the Securities Exchange Act
of
1934, as amended (the “1934
Act”),
and
the rules and regulations adopted by the SEC thereunder (the “1934
Act Rules and Regulations”).
Any
future documents incorporated by reference so filed, when they are filed, will
comply in all material respects with the requirements of the 1934 Act and the
1934 Act Rules and Regulations.
(iii) The
Company is eligible to use Issuer Free Writing Prospectuses in connection with
the offering of the Shares pursuant to Rules 164 and 433 of the 1933 Act. Any
Issuer Free Writing Prospectus that the Company is required to file pursuant
to
Rule 433(d) of the 1933 Act Rules and Regulations has been, or will be, timely
filed with the SEC in accordance with the requirements of the 1933 Act Rules
and
Regulations. Each Issuer Free Writing Prospectus that the Company has filed,
or
is required to file, pursuant to Rule 433(d) of the 1933 Act or that was
prepared by or on behalf of or used by the Company complies or will comply
in
all material respects with the requirements of the 1933 Act Rules and
Regulations, including but not limited to legending and recordkeeping
requirements. Except for the Issuer Free Writing Prospectuses, if any,
identified in Schedule
I
hereto,
the Company has not prepared, used or referred to, and will not, without your
prior consent, prepare, use or refer to any Free Writing Prospectus. Each Issuer
Free Writing Prospectus, as of its issue date and at all times through the
completion of the offering and sale of the Shares, did not, does not and will
not include any information that conflicted, conflicts or will conflict with
the
information contained in the Registration Statement. The Company filed the
Registration Statement with the SEC before using any Free Writing Prospectus.
The Company has satisfied and will satisfy the conditions of Rule 433 of the
1933 Act Rules and Regulations such that any electronic road show need not
be
filed with the SEC.
(iv) This
Agreement has been duly authorized, executed and delivered by the Company and
constitutes a valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms, except as enforceability
may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally and by general principles of equity.
(v) The
Company and its Subsidiaries have been duly organized and are validly existing
as corporations in good standing under the laws of the states or other
jurisdictions in which they are incorporated, with full power and authority
(corporate and other) to own, lease and operate their properties and conduct
their businesses as described in each of the Disclosure Package and the
Prospectus and, with respect to the Company, to execute and deliver, and perform
the Company’s obligations under, this Agreement; the Company and its
Subsidiaries are duly qualified to do business as foreign corporations in good
standing in each state or other jurisdiction in which their
ownership
5
or
leasing of property or conduct of business legally requires such qualification,
except where the failure to be so qualified, individually or in the aggregate,
would not have a Material Adverse Effect. The term “Material
Adverse Effect”
as
used
herein means any material adverse effect on the condition (financial or other),
net worth, business, affairs, management, results of operations or cash flow
of
the Company and its Subsidiaries, taken as a whole. The Company has no
significant subsidiaries (as such term is defined in Rule 1-02(w) of Regulation
S-X promulgated by the Commission) other than those Subsidiaries listed on
Schedule
II
hereto
(the “Subsidiaries”).
(vi) Neither
the Company nor any of its Subsidiaries has sustained since the date of the
latest audited financial statements included or incorporated by reference in
the
Disclosure Package any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree
other
than as set forth in each of the Disclosure Package and the Prospectus and,
since the respective dates as of which information is given in the Disclosure
Package, there has not been any change in the capital stock or long-term debt
of
the Company or any of its Subsidiaries or any Material Adverse Change, or any
development involving a prospective Material Adverse Change, otherwise than
as
set forth in each of the Disclosure Package and the Prospectus. The term
“Material
Adverse Change”
as
used
herein means any change that has a Material Adverse Effect.
(vii) The
issuance and sale of the Shares and the execution, delivery and performance
by
the Company of this Agreement, and the consummation of the transactions herein
contemplated, will not conflict with or result in a breach or violation of
any
of the terms or provisions of, or constitute a default under, or result in
the
creation or imposition of any lien, charge or encumbrance upon any properties
or
assets of the Company or any of its Subsidiaries under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any
of
its Subsidiaries is bound or to which any of the properties or assets of the
Company or any of its Subsidiaries is subject, except to such extent as,
individually or in the aggregate, does not have a Material Adverse Effect,
nor
will such action result in any violation of the provisions of the Company’s
certificate of incorporation or bylaws or any statute, rule, regulation or
other
law, or any order or judgment, of any court or governmental agency or body
having jurisdiction over the Company or any of its Subsidiaries or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement, the
issuance and sale of the Shares or the consummation of the transactions
contemplated hereby, except such as have been, or will be prior to the Closing
Date, obtained under the 1933 Act or as may be required by the National
Association of Securities Dealers, Inc. (the “NASD”)
and
such consents, approvals, authorizations, registrations or qualifications as
may
be required under state securities or blue sky laws in connection with the
purchase and distribution of the Shares to the Investors.
6
(viii) The
Company has duly and validly authorized capital stock as set forth in each
of
the Disclosure Package and Prospectus; all outstanding shares of Common Stock
of
the Company and the Shares conform, or when issued will conform, to the
description thereof in the Prospectus and have been, or, when issued and paid
for in the manner described herein will be, duly authorized, validly issued,
fully paid and non-assessable; and the issuance of the Shares to be purchased
from the Company hereunder is not subject to preemptive or other similar rights,
or any restriction upon the voting or transfer thereof pursuant to applicable
law or the Company’s certificate of incorporation, by-laws or governing
documents or any agreement to which the Company or any of its Subsidiaries
is a
party or by which any of them may be bound. All corporate action required to
be
taken by the Company for the authorization, issuance and sale of the Shares
has
been duly and validly taken. Except as disclosed in each of the Disclosure
Package and Prospectus, there are no outstanding subscriptions, rights,
warrants, options, calls, convertible securities, commitments of sale or rights
related to or entitling any person to purchase or otherwise to acquire any
shares of, or any security convertible into or exchangeable or exercisable
for,
the capital stock of, or other ownership interest in, the Company, except for
such options or rights as may have been granted by the Company to employees,
directors or consultants pursuant to its stock option or stock purchase plans.
The outstanding shares of capital stock of the Company’s Subsidiaries have been
duly authorized and validly issued, are fully paid and non-assessable and,
except for liens under the Company’s credit facility disclosed in the Disclosure
Package and Prospectus (the “Credit Facility”), are owned by the Company free
and clear of any mortgage, pledge, lien, encumbrance, charge or adverse claim
and are not the subject of any agreement or understanding with any person and
were not issued in violation of any preemptive or similar rights; and there
are
no outstanding subscriptions, rights, warrants, options, calls, convertible
securities, commitments of sale or instruments related to or entitling any
person to purchase or otherwise acquire any shares of, or any security
convertible into or exchangeable or exercisable for, the capital stock of,
or
other ownership interest in any of the Subsidiaries.
(ix) [Intentionally
deleted].
(x) Each
of
the Company and its Subsidiaries is in possession of and is operating in
compliance with all franchises, grants, authorizations, licenses, certificates,
permits, easements, consents, orders and approvals (“Permits”)
from
all state, federal, foreign and other regulatory authorities, and has satisfied
the requirements imposed by regulatory bodies, administrative agencies or other
governmental bodies, agencies or officials, that are required for the Company
and its Subsidiaries lawfully to own, lease and operate their properties and
conduct their businesses as described in each of the Disclosure Package and
the
Prospectus, and each of the Company and its Subsidiaries is conducting its
business in compliance with all of the laws, rules and regulations of each
jurisdiction in which it conducts its business, in each case with such
exceptions, individually or in the aggregate, as would not have a Material
Adverse Effect; each of the Company and its Subsidiaries has filed all notices,
reports, documents or other information (“Notices”)
required to be filed under applicable laws, rules and regulations, in each
case,
with such exceptions, individually or in the aggregate, as would not have a
Material Adverse Effect; and, except as otherwise specifically described in
each
of the
7
Disclosure
Package and the Prospectus, neither the Company nor any of its Subsidiaries
has
received any notification from any court or governmental body, authority or
agency, relating to the revocation or modification of any such Permit or to
the
effect that any additional authorization, approval, order, consent, license,
certificate, permit, registration or qualification (“Approvals”)
from
such regulatory authority is needed to be obtained by any of them, in any case
where it is reasonably expected that obtaining such Approvals or the failure
to
obtain such Approvals, individually or in the aggregate, would have a Material
Adverse Effect.
(xi) The
Company and its Subsidiaries have filed all necessary federal, state and foreign
income and franchise tax returns required to be filed prior to the date hereof
and paid all taxes shown as due thereon; all such tax returns are complete
and
correct in all material respects; all tax liabilities are adequately provided
for on the books of the Company and its Subsidiaries except to such extent
as
would not have a Material Adverse Effect; the Company and its Subsidiaries
have
made all necessary payroll tax payments; and the Company and its Subsidiaries
have no knowledge of any tax proceeding or action pending or threatened against
the Company or its Subsidiaries that, individually or in the aggregate, might
have a Material Adverse Effect.
(xii) Except
as
described in each of the Disclosure Package and the Prospectus, the Company
and
its Subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent licenses, trademarks, service marks and trade names necessary
to
conduct the business now operated by them, and neither the Company nor any
of
its Subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, patent licenses,
trademarks, service marks or trade names that, individually or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect.
(xiii)
At the
Closing, each of GMX and the Subsidiaries will have (i) good and Defensible
(as
defined below) title to all its interests in its producing natural gas and
oil
properties (including oil and gas ▇▇▇▇▇, producing leasehold interests and
appurtenant personal property) as described in the Disclosure Package and the
Prospectus as owned by it, (ii) investigated title in accordance with
customary industry procedures prior to acquiring any non-producing leasehold
properties (including undeveloped locations or leases held by production, and
those leases not held by production and including exploration prospects)
described in the Disclosure Package and the Prospectus as owned by it, (iii)
good and indefeasible title to its other real property as described in the
Disclosure Package and the Prospectus as owned by it and (iv) good title to
its
personal property as described in the Disclosure Package and the Prospectus
as
owned by it, in each case free and clear of all liens, claims, security
interests, equities, or other encumbrances except those (i) created, arising
under or securing the Credit Facility; (ii) described in the Disclosure Package
and the Prospectus or (iii) that do not materially interfere with the use or
value of such properties taken as a whole as described in the Disclosure Package
and the Prospectus. All real property and buildings held under lease or license
by the Company or the GMX Subsidiaries are held under valid and subsisting
and
enforceable leases or licenses with such exceptions as do not materially
interfere with the use of such properties taken as a whole as they have been
used in the past and are
8
proposed
to be used in the future as described in the Disclosure Package and the
Prospectus. As used herein, “Defensible” means, with respect to title to the
producing properties (including oil and gas ▇▇▇▇▇ and producing leasehold
interests) described in the Disclosure Package and the Prospectus as being
owned
by GMX or the Subsidiaries, that GMX or the Subsidiaries (i) are entitled to
receive not less than the net revenue interests of such properties as set forth
in the reserve report of ▇▇▇▇▇▇▇ & Associates in association with MHM
Petroleum Consultants, dated as of January 30, 2007 (the “Reserve
Report”)
of all
hydrocarbons and minerals produced, saved and marketed from such properties,
and
proceeds thereof, all without reduction, suspension or termination of such
interests throughout the productive life of such properties, and (ii) are
obligated to bear a share of the costs and expenses relating to the maintenance,
exploration, drilling, completion, development, operation, plugging and
abandonment of such properties not greater than the working interests of such
properties as set forth in the Reserve Report, without increase throughout
the
life of such properties.
(xiv) Except
as
described in each of the Disclosure Package and the Prospectus, there is no
pending action, suit or other proceeding involving the Company or any of its
Subsidiaries or any of their material assets for any failure of the Company
or
any of its Subsidiaries, or any predecessor thereof, to comply with any
requirements of federal, state or local regulation relating to air, water,
solid
waste management, hazardous or toxic substances, or the protection of health,
safety or the environment. Except as described in each of the Disclosure Package
and the Prospectus, none of the property owned or leased by the Company or
any
of its Subsidiaries is, to the best knowledge of the Company, contaminated
with
waste or hazardous or toxic substances in material amounts or in amounts that
pose a threat to employees or visitors, and neither the Company nor any of
its
Subsidiaries may be deemed an "owner or operator" of a "facility" or "vessel"
that owns, possesses, transports, generates or disposes of a "hazardous
substance" as those terms are defined in §9601 of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §9601
et seq.
(xv) No
labor
disturbance exists with the employees of the Company or any of its Subsidiaries
or is imminent that, individually or in the aggregate, would have a Material
Adverse Effect. None of the employees of the Company or any of its Subsidiaries
is represented by a union and, to the best knowledge of the Company and its
Subsidiaries, no union organizing activities are taking place. Neither the
Company nor any of its Subsidiaries has violated any federal, state or local
law
or foreign law relating to discrimination in hiring, promotion or pay of
employees, nor any applicable wage or hour laws, or the rules and regulations
thereunder, or analogous foreign laws and regulations, that would, individually
or in the aggregate, result in a Material Adverse Effect.
(xvi) The
Company and its Subsidiaries are in compliance in all material respects with
all
presently applicable provisions of the Employee Retirement Income Security
Act
of 1974, as amended, including the regulations and published interpretations
thereunder (“ERISA”);
no
“reportable event” (as defined in ERISA) has occurred with respect to any
“pension plan” (as defined in ERISA) for which the Company and its
9
Subsidiaries
would have any liability; the Company and its Subsidiaries have not incurred
and
do not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the “Code”);
and
each “pension plan” for which the Company or any of its Subsidiaries would have
any liability that is intended to be qualified under Section 401(a) of the
Code
is so qualified in all material respects, and nothing has occurred, whether
by
action or by failure to act, that would cause the loss of such
qualification.
(xvii) The
Company and its Subsidiaries maintain insurance of the types and in the amounts
generally deemed adequate for its business, including, but not limited to,
directors’ and officers’ insurance, insurance covering real and personal
property owned or leased by the Company and its Subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect. Neither the Company
nor any of its Subsidiaries has been refused any insurance coverage sought
or
applied for, and the Company has no reason to believe that it and its
Subsidiaries will not be able to renew their existing insurance coverage as
and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have
a
Material Adverse Effect.
(xviii) Neither
the Company nor any of its Subsidiaries is, or with the giving of notice or
lapse of time or both would be, in default or violation with respect to its
certificate of incorporation or by-laws. Neither the Company nor any of its
Subsidiaries is, or with the giving of notice or lapse of time or both would
be,
in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which the Company or
any
of its Subsidiaries is bound or to which any of the properties or assets owned
by the Company or any of its Subsidiaries is subject, or in violation of any
statutes, laws, ordinances or governmental rules or regulations or any orders
or
decrees to which it is subject, including, without limitation, Section 13
of the 1934 Act, which default or violation, individually or in the aggregate,
would have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has, at any time during the past five years, (A) made any unlawful
contributions to any candidate for any political office, or failed fully to
disclose any contribution in violation of law, or (B) made any payment to any
state, federal or foreign government official, or other person charged with
similar public or quasi-public duty (other than payment required or permitted
by
applicable law).
(xix) Other
than as set forth in each of the Disclosure Package and the Prospectus, there
are no legal or governmental proceedings pending to which the Company or any
of
its Subsidiaries is a party or of which any property of the Company or any
of
its Subsidiaries is the subject that, if determined adversely to the Company
or
any of its Subsidiaries, would individually or in the aggregate have a Material
Adverse Effect or that would materially and adversely affect the consummation
of
the transactions
10
contemplated
hereby or that is required to be disclosed in each of the Disclosure Package
or
the Prospectus; to the best of the Company’s knowledge, no such proceedings are
threatened or contemplated.
(xx) The
Company is not and, after giving effect to the offering and sale of the Shares,
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 (the “1940
Act”).
(xxi) At
the
earliest time after the filing of the Registration Statement at which the
Company or another offering participant made a bona
fide
offer
(within the meaning of Rule 164(a)(2) of the 1933 Act Rules and
Regulations) and as of the date hereof, the Company was not and is not an
“ineligible issuer” as such term is defined in Rule 405 of the 1933 Act Rules
and Regulations, without taking account of any determination by the SEC that
it
is not necessary that the Company be considered an “ineligible
issuer.”
(xxii) ▇▇▇▇▇,
▇▇▇▇▇▇ & Co., the accounting firm that has issued an opinion on the
financial statements filed with or incorporated by reference in and as a part
of
the Registration Statement, is an independent registered public accounting
firm
within the meaning of the 1933 Act and the 1933 Act Rules and Regulations and
the rules and regulations of the Public Company Accounting Oversight Board
(“PCAOB”)
of the
United States. The Company and each of its Subsidiaries maintains a system
of
internal accounting controls sufficient to provide reasonable assurance that:
(1) transactions are executed in accordance with management’s general or
specific authorization; (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (3) access
to
assets is permitted only in accordance with management’s general or specific
authorization; and (4) the recorded accounts for assets are compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect thereto. The consolidated financial statements and schedules of the
Company, including the notes thereto, filed with (or incorporated by reference)
and as a part of the Registration Statement, Disclosure Package or Prospectus,
present fairly the financial condition of the Company and its Subsidiaries
as of
the respective dates thereof and the consolidated results of operations and
changes in financial position and consolidated statements of cash flow for
the
respective periods covered thereby, all in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved except as otherwise disclosed therein. All adjustments necessary for
a
fair presentation of results for such periods have been made. The selected
financial data included or incorporated by reference in the Registration
Statement, Disclosure Package and Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with that of the
audited financial statements. Any operating or other statistical data included
or incorporated by reference in the Registration Statement, Disclosure Package
and Prospectus comply in all material respects with the 1933 Act and the 1933
Act Rules and Regulations and present fairly the information shown therein
and
are based on or derived from sources that the Company reasonably and in good
faith believes are reliable and accurate, and such data agree with the sources
from which they
11
are
derived. All non-GAAP financial information included (or incorporated by
reference) in the Registration Statement, Disclosure Package or Prospectus
complies in all material respects with the requirements of Regulation G and
Item
10 of Regulation S-K under the 1933 Act.
(xxiii) ▇▇▇▇▇▇▇
is a natural gas engineering firm from whose reserve reports information is
contained or incorporated by reference in the Registration Statement, the
Disclosure Package and the Prospectus, and acts as independent natural gas
engineers with respect to the Company. Other than (i) the production of reserves
in the ordinary course of business, (ii) intervening price fluctuations or
(iii)
as described in the Disclosure Package, the Company is not aware of any facts
or
circumstances that would result in a material adverse change in its proved
reserves in the aggregate, or the aggregate present value of estimated future
net revenues of the Company or the standardized measure of discounted future
net
cash flows therefrom, as described in the Disclosure Package and reflected
in
the reserve information as of the respective dates such information is given.
The Disclosure Package, including the oil and natural gas production and reserve
information and estimates of future net revenues and discounted future net
cash
flows, complies in all material respects with the applicable requirements of
Regulation S-X of the 1933 Act Rules and Regulations, Industry Guide 2 under
the
1933 Act and Statement of Financial Accounting Standards Board No. 69,
Disclosures
about Oil and Petroleum Producing Activities, as
amended to date (“SFAS 69”).
(xxiv) Except
as
disclosed in each of the Disclosure Package and the Prospectus, no holder of
any
security of the Company has any right to require registration of shares of
Common Stock or any other security of the Company because of the filing of
the
Registration Statement or the consummation of the transactions contemplated
hereby and, except as disclosed in each of the Disclosure Package and the
Prospectus, no person has the right to require registration under the 1933
Act
of any shares of Common Stock or other securities of the Company. No person
has
the right, contractual or otherwise, to cause the Company to permit such person
to underwrite the sale of any of the Shares. Except for this Agreement and
those
certain financial advisory agreements between the Company and each of Capital
One Southcoast, Inc., ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Incorporated, First Albany Capital
and ▇▇▇▇▇▇▇▇▇ Energy Partners, there are no contracts, agreements or
understandings between the Company or any of its Subsidiaries and any person
that would give rise to a valid claim against the Company, its Subsidiaries
or
any Placement Agent for a brokerage commission, finder’s fee or like payment in
connection with the issuance, purchase and sale of the Shares.
(xxv) The
Company has not distributed and, prior to the later to occur of (A) the Closing
Date and (B) completion of the distribution of the Shares, will not distribute
any offering material in connection with the offering and sale of the Shares
other than the Registration Statement, any Issuer Free Writing Prospectus
identified in Schedule
I
hereto, the
Disclosure Package and the Prospectus; it being understood that the posting
on
the Company’s website of the investor presentation dated January 27, 2007 shall
not be deemed to be a distribution of offering material.
12
(xxvi) The
Company has not taken and will not take, directly or indirectly, any action
designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Company's Common Stock, and
the Company is not aware of any such action taken or to be taken by affiliates
of the Company.
(xxvii) There
is
not currently and has not in the past been a failure on the part of the Company
or, to the Company’s knowledge, any of its respective directors or officers, in
their capacities as such, to comply with any applicable provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (“▇▇▇▇▇▇▇▇-▇▇▇▇▇”)
and
the rules and regulations promulgated in connection therewith, including
Sections 302, 402 and 906, and the statements contained in any certification
pursuant to such Act and related rules and regulations are complete and
correct.
(xxviii)
The
Company has established and maintains disclosure controls and procedures and
internal control over financial reporting as are currently required (as such
terms are defined in Rule 13a-15 and 15d-15 under the 1934 Act); the Company’s
disclosure controls and procedures (i) are designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is accumulated and communicated to management, including
the
principal executive and principal financial officer of the Company, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure, and that such information is recorded, processed,
summarized and reported, within the time periods specified in the 1934 Act
Rules
and Regulations; (ii) have been evaluated for effectiveness; and (iii) are
effective in all material respects to perform the functions for which they
were
established.
(xxix) Except
as
discussed with the Company’s auditors and audit committee and as disclosed in
each of the Disclosure Package and the Prospectus, (i) there are no significant
deficiencies or material weaknesses in the design or operation of internal
control over financial reporting that are reasonably likely to adversely affect
the Company's ability to record, process, summarize, and report financial data
and (ii) there is, and there has been, no fraud, whether or not material, that
involves management or other employees who have a role in the Company's internal
control over financial reporting.
(xxx) Since
the
date of the end of the last fiscal year for which audited financial statements
are included or incorporated by reference in each of the Disclosure Package
and
the Prospectus, there have been no significant changes in internal control
over
financial reporting or in other factors that could significantly affect internal
control over financial reporting, including any corrective actions with regard
to significant deficiencies and material weaknesses.
(xxxi) The
Company has received no written comments from the SEC staff regarding its
periodic or current reports under the 1934 Act that remain unresolved and have
not been disclosed in the Registration Statement, Disclosure Package and
Prospectus.
13
(xxxii) No
relationship, direct or indirect, exists between or among the Company and any
director, officer or stockholder of the Company, or any member of his or her
immediate family, or any customers or suppliers that is required to be described
in the Registration Statement, the Disclosure Package or the Prospectus and
that
is not so described and described as required in material compliance with such
requirement. There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any member of their respective immediate families,
except as disclosed in the Registration Statement, the Disclosure Package and
the Prospectus. The Company has not, in violation of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act,
directly or indirectly, extended or maintained credit, arranged for the
extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer of the
Company.
(xxxiii)
To the
best knowledge of the Company, no change in any laws or regulations is pending
that could reasonably be expected to be adopted and if adopted, is reasonably
expected to have, individually or in the aggregate with all such changes, a
Material Adverse Effect, except as set forth in or contemplated in each of
the
Disclosure Package and the Prospectus.
(xxxiv)
The
minute books of each of the Company and its Subsidiaries have been made
available to the Placement Agent and contain a complete summary of all meetings
and other actions of the directors and shareholders of each such entity in
all
material respects, and reflect all transactions referred to in such minutes
accurately in all material respects.
(xxxv) Neither
the Company nor any of its Subsidiaries, nor, to the Company’s knowledge, any
director, officer, agent, employee or other person associated with or acting
on
behalf of the Company or any of its Subsidiaries, has, directly or indirectly,
used any corporate funds for any unlawful contribution, gift, entertainment
or
other unlawful expense relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee or to foreign or domestic political parties or campaigns from corporate
funds; violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
(xxxvi)
The
operations of the Company and its Subsidiaries are and have been conducted
at
all times in compliance in all material respects with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes
of
all jurisdictions, the rules and regulations thereunder and any related or
similar rules, regulations or guidelines, issued, administered or enforced
by
any governmental agency (collectively, the “Money
Laundering Laws”),
and
no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its
Subsidiaries with respect to the Money Laundering Laws is pending, or to the
knowledge of the Company, threatened.
14
(xxxvii) Neither
the Company nor any of its Subsidiaries nor, to the knowledge of the Company,
any director, officer, agent, employee or affiliate of the Company or any of
its
Subsidiaries is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”);
and
the Company will not directly or indirectly use the proceeds of the offering,
or
lend, contribute or otherwise make available such proceeds to any Subsidiary,
joint venture partner or other person or entity that, to the Company’s
knowledge, will use such proceeds, for the purpose of financing the activities
of any person currently subject to any U.S. sanctions administered by
OFAC.
(xxxviii) No
customer of or supplier to the Company or any of its Subsidiaries has ceased
purchases or shipments of merchandise to the Company or indicated, to the
Company’s knowledge, an interest in decreasing or ceasing its purchases from the
Company or otherwise modifying its relationship with the Company, other than
in
the normal and ordinary course of business consistent with past practices in
a
manner which would not, singly or in the aggregate, result in a Material Adverse
Effect.
(b) Any
certificate signed by any officer of the Company and delivered to the Placement
Agent or to counsel for the Placement Agent shall be deemed a representation
and
warranty by the Company to the Placement Agent as to the matters covered
thereby.
4. Additional
Covenants.
The
Company covenants and agrees with the Placement Agent that:
(a) The
Company will timely transmit copies of the Prospectus, and any amendments or
supplements thereto, to the SEC for filing pursuant to Rule 424(b) of the
1933 Act Rules and Regulations.
(b) The
Company has furnished or will deliver to the Placement Agent and to counsel
for
the Placement Agent (i) such number of signed copies of the Registration
Statement as originally filed, including copies of exhibits thereto (other
than
any exhibits incorporated by reference therein), and any amendments and
supplements to the Registration Statement (including all documents incorporated
by reference therein), as may be reasonably requested by the Placement Agent
or
counsel for the Placement Agent and (ii) a signed copy of each consent and
certificate included or incorporated by reference in, or filed as an exhibit
to,
the Registration Statement as so amended or supplemented; the Company will
deliver to the Placement Agent as soon as practicable after the date of this
Agreement as many copies of the Disclosure Package and the Prospectus (including
all documents incorporated by reference therein) as the Placement Agent may
reasonably request for the purposes contemplated by the 1933 Act; the Company
will promptly advise the Placement Agent of any request of the SEC for amendment
of the Registration Statement or for supplement to the Disclosure Package or
the
Prospectus or for any additional information, and of the issuance by the SEC
or
any state or other jurisdiction or other regulatory body of any stop order
under
the 1933 Act or other order suspending the effectiveness of the Registration
Statement (as amended or supplemented) or preventing or suspending the use
of
any Preliminary Prospectus, Disclosure Package or the Prospectus or suspending
the qualification or registration of the Shares for offering or sale in any
jurisdiction, and of the institution or threat of any proceedings therefor,
of
which the Company shall have received
15
notice
or
otherwise have knowledge prior to the completion of the distribution of the
Shares; and the Company will use its best efforts to prevent the issuance of
any
such stop order or other order and, if issued, to secure the prompt removal
thereof.
(c) The
Company will obtain the Placement Agent’s consent before taking, or failing to
take, any action that would cause the Company to make an offer of Shares that
would constitute an Issuer Free Writing Prospectus or to be required to file
a
Free Writing Prospectus pursuant to Rule 433(d) of the 1933 Act Rules and
Regulations, other than the Issuer Free Writing Prospectuses, if any, listed
on
Schedule
I
hereto.
(d) The
Company will not take any action that would result in the Placement Agent being
required to file with the SEC pursuant to Rule 433(d) of the 1933 Act Rules
and
Regulations a Free Writing Prospectus prepared by or on behalf of the Placement
Agent that the Placement Agent otherwise would not have been required to file
thereunder.
(e) If
the
Disclosure Package is being used to solicit offers to buy the Shares at a time
when the Prospectus is not yet available to prospective purchasers and any
event
shall occur or condition exist as a result of which it is necessary to amend
or
supplement the Disclosure Package in writing in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or if, in the opinion of counsel for the Placement Agent, it is
necessary to amend or supplement the Disclosure Package to comply with
applicable law, the Company will forthwith prepare, file with the SEC and
furnish, at its own expense, to the Placement Agent, either amendments or
supplements to the Disclosure Package so that statements in the Disclosure
Package as so amended or supplemented will not, in light of the circumstances
when delivered to a prospective purchaser, be misleading or so that the
Disclosure Package, as amended or supplemented, will comply with
law.
(f) The
Company will not file any amendment or supplement to the Registration Statement,
the Disclosure Package, the Prospectus (or any other prospectus relating to
the
Shares filed pursuant to Rule 424(b) of the 1933 Act Rules and Regulations
that differs from the Prospectus as filed pursuant to such Rule 424(b)) and
will
not file any document under the 1934 Act before the termination of the offering
of the Shares by the Company if the document would be deemed to be incorporated
by reference into the Registration Statement, the Disclosure Package, or the
Prospectus, of which the Placement Agent shall not previously have been advised
and furnished with a copy or to which the Placement Agent shall have reasonably
objected or which is not in compliance with the 1933 Act Rules and Regulations;
and the Company will promptly notify the Placement Agent after it shall have
received notice thereof of the time when any amendment to the Registration
Statement becomes effective or when any supplement to, the Disclosure Package,
the Prospectus has been filed.
(g) During
the period when a prospectus (or in lieu thereof, the notice contemplated by
Rule 173(a) of the 1933 Act Rules and Regulations) relating to any of the Shares
is required to be delivered under the 1933 Act by the Placement Agent, the
Company will comply, at its own expense, with all requirements imposed by the
1933 Act and the 1933 Act Rules and Regulations, as now and hereafter amended,
and by the rules and regulations of the SEC thereunder, as from time to time
in
force, as necessary to permit the continuance of sales of
16
or
dealing in the Shares during such period in accordance with the provisions
hereof and as contemplated by the Prospectus.
(h) If,
during the period when a prospectus (or in lieu thereof, the notice contemplated
by Rule 173(a) of the 1933 Act Rules and Regulations) relating to any of the
Shares is required to be delivered under the 1933 Act by the Placement Agent,
(i) any event relating to or affecting the Company or of which the Company
shall
be advised in writing by the Placement Agent shall occur as a result of which,
in the opinion of the Company or the Placement Agent, the Disclosure Package
or
the Prospectus as then amended or supplemented would include any 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, (ii) any event shall occur as a result of which
any Free Writing Prospectus conflicted or would conflict with the information
in
the Registration Statement, or (iii) it shall be necessary to amend or
supplement the Registration Statement, the Disclosure Package or the Prospectus
to comply with the 1933 Act, the 1933 Act Rules and Regulations, the 1934 Act
or
the 1934 Act Rules and Regulations, the Company will forthwith at its expense
prepare and file with the SEC, and furnish to the Placement Agent a reasonable
number of copies of, such amendment or supplement or other filing that will
correct such statement or omission or effect such compliance.
(i) During
the period when a prospectus (or in lieu thereof, the notice contemplated by
Rule 173(a) of the 1933 Act Rules and Regulations) relating to any of the Shares
is required to be delivered under the 1933 Act by any Placement Agent, the
Company will furnish such proper information as may be lawfully required and
otherwise cooperate in qualifying the Shares for offer and sale under the
securities or blue sky laws of such jurisdictions as the Placement Agent may
reasonably designate and will file and make in each year such statements or
reports as are or may be reasonably required by the laws of such jurisdictions;
provided,
however,
that
the Company shall not be required to qualify as a foreign corporation or shall
be required to qualify as a dealer in securities or to file a general consent
to
service of process under the laws of any jurisdiction.
(j) In
accordance with Section 11(a) of the 1933 Act and Rule 158 of the 1933 Act
Rules
and Regulations, the Company has made generally available to its security
holders and to holders of the Shares an earnings statement (which need not
be
audited) in reasonable detail covering the 12 months beginning not later than
the first day of the month next succeeding the month in which occurred the
effective date (within the meaning of Rule 158) of the Registration
Statement.
(k) The
Company will apply the proceeds from the sale of the Shares as set forth in
the
description under “Use
of
Proceeds”
in
the
Disclosure Package and the Prospectus, which description complies in all
respects with the requirements of Item 504 of Regulation S-K.
(l) The
Company will promptly provide the Placement Agent with copies of all
correspondence to and from, and all documents issued to and by, the SEC in
connection with the registration of the Shares under the 1933 Act or relating
to
any documents incorporated by reference into the Registration Statement, the
Disclosure Package or the Prospectus.
17
(m) Prior
to
the Closing Date, the Company will furnish to the Placement Agent, as soon
as
they have been prepared, copies of any unaudited interim consolidated financial
statements of the Company and its Subsidiaries for any periods subsequent to
the
periods covered by the financial statements appearing in the Registration
Statement and the Prospectus or incorporated therein by reference.
(n) The
Company will use its best efforts to obtain approval for, and maintain the
listing of the Shares for trading on, the Nasdaq Global Market.
(o) The
Company will cause its directors and officers to furnish to the Placement Agent,
on or prior to the date of this Agreement, a letter or letters, in form and
substance satisfactory to counsel for the Placement Agent, pursuant to which
each such person shall agree not to, and the Company will not, and will not
publicly announce any intention to, during the period ending 90 days after
the
date of the Prospectus, without the prior written consent of the Placement
Agent, directly or indirectly, (1) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or otherwise transfer
or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock; (2) enter
into
any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of the Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise; or (3) file any registration statement with the SEC relating to
the
offering of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock.
The
restrictions contained in the preceding paragraph shall not apply to (a) the
issuance by the Company of shares of Common Stock upon the exercise of an option
or warrant or the conversion of a security outstanding on the date hereof of
which the Placement Agent has been advised in writing or the granting or
exercise of options or stock purchase rights pursuant to the Company’s stock
option and stock purchase plans, whenever granted; provided that the underlying
shares of Common Stock issued to any person who has delivered a lock−up
agreement pursuant to this Section 4(o) hereto shall continue to be subject
to
the restrictions contained in the immediately preceding paragraph or such
lock−up agreement, as applicable, except to the extent of any shares sold in
order to raise funds sufficient to pay the exercise price and any tax on
exercise of options; (b) the issuance by the Company of shares of Common Stock
or options to purchase shares of Common Stock to, or the repurchase by the
Company of unvested shares of Common Stock upon termination of service from,
an
employee, director, consultant other service provider, pursuant to the Company's
stock option or stock purchase plans in effect on the date hereof or approved
by
the stockholders before the date hereof; provided that the shares of Common
Stock or options to purchase shares of Common Stock issued to the Company's
directors and executive officers shall be subject to the restrictions contained
in the lock−up agreements delivered pursuant to this Section 4(o), except to the
extent of any shares sold in order to raise funds sufficient to pay the exercise
price and any tax on exercise of options; and (c) the filing by the Company
of
any registration statement with the Commission on Form S−8 relating to the
offering of securities pursuant to the terms of a stock
18
option
or
stock purchase plan of the Company in effect on the date hereof or approved
by
the stockholders before the date hereof.
(p) Notwithstanding
the foregoing, if (1) during the last 17 days of the 90−day restricted period
the Company issues an earnings release or material news or a material event
relating to the Company occurs; or (2) prior to the expiration of the 90−day
restricted period, the Company announces that it will release earnings results
during the 16−day period beginning on the last day of the 90−day period, the
restrictions imposed by this agreement shall continue to apply until the
expiration of the 18−day period beginning on the issuance of the earnings
release or the occurrence of the material news or material event. The Company
shall promptly notify the Placement Agent of any earnings release, news or
event
that may give rise to an extension of the initial 90−day restricted
period.
(q) At
the
time of execution of this Agreement and on the Closing, the Placement Agent
shall have received from ▇▇▇▇▇▇▇, a letter or letters, in form and substance
satisfactory to the Placement Agent, addressed to the Placement Agent with
respect to: (i) the estimated quatities of the Company’s proved net reserves,
(ii) the future net revenues from those reserves, (iii) their present value
as
set forth in the Registration Statement and the Prospectus and (iv) such related
matters as the Placement Agent shall reasonably request.
(r) The
Company and its Subsidiaries will maintain and keep accurate books and records
reflecting their assets and maintain internal accounting controls that provide
reasonable assurance that (1) transactions are executed in accordance with
management's general or specific authorization, (2) transactions are recorded
as
necessary to permit the preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles and
to
maintain accountability for the assets of the Company and its Subsidiaries,
(3)
access to the assets of the Company and its Subsidiaries is permitted only
in
accordance with management's general or specific authorization, and (4) the
recorded accounts of the assets of the Company and its Subsidiaries are compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(s) During
any period in which a prospectus (or in lieu thereof, a notice contemplated
by
Rule 173(a) of the 1933 Act Rules and Regulations) is required by law to be
delivered by the Placement Agent, the Company will promptly file all documents
required to be filed with the SEC pursuant to Sections 13, 14 or 15(d) of the
1934 Act and will furnish to its security holders annual reports containing
financial statements audited by independent public accountants and quarterly
reports containing financial statements and financial information, which may
be
unaudited. The Company will deliver to the Placement Agent similar reports
with
respect to any significant Subsidiaries, as that term is defined in the 1933
Act
Rules and Regulations, that are not consolidated in the Company's financial
statements. Any report, document or other information required to be furnished
under this paragraph (s) shall be furnished as soon as practicable after such
report, document or information becomes available.
(t) The
Company will comply with all applicable securities and other applicable laws,
rules and regulations, including, without limitation, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of
2002, and will use its best efforts to cause the Company's directors and
officers, in their
19
capacities
as such, to comply with such laws, rules and regulations, including, without
limitation, the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
(u) Except
as
required by law, prior to the Closing Date, the Company will issue no press
release or other communication, directly or indirectly, and will hold no press
conferences with respect to the Company or any of its Subsidiaries, the
financial condition, results of operations, business, properties, assets or
liabilities of the Company or any of its Subsidiaries, or the offering of the
Shares, without the Placement Agent’s prior written consent which shall include
e-mail. In the event that any such disclosure is required by law, the Company
will promptly notify the Placement Agent of such required disclosure prior
to
issuing any press release or other communication or holding any press
conference, and, to the extent reasonably practicable, the Company will permit
the Placement Agent to comment on any press release or other
communication.
5. Conditions
of Closing. The
Closing shall be subject to the accuracy, as of the date hereof and as of the
Closing Date, of the representations and warranties of the Company contained
herein, to the performance by the Company of its covenants and obligations
hereunder, and to the following additional conditions, and the Company shall
not
issue or sell the Shares unless and until all of the conditions of this Section
5 shall have been satisfied or waived by the Placement Agent:
(a) The
Registration Statement has been declared effective by the SEC and the offering
of the Shares by the Company complies with Rule 415 of the 1933 Act Rules and
Regulations. All filings required by Rule 424, Rule 430A, Rule 430B and Rule
433(d) of the 1933 Act Rules and Regulations will be promptly made. No stop
order suspending the effectiveness of the Registration Statement, as amended
from time to time, shall have been issued and no proceeding for that purpose
shall have been initiated or, to the knowledge of the Company or the Placement
Agent, threatened or contemplated by the SEC, and any request of the SEC for
additional information (to be included in the Registration Statement, the
Disclosure Package or the Prospectus or otherwise) shall have been complied
with
to the reasonable satisfaction of the Placement Agent.
(b) The
Placement Agent shall not have advised the Company on or prior to the Closing
Date, that the Registration Statement, the Disclosure Package or Prospectus
or
any amendment or supplement thereto contains an untrue statement of fact that,
in the opinion of counsel to the Placement Agent, is material, or omits to
state
a fact that, in the opinion of such counsel, is material and is required to
be
stated therein or is necessary to make the statements therein, in light of
the
circumstances under which they were made, not misleading.
(c) On
the
Closing Date, the Placement Agent shall have received the opinion of ▇▇▇▇▇
&
▇▇▇▇▇▇▇, PC, counsel for the Company, addressed to the Placement Agent and
the
Investors and dated the Closing Date, in substance as set forth on Exhibit
A
hereto.
(d) On
the
Closing Date, the Placement Agent shall have received the opinion of ▇▇▇▇▇
▇▇▇▇
LLP, counsel to the Placement Agent, addressed to the Placement Agent and dated
the Closing Date, with respect to such matters as the Placement Agent may
reasonably
20
require;
and the Company shall have furnished to such counsel such documents as it may
reasonably request for the purposes of enabling it to review or pass on such
matters.
(e) On
the
Closing Date, the Placement Agent shall have received the opinion of ▇▇▇▇▇▇
& ▇▇▇▇ LLP, special counsel to the Placement Agent, addressed to the
Placement Agent and dated the Closing Date, with respect to such matters as
the
Placement Agent may reasonably require; and the Company shall have furnished
to
such counsel such documents as it may reasonably request for the purposes of
enabling it to review or pass on such matters.
(f) On
the
date of this Agreement and on the Closing Date, the Placement Agent shall have
received from ▇▇▇▇▇, ▇▇▇▇▇▇ & Co., a letter or letters, dated the date of
this Agreement and the Closing Date, respectively, in form and substance
satisfactory to the Placement Agent and counsel for the Placement Agent,
confirming that they are independent registered public accountants with respect
to the Company within the meaning of the 1933 Act and the published Rules and
Regulations and the rules and regulations of the PCAOB, and stating the
conclusions and findings of such firm with respect to the financial information
and other matters ordinarily covered by accountants’ “comfort letters” to
placement agents in connection with registered public offerings.
(g) On
the
date of this Agreement, the Placement Agent shall have received from ▇▇▇▇▇▇▇
a
letter or letters, in form and substance satisfactory to the Placement Agent,
addressed to the Placement Agent with respect to: (i) the estimated quantities
of the Company’s proved net reserves, (ii) the future net revenues from those
reserves, (iii) their present value as set forth in the Registration Statement
and the Prospectus and (iv) such related matters as the Placement Agent shall
reasonably request.
(h) Except
as
contemplated in each of the Disclosure Package and the Prospectus, (i) neither
the Company nor any of its Subsidiaries shall have sustained since the date
of
the latest audited financial statements included or incorporated by reference
in
the Disclosure Package and the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree; and (ii) subsequent to the respective dates as of which information
is given in the Registration Statement, the Disclosure Package and the
Prospectus, neither the Company nor any of its Subsidiaries shall have incurred
any liability or obligation, direct or contingent, or entered into any
transactions, and there shall not have been any change in the capital stock
or
short-term or long-term debt of the Company and its Subsidiaries or any change,
or any development involving or which is reasonably expected to involve a
prospective change in the condition (financial or other), net worth, business,
affairs, management, results of operations or cash flow of the Company or its
Subsidiaries, the effect of which, in any such case described in clause (i)
or
(ii), is in your reasonable judgment so material or adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered on such Closing Date on the terms and in the
manner contemplated in each of the Disclosure Package and the
Prospectus.
(i) There
shall not have occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New York Stock Exchange
or
The Nasdaq Global Market or the establishing on such exchanges by the SEC or
by
such exchanges of minimum or maximum prices that are not in force and effect
on
the date hereof; (ii) a suspension or material limitation in trading in the
Company’s securities on the Nasdaq Global Market or the establishing on such
exchange by the SEC or by such exchange
21
of
minimum or maximum prices that are not in force and effect on the date hereof;
(iii) a general moratorium on commercial banking activities declared by either
federal or any state authorities; (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of a
national emergency or war, which in your reasonable judgment makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares in the manner contemplated in the Prospectus; or (v) any calamity
or crisis, change in national, international or world affairs, act of God,
change in the international or domestic markets, or change in the existing
financial, political or economic conditions in the United States or elsewhere,
that in your reasonable judgment makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares in the manner
contemplated in each of the Disclosure Package and the Prospectus.
(j) The
Placement Agent shall have received certificates, dated the Closing Date and
signed by the Chief Executive Officer and the Chief Financial Officer of the
Company, in their capacities as such, stating that:
(i) the
conditions set forth in Section 5(a) have been fully satisfied;
(ii) they
have
carefully examined the Registration Statement, the Disclosure Package and the
Prospectus as amended or supplemented and all documents incorporated by
reference therein and nothing has come to their attention that would lead them
to believe that any of the Registration Statement, the Disclosure Package or
the
Prospectus, or any amendment or supplement thereto or any documents incorporated
by reference therein as of their respective effective, issue or filing dates,
contained, and the Prospectus as amended or supplemented and all documents
incorporated by reference therein and when read together with the documents
incorporated by reference therein, at such Closing Date, contains any untrue
statement of a material fact, or omits to state a 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;
(iii) since
the
Effective Date, there has occurred no event required to be set forth in an
amendment or supplement to the Registration Statement, the Disclosure Package
or
the Prospectus which has not been so set forth; there has been no Issuer Free
Writing Prospectus required to be filed under Rule 433(d) of the 1933 Act Rules
and Regulations that has not been so filed; and there has been no document
required to be filed under the 1934 Act and the 1934 Act Rules and Regulations
that upon such filing would be deemed to be incorporated by reference into
the
Disclosure Package or the Prospectus that has not been so filed;
(iv) all
representations and warranties made herein by the Company are true and correct
in all material respects (except for those representations and warranties which
are qualified by materiality, in which case such representations and warranties
shall be true and correct in all respects) at such Closing Date, with the same
effect as if made on and as of such Closing Date, and all agreements herein
to
be performed or
22
complied
with by the Company on or prior to such Closing Date have been duly performed
and complied with by the Company;
(v) neither
the Company nor any of its Subsidiaries has sustained since the date of the
latest audited financial statements included or incorporated by reference in
each of the Disclosure Package and the Prospectus any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree; and
(vi) except
as
disclosed in each of the Disclosure Package and the Prospectus, subsequent
to
the respective dates as of which information is given in the Registration
Statement, each of the Disclosure Package and the Prospectus, neither the
Company nor any of its Subsidiaries has incurred any liabilities or obligations,
direct or contingent, other than in the ordinary course of business, or entered
into any transactions not in the ordinary course of business, which in either
case are material to the Company or such Subsidiary; and there has not been
any
change in the capital stock or material increase in the short-term debt or
long-term debt of the Company or any of its Subsidiaries or any material adverse
change or any development involving or that is reasonably expected to involve
a
prospective material adverse change, in the condition (financial or other),
net
worth, business, affairs, management, results of operations or cash flow of
the
Company and its Subsidiaries taken as a whole; and there has been no dividend
or
distribution of any kind, paid or made by the Company on any class of its
capital stock.
(k) The
Company shall have furnished to the Placement Agent at the Closing Date such
further information, opinions, certificates, letters and documents as the
Placement Agent may have reasonably requested.
(l) The
Shares shall have been listed for trading on The Nasdaq Global
Market.
(m) The
Placement Agent shall have received duly and validly executed letter agreements
referred to in Section 4(o) hereof.
(n) All
such
opinions, certificates, letters and documents will be in compliance with the
provisions hereof only if they are satisfactory in form and substance to the
Placement Agent and to ▇▇▇▇▇ ▇▇▇▇ LLP, counsel for the Placement Agent. The
Company will furnish the Placement Agent with such signed and conformed copies
of such opinions, certificates, letters and documents as the Placement Agent
may
request.
(o) If
any of
the conditions specified above in this Section 5 shall not have been satisfied
at or prior to the Closing Date or waived by the Placement Agent in writing,
this Agreement may be terminated by the Placement Agent on written notice to
the
Company, whereupon the Company shall not issue or sell the Shares.
6. Indemnification
and Contribution.
23
(a) The
Company will indemnify and hold harmless the Placement Agent from and against
any losses, damages or liabilities, joint or several, to which the Placement
Agent may become subject, under the 1933 Act or otherwise, insofar as such
losses, damages or liabilities (or actions or claims in respect thereof) arise
out of or are based upon (i) an untrue statement or alleged untrue statement
of
a material fact contained (A) in any Preliminary Prospectus, the Registration
Statement, any Issuer Free Writing Prospectus that the Company has filed or
is
required to file pursuant to Rule 433(d) of the 1933 Act Rules and Regulations,
the Prospectus or any other prospectus relating to the Shares, or any amendment
or supplement thereto, (B) in any blue sky application or other document
executed by the Company or based on any information furnished in writing by
the
Company, filed in any state or other jurisdiction in order to qualify any or
all
of the Shares under the securities laws thereof (the “Blue
Sky Application”)
or (C)
in any materials or information provided to investors by, or with the approval
of, the Company in connection with the marketing of the offering of the Shares
(“Marketing
Materials”),
including any road show or investor presentations made to investors by the
Company (whether in person or electronically), when read together with the
Registration Statement and the Prospectus, (ii) the omission or alleged omission
to state in any Preliminary Prospectus, the Registration Statement, any Issuer
Free Writing Prospectus that the Company has filed or is required to file
pursuant to Rule 433(d) of the 1933 Act Rules and Regulations, the Prospectus
or
any other prospectus relating to the Shares, or any amendment or supplement
thereto or in any Blue Sky Application or in any Marketing Materials, when
read
together with the Registration Statement and the Prospectus, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any act or failure to act or any alleged act or failure
to
act by the Placement Agent in connection with, or relating in any manner to,
the
Shares or the offering contemplated hereby, and that is the result of the
matters giving rise to any loss, damage or liabilities (or actions or claims
in
respect thereof) arising out of or based upon matters covered by clause (i)
or
(ii) above (provided that the Company shall not be liable under this clause
(iii) to the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, damage or liabilities (or actions or
claims in respect thereof) resulted directly from any such acts or failures
to
act undertaken or omitted to be taken by the Placement Agent through its gross
negligence or willful misconduct), and will reimburse the Placement Agent
promptly upon demand for any legal or other expenses incurred by the Placement
Agent in connection with investigating, preparing, pursuing or defending against
or appearing as a third party witness in connection with any such loss, damage,
liability or action or claim, including, without limitation, any investigation
or proceeding by any governmental agency or body, commenced or threatened,
including the reasonable fees and expenses of counsel to the indemnified party,
as such expenses are incurred (including such losses, damages, liabilities
or
expenses to the extent of the aggregate amount paid in settlement of any such
action or claim, provided that (subject to Section 6(d) hereof) any such
settlement is effected with the written consent of the Company); provided,
however, that
the
Company shall not be liable in any such case to the extent, but only to the
extent, that any such loss, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement, any Issuer
Free
Writing Prospectus that the Company has filed or is required to file pursuant
to
Rule 433(d) of the 1933 Act Rules and Regulations, the Prospectus or any other
prospectus relating to the Shares, or any such amendment or supplement, or
in
any Blue Sky Application or in any Marketing Materials, read together with
the
Registration Statement and the Prospectus, in reliance upon and in
24
conformity
with written information relating to the Placement Agent furnished to the
Company by the Placement Agent expressly for use in the preparation thereof
(as
provided in Section 12 hereof); provided,
further,
that
the Company shall not be liable in any such case to the extent, but only to
the
extent, that any such loss, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, any Issuer Free Writing Prospectus listed
on
Schedule
I
hereto,
the Prospectus or any other prospectus relating to the Shares, or any such
amendment or supplement, if the Placement Agent failed to convey the Disclosure
Package to the investor making the claim prior to the Initial Time of Sale
or if
such untrue statement or omission was made in a Preliminary Prospectus, such
statement or omission was corrected in the Disclosure Package prior to such
time.
(b) The
Placement Agent will indemnify and hold harmless the Company from and against
any losses, damages or liabilities to which the Company may become subject,
under the 1933 Act or otherwise, insofar as such losses, damages or liabilities
(or actions or claims in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any
Preliminary Prospectus, the Registration Statement, any Issuer Free Writing
Prospectus that the Company has filed or is required to file pursuant to Rule
433(d) of the 1933 Act Rules and Regulations, the Prospectus or any other
prospectus relating to the Shares, or any amendment 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 such untrue statement or alleged untrue statement or omission
or
alleged omission was made in (i) any Preliminary Prospectus, the Registration
Statement, any Issuer Free Writing Prospectus that the Company has filed or
is
required to file pursuant to Rule 433(d) of the 1933 Act Rules and Regulations,
the Prospectus or any other prospectus relating to the Shares, or any such
amendment or supplement, in reliance upon and in conformity with written
information relating to the Placement Agent furnished to the Company by the
Placement Agent, expressly for use in the preparation thereof (as provided
in
Section 12 hereof) or (ii) any Preliminary Prospectus, any Issuer Free Writing
Prospectus listed on Schedule
I
hereto,
the Prospectus or any other prospectus relating to the Shares, or any such
amendment or supplement, if the Placement Agent failed to convey the Disclosure
Package to the investor making the claim prior to the Initial Time of Sale.
The
Placement Agent will reimburse the Company for any legal or other expenses
incurred by the Company in connection with investigating or defending any such
action or claim as such expenses are incurred (including such losses, damages,
liabilities or expenses to the extent of the aggregate amount paid in settlement
of any such action or claim, provided that (subject to Section 6(c) hereof)
any
such settlement is effected with the written consent of the Placement Agent).
Notwithstanding the provisions of this Section 6(b), in no event shall any
indemnity by the Placement Agent under this Section 6(b) exceed the total
compensation received by such Placement Agent in accordance with this
Agreement.
(c) Promptly
after receipt by an indemnified party under Section 6(a) or 6(b) hereof of
notice of the commencement of any action, such indemnified party shall, if
a
claim in respect thereof is to be made against an indemnifying party under
Section 6(a) or 6(b) hereof, notify each such indemnifying party in writing
of
the commencement thereof, but the failure so to notify such indemnifying party
shall not relieve such indemnifying party from any liability except to the
extent that it has been prejudiced in any material respect by such failure
or
from
25
any
liability that it may have to any such indemnified party otherwise than under
Section 6(a) or 6(b) hereof. In case any such action shall be brought
against any such indemnified party and it shall notify each indemnifying party
of the commencement thereof, each such indemnifying party shall be entitled
to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party under Section 6(a) or 6(b) hereof similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of such indemnified party, be
counsel to such indemnifying party), and, after notice from such indemnifying
party to such indemnified party of its election so to assume the defense
thereof, such indemnifying party shall not be liable to such indemnified party
under Section 6(a) or 6(b) hereof for any legal expenses of other counsel or
any
other expenses, in each case subsequently incurred by such indemnified party,
in
connection with the defense thereof other than reasonable costs of
investigation. The indemnified party shall have the right to employ its own
counsel in any such action, but the fees and expenses of such counsel shall
be
at the expense of such indemnified party unless (i) the employment of
counsel by such indemnified party at the expense of the indemnifying party
has
been authorized by the indemnifying party, (ii) the indemnified party shall
have been advised by such counsel that there may be a conflict of interest
between the indemnifying party and the indemnified party in the conduct of
the
defense, or certain aspects of the defense, of such action (in which case the
indemnifying party shall not have the right to direct the defense of such action
with respect to those matters or aspects of the defense on which a conflict
exists or may exist on behalf of the indemnified party) or (iii) the
indemnifying party shall not in fact have employed counsel reasonably
satisfactory to such indemnified party to assume the defense of such action,
in
any of which events such fees and expenses to the extent applicable shall be
borne, and shall be paid as incurred, by the indemnifying party. If at any
time
such indemnified party shall have requested such indemnifying party under
Section 6(a) or 6(b) hereof to reimburse such indemnified party for fees and
expenses of counsel, such indemnifying party agrees that it shall be liable
for
any settlement of the nature contemplated by Section 6(a) or 6(b) hereof
effected without its written consent if (I) such settlement is entered into
more
than 45 days after receipt by such indemnifying party of such request for
reimbursement, (II) such indemnifying party shall have received notice of the
terms of such settlement at least 30 days prior to such settlement being entered
into and (III) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request for reimbursement prior to
the
date of such settlement. No such indemnifying party shall (1) without the
written consent of such indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action, claim or proceeding in respect of which indemnification
or
contribution may be sought hereunder (whether or not such indemnified party
is
an actual or potential party to such action, claim or proceeding) unless such
settlement, compromise or judgment (A) includes an unconditional release of
such
indemnified party from all liability arising out of such action, claim or
proceeding and (B) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any such indemnified party
or (2) be liable for any settlement or any such action effected without its
written consent, but if settled with the consent of the indemnifying party
or if
there be a final judgment of the plaintiff in any such action, the indemnifying
party agrees to indemnify and hold harmless any indemnified party from and
against any loss or liability by reason of such settlement or judgment. In
no
event shall such indemnifying parties be liable for the fees and expenses of
more than one counsel, in addition to any local counsel, for all such
indemnified parties in
26
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.
(d) If
the
indemnification provided for in this Section 6 is by its terms due and owing
but
is unavailable or insufficient to indemnify or hold harmless an indemnified
party under Section 6(a) or 6(b) hereof in respect of any losses, damages or
liabilities (or actions or claims in respect thereof) referred to therein,
then
each indemnifying party under Section 6(a) or 6(b) hereof shall contribute
to
the amount paid or payable by such indemnified party as a result of such losses,
damages or liabilities (or actions or claims in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Placement Agent, on the other hand, from
the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under Section 6(c) hereof and such
indemnifying party was prejudiced in a material respect by such failure, then
each such indemnifying party shall contribute to such amount paid or payable
by
such indemnified party in such proportion as is appropriate to reflect not
only
such relative benefits but also the relative fault, as applicable, of the
Company, on the one hand, and the Placement Agent, on the other hand, in
connection with the statements or omissions that resulted in such losses,
damages or liabilities (or actions or claims in respect thereof), as well as
any
other relevant equitable considerations. The relative benefits received by,
as
applicable, the Company, on the one hand, and the Placement Agent, on the other
hand, shall be deemed to be in the same proportion as the total net proceeds
from such offering (before deducting expenses) received by the Company bear
to
the portion of the total Placement Fee received by the Placement Agent. The
relative fault, as applicable, of the Company, on the one hand, and the
Placement Agent, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or the Placement Agent,
on
the other hand, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Placement Agent agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by
pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to above in this Section 6(d). The
amount paid or payable by such an indemnified party as a result of the losses,
damages or liabilities (or actions or claims in respect thereof) referred to
above in this Section 6(d) shall be deemed to include any legal or other
expenses incurred by such indemnified party in connection with investigating
or
defending any such action or claim. Notwithstanding the provisions of this
Section 6(d), the Placement Agent shall not be required to contribute any amount
in excess of the amount by which the total price at which the Shares were sold
to the Investors exceeds the amount of any damages that the Placement Agent
has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall
be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The
obligations of the Company under this Section 6 shall be in addition to any
liability that the Company may otherwise have and shall extend, upon the same
terms and conditions, to each officer, director, employee, agent or other
representative and to each person, if any, who controls the Placement Agent
within the meaning of the 1933 Act; and the
27
obligations
of the Placement Agent under this Section 6 shall be in addition to any
liability that the Placement Agent may otherwise have and shall extend, upon
the
same terms and conditions, to each officer and director of the Company who
signed the Registration Statement and to each person, if any, who controls
the
Company within the meaning of the 1933 Act
(f) The
parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations
regarding the provisions hereof, including, without limitation, the provisions
of this Section 6, and are fully informed regarding such provisions. They
further acknowledge that the provisions of this Section 6 fairly allocate the
risks in light of the ability of the parties to investigate the Company and
its
business in order to assure that adequate disclosure is made in the Registration
Statement, any Preliminary Prospectus, the Disclosure Package, the Prospectus,
and any supplement or amendment thereof, as required by the 1933
Act.
7. Representations
and Agreements to Survive Delivery.
The
respective representations, warranties, agreements and statements of the Company
and the Placement Agent, as set forth in this Agreement or made by or on behalf
of them, respectively, pursuant to this Agreement, shall remain operative and
in
full force and effect regardless of any investigation (or any statement as
to
the results thereof) made by or on behalf of the Placement Agent or any
controlling person of the Placement Agent, the Company or any of its officers,
directors or any controlling persons, and shall survive the
Closing.
8. [Reserved].
9. Effective
Date and Termination.
This
Agreement may be terminated by the Placement Agent at any time at or prior
to
the Closing Date (by telephone, facsimile or telegram, confirmed by letter)
if
any condition specified in Section 5 hereof shall not have been satisfied on
or
prior to the Closing Date; provided, however, that the provisions of this
Section 9 and of Section 6 and Section 10 hereof shall at all times be
effective. Any such termination shall be without liability of any party to
any
other party except as provided in Section 6 or Section 10 hereof.
10.
Costs
and Expenses. The
Company, whether or not the transactions contemplated hereby are consummated
or
this Agreement is terminated, will bear and pay the costs and expenses incident
to the registration of the Shares and offering thereof, including, without
limitation, (a) all expenses (including stock transfer taxes) incurred in
connection with the delivery to the several Investors of the Shares, the filing
fees of the SEC, and the fees and expenses of the Company's counsel and
accountants, (b) the preparation, printing, filing, delivery and shipping of
the
Registration Statement, each Preliminary Prospectus, the Disclosure Package,
any
Free Writing Prospectus, the Prospectus and any amendments or supplements
thereto and the printing, delivery and shipping of this Agreement and other
offering documents, including the Blue Sky Memoranda, and any instruments or
documents related to any of the foregoing, (c) the furnishing of copies of
such
documents to the Placement Agent, (d) the registration or qualification of
the
Shares for offering and sale under the securities laws of the various states
and
other jurisdictions, (e) the filing fees of the NASD (if any), (f) the fees
and
disbursements of counsel to the Placement Agent relating to the Shares and
the
offering thereof, including, without limitation, relating to any review of
the
offering by the NASD, (g) all printing
28
and
engraving costs related to preparation of the certificates for the Shares,
including transfer agent and registrar fees, (h) all fees and expenses relating
to the listing of the Shares for trading on The Nasdaq Global Market,
(i) the costs and expenses relating to any investor presentations or any
“road show” undertaken in connection with the marketing of the offering of the
Shares, including, without limitation, expenses associated with the production
of road show slides and graphics, fees and expenses of any consultants engaged
in connection with the road show presentations, travel and lodging expenses
of
the representatives and officers or representatives of the Company or the
Placement Agent and any such consultants, and the cost of any aircraft chartered
in connection with the road show and (j) all of the other costs and expenses
incident to the performance by the Company of the registration and offering
of
the Shares; provided, that the Placement Agent will bear and pay any advertising
costs and expenses incurred by the Placement Agent incident to the offering
of
the Shares. Notwithstanding the foregoing, in no event shall the Company be
obligated to reimburse the Placement Agent for fees and expenses, including
fees
and expenses of counsel to the Placement Agent, in excess of $125,000 in the
aggregate without the prior agreement of the Company. The Company shall
reimburse the Placement Agent within 10 days of receiving an invoice (and such
other supporting documentation as may be reasonably requested by the Company)
from the Placement Agent for such costs and expenses.
11. Notices.
All
notices or communications hereunder, except as herein otherwise specifically
provided, shall be in writing and, if sent to the Placement Agent, shall be
mailed, delivered, sent by facsimile transmission, or telegraphed and confirmed,
to ▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, facsimile number (▇▇▇)
▇▇▇-▇▇▇▇, with a copy (which shall not constitute notice) to: ▇▇▇▇▇ ▇▇▇▇ LLP,
One Metropolitan Square, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq., facsimile number (▇▇▇) ▇▇▇-▇▇▇▇; or if
sent
to the Company, shall be mailed, delivered, sent by facsimile transmission,
or
telegraphed and confirmed to GMX Resources Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer, facsimile
number (▇▇▇) ▇▇▇-▇▇▇▇, with a copy (which shall not constitute notice) to:
▇▇▇▇▇
& ▇▇▇▇▇▇▇ PC, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq., facsimile number (▇▇▇) ▇▇▇-▇▇▇▇.
12. Information
Furnished by Placement Agent.
The
statements set forth in the seventh paragraph under the caption “Plan of
Distribution” in the Prospectus solely to the extent included in reliance upon
and in conformity with written information related to the Placement Agent
furnished to the Company by the Placement Agent, expressly for use in the
preparation thereof, constitute the only information furnished by or on behalf
of the Placement Agent as such information is referred to herein.
29
13. Parties. This
Agreement shall inure to the benefit of and be binding upon the Placement Agent,
the Company and, to the extent provided in Sections 6 and 7, the officers and
directors of the Company and each person who controls the Company or the
Placement Agent and their respective heirs, executors, administrators, and
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, corporation or other entity any legal
or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of
the
parties hereto and their respective successors and said controlling persons
and
with respect to said Sections 6 and 7 said officers and directors, and for
the
benefit of no other person, corporation or other entity.
14. Entire
Agreement; Amendments and Waivers.
This
Agreement, together with that certain Engagement Letter dated January 25, 2007,
by and between the Company and the Placement Agent, constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof
and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements among the parties in connection with the
subject matter hereof except as set forth specifically herein or contemplated
hereby. No supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. The failure of
a
party to exercise any right or remedy shall not be deemed or constitute a waiver
of such right or remedy in the future. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (regardless of whether similar), nor shall any such waiver
constitute a continuing waiver unless otherwise expressly provided.
15. Counterparts. This
Agreement may be executed by any one or more of the parties hereto in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
16. Pronouns. Whenever
a pronoun of any gender or number is used herein, it shall, where appropriate,
be deemed to include any other gender and number.
17. Time
of Essence. Time
shall be of the essence of this Agreement.
18. Headings. The
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this
Agreement.
19. Applicable
Law. This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of New York, without giving effect to the choice of law or conflict
of
laws principles thereof.
30
If
the
foregoing is in accordance with your understanding, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute
a
binding agreement between the Company and the Placement Agent.
By:
/s/
▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇
Name:
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title:
EVP-CFO
Accepted
as of the date
first
above written.
▇.▇.
▇▇▇▇▇▇▇ & SONS, INC.
By:
/s/
▇▇▇▇▇▇
▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:
Managing Director
31
SCHEDULE
I
FREE
WRITING PROSPECTUSES
None
32
SCHEDULE
II
SUBSIDIARIES
Diamond
Blue Drilling Co.
Endeavor
Pipeline Inc.
33
Exhibit
A
Form
of
Company Counsel Legal Opinion
(i)
Each
of the Company and the Subsidiaries has been duly formed and is validly existing
in good standing under its jurisdiction of formation with all necessary power
and authority to own or lease its properties and to conduct its business in
all
material respects as described in the Disclosure Package and the Prospectus.
Each of the Company and the Subsidiaries is duly registered or qualified as
a
foreign entity for the transaction of business under the laws of the
jurisdictions set forth on Exhibit
A
to this
Opinion.
(ii)
The
Company directly owns 100% of the issued shares of capital stock in each of
the
Subsidiaries and such shares of capital stock have been duly authorized and
validly issued in accordance with the certificate of incorporation governing
such entity and are fully paid and non-assessable; and the Company owns such
shares of capital stock free and clear of all liens, encumbrances, security
interests, equities, charges or claims, other than liens arising pursuant to
the
Credit Facility.
(iii)
The
Shares have been duly authorized by the Company and, when issued and delivered
by the Company against payment therefor in accordance with the terms of the
Placement
Agency Agreement and the Subscription Agreements,
will be
validly issued, fully paid and non-assessable.
(iv)
To
the knowledge of such counsel, (A) there are no legal or governmental
proceedings pending or threatened against any of the Company or the Subsidiaries
or to which any of the Company or the Subsidiaries is a party or to which any
of
their respective properties is subject that are required to be described in
the
Prospectus but are not so described as required and (B) there are no agreements,
contracts, indentures, leases or other instruments that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required by the 1933 Act and the 1933 Act Rules and Regulations.
(v)
Except as described in the Prospectus, there are no preemptive rights or other
rights to subscribe for or to purchase, nor any restriction upon the voting
or
transfer of any capital stock of the Company. To such counsel’s knowledge,
neither the filing of the Registration Statement or the Prospectus, nor the
offering, issuance or sale of the Shares as contemplated by the Placement Agency
Agreement and the Subscription Agreements gives rise to any rights for or
relating to the registration of any stock or other securities of the Company
other than rights which have been waived. To such counsel’s knowledge, except as
described in the Disclosure Package and the Prospectus and except for options
issued in the ordinary course after September 30, 2006, pursuant to the
Company’s Stock Option Plan, there are no outstanding options or warrants to
purchase any Common Stock or Preferred Stock in the Company.
(vi)
The
Company has all requisite power and authority to issue, sell and deliver the
Shares to be sold by it in accordance with and upon the terms and conditions
set
forth in the Placement Agency Agreement, the Subscription Agreements, the
Registration Statement, the Disclosure Package and the Prospectus.
34
(vii)
The
Placement Agency Agreement and the Subscription Agreements have been duly
authorized, executed and delivered by the Company, and each of the Placement
Agency Agreement and the Subscription Agreements is a valid and legally binding
obligation of the Company, enforceable in accordance with its
terms.
(viii)
None of the offering, issuance and sale by the Company of the Shares to be
sold
by under the Placement Agency Agreement and the Subscription Agreements, the
execution, delivery and performance of Placement Agency Agreement and the
Subscription Agreements by the Company, or the consummation by the Company
of
the transactions contemplated hereby or thereby (A) constitutes or will
constitute a violation of its Organizational Documents, (B) constitutes or
will
constitute a breach or violation of, or a default (or an event which, with
notice or lapse of time or both, would constitute such a default) under, the
Credit Facility, any other agreement filed or incorporated by reference as
an
exhibit to the Registration Statement, or (C) to such counsel’s knowledge,
results or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the Subsidiaries,
which breaches, violations, defaults or liens, in the case of clause (B) would,
individually or in the aggregate, have a Material Adverse Effect.
(ix)
No
permit, consent, approval, authorization, order, registration, filing or
qualification of or with any court, governmental agency or body having
jurisdiction over any of the Company or the Subsidiaries is required for the
offering, issuance and sale by the Company of the Shares, the execution,
delivery and performance of the Placement Agency Agreement and the Subscription
Agreements by the Company or the consummation by the Company of the transactions
contemplated by the Placement Agency Agreement and the Subscription
Agreements.
(x)
The
statements in the Registration Statement, the Preliminary Prospectus and the
Prospectus under the captions “Description of Capital Stock,” and the attached
identified statements in “Item 1. Business” and “Item 2. Properties” in the
Company’s Annual Report on Form 10-KSB and “Item 1.01 Entry Into A Material
Definitive Agreement” in the Company’s Current Reports on Form 8-K incorporated
by reference therein, insofar as they constitute descriptions of agreements
or
refer to statements of law or legal conclusions, are accurate and complete
in
all material respects, and the Common Stock conforms in all material respects
to
the description thereof contained in the Registration Statement and the
Prospectus.
(xi)
The
opinion of such counsel that is filed as Exhibit 5.1 to the Registration
Statement is confirmed and the Placement Agent and Investors may rely upon
such
opinion as if it were addressed to them.
(xii)
The
Registration Statement was declared effective under the 1933 Act on July 3,
2006; to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or threatened by the SEC; and any required
filing of the Prospectus pursuant to Rule 424(b) has been made in the manner
and
within the time period required by such Rule.
(xiii)
The Registration Statement, on the Effective Date and on the Closing Date and
the Prospectus (including any document that is incorporated by reference
therein), when filed
35
with
the
SEC pursuant to Rule 424(b) and on the Closing Date (except for the financial
statements and the notes and the schedules thereto, and the other financial,
statistical and accounting data included or incorporated by reference in the
Registration Statement or the Prospectus, as to which such counsel need not
express any opinion) comply as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Rules and
Regulations.
(xiv)
None of the Company or the Subsidiaries is an “investment company” as such term
is defined in the Investment Company Act of 1940, as amended.
In
addition, such counsel shall state that he has participated in conferences
with
officers and other representatives of the Company and the independent public
accountants of the Company and your representatives, at which the contents
of
the Registration Statement, the Disclosure Package and the Prospectus and
related matters were discussed, and although such counsel has not independently
verified, is not passing upon, and is not assuming any responsibility for the
accuracy, completeness or fairness of the statements contained in, the
Registration Statement, the Disclosure Package and the Prospectus (except to
the
extent specified in the foregoing opinion), based on the foregoing, no facts
have come to such counsel’s attention that lead such counsel to believe
that:
(A) the
Registration Statement, as of the Effective Date (after giving effect to any
information included therein pursuant to Rule 430B under the 1933 Act),
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading,
(B) the
Disclosure Package, as of the Initial Time of Sale, contained any untrue
statement of a material fact or omitted to state any material fact necessary
in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, or
(C) the
Prospectus, as of its issue date and as of the Closing Date contained or
contains an untrue statement of a material fact or omitted or omits to state
a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
it
being
understood that such counsel expresses no statement or belief in this letter
with respect to (i) the financial statements and related schedules, including
the notes and schedules thereto and the auditor’s report thereon, any other
financial, accounting or statistical data, included or incorporated or deemed
incorporated by reference in, or excluded from, the Registration Statement
or
the Prospectus or the Disclosure Package, and (ii) representations and
warranties and other statements of fact included in the exhibits to the
Registration Statement.
36