20,000,000 Shares CRIMSON EXPLORATION INC. Common Stock UNDERWRITING AGREEMENT
Exhibit 1.1
Execution Version
20,000,000 Shares
Common Stock
December 16, 2009
Barclays Capital Inc.
Credit Suisse Securities (USA) LLC
As Representatives of the several
Underwriters named in Schedule 1 attached hereto,
c/o Barclays Capital Inc.
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Ladies and Gentlemen:
Credit Suisse Securities (USA) LLC
As Representatives of the several
Underwriters named in Schedule 1 attached hereto,
c/o Barclays Capital Inc.
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Ladies and Gentlemen:
Crimson Exploration Inc., a Delaware corporation (the “Company”), proposes to sell 20,000,000
shares (the “Firm Stock”) of its common stock, par value $0.001 per share (the “Common Stock”). In
addition, the Company proposes to grant to the underwriters (the “Underwriters”) named in
Schedule 1 attached to this agreement (this “Agreement”) an option to purchase up to an
aggregate of 3,000,000 additional shares of the Common Stock on the terms set forth in Section 2
(the “Option Stock”). The Firm Stock and the Option Stock, if purchased, are hereinafter
collectively called the “Stock.” This is to confirm the agreement concerning the purchase of the
Stock from the Company by the Underwriters.
1. Representations, Warranties and Agreements of the Company. The Company represents,
warrants and agrees that:
(a) A registration statement on Form S-1 relating to the Stock has (i) been prepared by
the Company in conformity with the requirements of the Securities Act of 1933, as amended
(the “Securities Act”), and the rules and regulations (the “Rules and Regulations”) of the
Securities and Exchange Commission (the “Commission”) thereunder; (ii) been filed with the
Commission under the Securities Act; and (iii) become effective under the Securities Act.
Copies of such registration statement and any amendment thereto have been delivered by the
Company to you as the representatives (the “Representatives”) of the Underwriters. As used
in this Agreement:
(i) “Applicable Time” means 7:48 p.m. (New York City time) on the date of this
Agreement;
(ii) “Effective Date” means the date and time as of which such registration
statement, or the most recent post-effective amendment thereto, was declared
effective by the Commission;
(iii) “Issuer Free Writing Prospectus” means each “free writing prospectus” (as
defined in Rule 405 of the Rules and Regulations) prepared by or
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on behalf of the Company or used or referred to by the Company in connection
with the offering of the Stock;
(iv) “Preliminary Prospectus” means any preliminary prospectus relating to the
Stock included in such registration statement or filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations;
(v) “Pricing Disclosure Package” means, as of the Applicable Time, the most
recent Preliminary Prospectus, together with the information included in
Schedule 3 hereto each Issuer Free Writing Prospectus filed or used by the
Company on or before the Applicable Time, other than a road show that is an Issuer
Free Writing Prospectus but is not required to be filed under Rule 433 of the Rules
and Regulations.
(vi) “Prospectus” means the final prospectus relating to the Stock, as filed
with the Commission pursuant to Rule 424(b) of the Rules and Regulations; and
(vii) “Registration Statement” means such registration statement, as amended as
of the Effective Date, including any Preliminary Prospectus or the Prospectus and
all exhibits to such registration statement.
Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer to the
latest Preliminary Prospectus included in the Registration Statement or filed pursuant to
Rule 424(b) prior to or on the date hereof. The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus or the Prospectus or
suspending the effectiveness of the Registration Statement, and no proceeding or examination
for such purpose has been instituted or, to the knowledge of the Company, threatened by the
Commission.
(b) The Company was not at the time of initial filing of the Registration Statement and
at the earliest time thereafter that the Company or another offering participant made a bona
fide offer (within the meaning of Rule 164(h)(2) of the Rules and Regulations) of the Stock,
is not on the date hereof and will not be on the applicable Delivery Date an “ineligible
issuer” (as defined in Rule 405).
(c) The Registration Statement conformed and will conform in all material respects on
the Effective Date and on the applicable Delivery Date, and any amendment to the
Registration Statement filed after the date hereof will conform in all material respects
when filed, to the requirements of the Securities Act and the Rules and Regulations. The
most recent Preliminary Prospectus conformed, and the Prospectus will conform, in all
material respects when filed with the Commission pursuant to Rule 424(b) and on the
applicable Delivery Date to the requirements of the Securities Act and the Rules and
Regulations.
(d) The Registration Statement did not, as of the Effective Date, contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided that no
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representation or warranty is made as to information contained in or omitted from the
Registration Statement in reliance upon and in conformity with written information furnished
to the Company through the Representatives by or on behalf of any Underwriter specifically
for inclusion therein, which information is specified in Section 8(e).
(e) The Prospectus will not, as of its date and on the applicable Delivery Date,
contain an untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that no representation or
warranty is made as to information contained in or omitted from the Prospectus in reliance
upon and in conformity with written information furnished to the Company through the
Representatives by or on behalf of any Underwriter specifically for inclusion therein, which
information is specified in Section 8(e).
(f) [Intentionally omitted.]
(g) The Pricing Disclosure Package did not, as of the Applicable Time, contain an
untrue statement of a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not
misleading; provided that no representation or warranty is made as to information contained
in or omitted from the Pricing Disclosure Package in reliance upon and in conformity with
written information furnished to the Company through the Representatives by or on behalf of
any Underwriter specifically for inclusion therein, which information is specified in
Section 8(e).
(h) Each Issuer Free Writing Prospectus (including, without limitation, any road show
that is a free writing prospectus under Rule 433), when considered together with the Pricing
Disclosure Package as of the Applicable Time, did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they were made,
not misleading; provided that no representation or warranty is made with respect to any
statements or omissions made in each such Issuer Free Writing Prospectus in reliance upon
and in conformity with information relating to any Underwriter furnished to the Company
through the Representatives by or on behalf of any Underwriter specifically for inclusion
therein.
(i) Each Issuer Free Writing Prospectus conformed or will conform in all material
respects to the requirements of the Securities Act and the Rules and Regulations on the date
of first use, and the Company has complied with all prospectus delivery and any filing
requirements applicable to such Issuer Free Writing Prospectus pursuant to the Rules and
Regulations. The Company has not made any offer relating to the Stock that would constitute
an Issuer Free Writing Prospectus without the prior written consent of the Representatives.
The Company has retained in accordance with the Rules and Regulations all Issuer Free
Writing Prospectuses that were not required to be filed pursuant to the Rules and
Regulations. The Company has taken all actions necessary so that any “road show” (as
defined in Rule 433 of the Rules and Regulations) in connection
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with the offering of the Stock will not be required to be filed pursuant to the Rules
and Regulations.
(j) Each of the Company and its subsidiaries (as defined in Section 17) has been duly
organized, is validly existing and in good standing as a corporation or other business
entity under the laws of its jurisdiction of organization and is duly qualified to do
business and in good standing as a foreign corporation or other business entity in each
jurisdiction in which its ownership or lease of property or the conduct of its businesses
requires such qualification, except where the failure to be so qualified or in good standing
could not, in the aggregate, reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), results of operations, stockholders’ equity, properties,
business or business prospects of the Company and its subsidiaries taken as a whole (a
“Material Adverse Effect”); each of the Company and its subsidiaries has all requisite
corporate power and authority necessary to own or hold its properties and to conduct the
businesses in which it is engaged. The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the subsidiaries listed
in Exhibit 21 to the Registration Statement, except for LTW Pipeline Co., a Texas
corporation. None of the subsidiaries of the Company (other than Crimson Exploration
Operating, Inc. (the “Significant Subsidiary”)) is a “significant subsidiary” (as defined in
Rule 405).
(k) The Company has an authorized capitalization as set forth in each of the most
recent Preliminary Prospectus and the Prospectus, and all of the issued shares of capital
stock of the Company have been duly authorized and validly issued, are fully paid and
non-assessable, conform in all material respects to the description thereof contained in the
most recent Preliminary Prospectus and were issued in compliance with federal and state
securities laws and not in violation of any preemptive right, resale right, right of first
refusal or similar right. All of the Company’s options, warrants and other rights to
purchase or exchange any securities for shares of the Company’s capital stock have been duly
authorized and validly issued, conform to the description thereof contained in the most
recent Preliminary Prospectus and were issued in compliance with federal and state
securities laws. All of the issued shares of capital stock of each subsidiary of the
Company have been duly authorized and validly issued, are fully paid and non-assessable and
are owned directly or indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims, except for such liens, encumbrances, equities or claims granted in
connection with that certain Second Lien Credit Agreement, dated as of May 8, 2007, among
the Company, as borrower, Credit Suisse, as agent, and each lender from time to time party
thereto, as amended, restated or modified from time to time, and that certain Amended and
Restated Credit Agreement, dated as of May 31, 2007, among Crimson Exploration Inc., as
borrower, ▇▇▇▇▇ Fargo Bank, National Association, as agent, ▇▇▇▇▇ Fargo Bank, National
Association and The Royal Bank of Scotland, plc, as co-lead arrangers and joint bookrunners,
and each lender from time to time party thereto, as amended, restated or modified from time
to time, and related security documents (collectively, the “Credit Agreements”), or as could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
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(l) The shares of the Stock to be issued and sold by the Company to the Underwriters
hereunder have been duly authorized and, upon payment and delivery in accordance with this
Agreement, will be validly issued, fully paid and non-assessable, will conform in all
material respects to the description thereof contained in the most recent Preliminary
Prospectus, will be issued in compliance with federal and state securities laws and will be
free of (or the applicable parties shall have waived) statutory and contractual preemptive
rights, rights of first refusal and similar rights.
(m) The Company has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement. This Agreement has been duly and validly
authorized, executed and delivered by the Company.
(n) The execution, delivery and performance of this Agreement by the Company, the
consummation of the transactions contemplated hereby and the application of the proceeds
from the sale of the Stock as described under “Use of Proceeds” in the most recent
Preliminary Prospectus and the conversion of all outstanding shares of the Company’s Series
G Preferred Stock and Series H Preferred Stock as defined and described in the most recent
Preliminary Prospectus under the caption “The Preferred Stock Conversion” (such actions are
herein collectively called the “Conversion”) will not (i) conflict with or result in a
breach or violation of any of the terms or provisions of, impose any lien, charge or
encumbrance upon any property or assets of the Company and its subsidiaries, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement, license 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 property or
assets of the Company or any of its subsidiaries is subject and that is required to be filed
by the Company with the Commission under Item 601 of Regulation S-K; (ii) result in any
violation of the provisions of the charter or by-laws (or similar organizational documents)
of the Company or any of its subsidiaries; or (iii) result in any violation of any statute
or any order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their properties or
assets, except in the case of (i) or (iii), to the extent any such conflict, breach,
violation or default could not reasonably be expected to, in the aggregate, have a Material
Adverse Effect.
(o) No consent, approval, authorization or order of, or filing or registration with,
any court or governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets is required for the execution, delivery
and performance of this Agreement by the Company, the consummation of the transactions
contemplated hereby, the application of the proceeds from the sale of the Stock as described
under “Use of Proceeds” in the most recent Preliminary Prospectus and the Conversion, except
for the registration of the Stock under the Securities Act and such consents, approvals,
authorizations, orders, filings, registrations or qualifications as have been obtained or
made as of the date hereof or as may be required under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and applicable state or foreign securities laws in
connection with the purchase and sale of the Stock by the Underwriters.
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(p) Except as described in the most recent Preliminary Prospectus, there are no
contracts, agreements or understandings between the Company and any person granting such
person the right to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or to be owned by such
person, other than as contemplated by (i) that certain Shareholders Rights Agreement between
the Company (as successor to GulfWest Energy Inc., a Texas corporation) and OCM GW Holdings,
LLC, a Delaware limited liability company, dated as of February 28, 2005 (the “Shareholders
Rights Agreement”) or (ii) that certain Omnibus and Release Agreement, dated as of February
28, 2005, by and among OCM GW Holdings, LLC, a Delaware limited liability company, the
Company (as successor to GulfWest Energy Inc., a Texas corporation), and those certain
Shareholders of the Company set forth on the signature page thereto (the “Omnibus
Agreement”), or to require the Company to include such securities in the securities
registered pursuant to the Registration Statement (other than under the Omnibus Agreement or
rights which have been waived in writing or otherwise satisfied or extinguished) or in any
securities being registered pursuant to any other registration statement filed by the
Company under the Securities Act, other than as contemplated by the Shareholders Rights
Agreement or the Omnibus Agreement.
(q) The Company has not sold or issued any securities that would be integrated with the
offering of the Stock contemplated by this Agreement pursuant to the Securities Act, the
Rules and Regulations or the interpretations thereof by the Commission.
(r) Except as described in the most recent Preliminary Prospectus, neither the Company
nor any of its subsidiaries has sustained, since the date of the latest audited financial
statements included in the most recent Preliminary 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
since such date, there has not been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any adverse change, or any development involving a
prospective adverse change, in or affecting the condition (financial or otherwise), results
of operations, stockholders’ equity, properties, management, or business of the Company and
its subsidiaries taken as a whole, in each case except as could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(s) Since the date as of which information is given in the most recent Preliminary
Prospectus and except as described therein, the Company has not (i) incurred any material
liability or obligation, direct or contingent, other than liabilities and obligations that
were incurred in the ordinary course of business, (ii) entered into any material transaction
not in the ordinary course of business or (iii) declared or paid any dividend on its capital
stock.
(t) The historical financial statements (including the related notes and supporting
schedules) included in the most recent Preliminary Prospectus comply as to form in all
material respects with the requirements of Regulation S-X under the Securities
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Act and present fairly in all material respects the financial condition, results of
operations and cash flows of the entities purported to be shown thereby at the dates and for
the periods indicated and have been prepared in conformity with accounting principles
generally accepted in the United States applied on a consistent basis throughout the periods
involved, except otherwise stated therein and in the case of unaudited financial statements,
subject to year end audit adjustments.
(u) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, who have certified certain financial statements of the Company
and its consolidated subsidiaries, whose report appears in the most recent Preliminary
Prospectus or is incorporated by reference therein and who have delivered the initial letter
referred to in Section 7(f) hereof, are independent public accountants as required by the
Securities Act and the Rules and Regulations and the rules and regulations of the Public
Company Accounting Oversight Board (“PCAOB”).
(v) Netherland ▇▇▇▇▇▇ & Associates, Inc., an oil and gas consulting firm (“NSAI”),
whose summary letter from its report as of December 31, 2008 appears in the most recent
Preliminary Prospectus, whose reserve estimates from its reports are included therein and
who has delivered the letter referred to in Section 7(h) hereof, was, as of the date of such
reports, and is, as of the date hereof, an independent petroleum engineer with respect to
the Company. The written engineering reports prepared by NSAI dated February 14, 2007,
February 8, 2008, February 13, 2009 and November 20, 2009, setting forth the proved reserves
attributed to the oil and gas properties of the Company and its subsidiaries accurately
reflects in all material respects the ownership interests of the Company and its
subsidiaries in the properties therein as of December 31, 2006, 2007, and 2008 and September
30, 2009, respectively; the information furnished by the Company to NSAI for purposes of
preparing its reports, including, without limitation, production, costs of operation and
development, current prices for production, agreements relating to current and future
operations and sales of production, was true, correct and complete in all material respects
on the date supplied and was prepared in accordance with customary industry practices.
(w) Except as described in the most recent Preliminary Prospectus, the Company and the
subsidiaries have defensible title to all of their interests in oil and gas properties and
all other real property owned by the Company and the subsidiaries and good title to all
other properties owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any kind except such as
(i) are described in the most recent Preliminary Prospectus and in connection with the
Credit Agreements, (ii) liens and encumbrances under operating agreements, unitization and
pooling agreements, production sales contracts, farm-out agreements and other oil and gas
exploration participation and production agreements, in each case that secure payment of
amounts not yet due and payable for the performance of other unmatured obligations and are
of a scope and nature customary in the oil and gas industry or arise in connection with
drilling and production operations, or (iii) would not, in the aggregate, have a Material
Adverse Effect; except as would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect or as described in the most recent Preliminary Prospectus, all of
the leases and subleases of real property of the Company or any of its subsidiaries and
under which the Company or any of its
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subsidiaries holds properties described in the most recent Preliminary Prospectus, are
in full force and effect, and neither the Company nor any of its subsidiaries has received
written notice of any claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any of its subsidiaries under any of such leases or subleases, or
affecting or questioning the rights of the Company or such subsidiary to the continued
possession of the leased or subleased premises under any such lease or sublease. With
respect to interests in oil and gas leases obtained by or on behalf of the Company or its
subsidiaries that have not yet been drilled or included in a unit for drilling, the Company
or its subsidiaries have carried out such title investigations in accordance with the
practices customary in the oil and gas industry in the areas in which the leased properties
are located.
(x) The Company and each of its subsidiaries carry, or are covered by, insurance from
insurers of recognized financial responsibility in such amounts and covering such risks as
is adequate for the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar businesses in similar
industries. All policies of insurance of the Company and its subsidiaries are in full force
and effect; the Company and its subsidiaries are in compliance with the terms of such
policies in all material respects; and neither the Company nor any of its subsidiaries has
received notice from any insurer or agent of such insurer that capital improvements or other
expenditures are required or necessary to be made in order to continue such insurance; there
are no claims by the Company or any of its subsidiaries under any such policy or instrument
as to which any insurance company is denying liability or defending under a reservation of
rights clause; and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its 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 could not reasonably be expected to have a Material Adverse
Effect.
(y) The statistical and market-related data included under the captions “Prospectus
Summary,” “Market for Our Common Stock,” “Risk Factors,” “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and “Business” in the most recent
Preliminary Prospectus and the consolidated financial statements of the Company and its
subsidiaries included in the most recent Preliminary Prospectus are based on or derived from
sources that the Company believes to be reliable and accurate in all material respects.
(z) Neither the Company nor any subsidiary is, and as of the applicable Delivery Date
and, after giving effect to the offer and sale of the Stock and the application of the
proceeds therefrom as described under “Use of Proceeds” in the most recent Preliminary
Prospectus and the Prospectus, none of them will be, (i) an “investment company” within the
meaning of such term under the Investment Company Act of 1940, as amended (the “Investment
Company Act”), and the rules and regulations of the Commission thereunder or (ii) a
“business development company” (as defined in Section 2(a)(48) of the Investment Company
Act).
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(aa) Except as described in the most recent Preliminary 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 or assets of the Company or any of its subsidiaries is the
subject that could, in the aggregate, reasonably be expected to have a Material Adverse
Effect or could, in the aggregate, reasonably be expected to have a material adverse effect
on the performance of this Agreement or the consummation of the transactions contemplated
hereby; and to the Company’s knowledge, no such proceedings are threatened or contemplated
by governmental authorities or others.
(bb) There are no legal or governmental proceedings or contracts or other documents of
a character required to be described in the Registration Statement or the most recent
Preliminary Prospectus or, in the case of documents, to be filed as exhibits to the
Registration Statement, that are not described and filed as required. Neither the Company
nor any of its subsidiaries has knowledge that any other party to any such contract,
agreement or arrangement has any intention not to render full performance as contemplated by
the terms thereof; and that statements made in the most recent Preliminary Prospectus
insofar as they purport to constitute summaries of legal or governmental proceedings or the
terms of contracts and other documents, constitute accurate summaries of such legal and
governmental proceedings and the terms of such contracts and other documents in all material
respects.
(cc) No relationship, direct or indirect, exists between or among the Company, on the
one hand, and the directors, officers, stockholders, customers or suppliers of the Company,
on the other hand, that is required to be described in the most recent Preliminary
Prospectus which is not so described.
(dd) No labor disturbance by the employees of the Company or its subsidiaries exists
or, to the knowledge of the Company, is imminent that could reasonably be expected to have a
Material Adverse Effect.
(ee) (i) Each “employee benefit plan” (within the meaning of Section 3(3) of the
Employee Retirement Security Act of 1974, as amended (“ERISA”)) for which the Company or any
member of its “Controlled Group” (defined as any organization which is a member of a
controlled group of corporations within the meaning of Section 414 of the Internal Revenue
Code of 1986, as amended (the “Code”)) would have any liability (each a “Plan”) has been
maintained in material compliance with its terms and with the requirements of all applicable
statutes, rules and regulations including ERISA and the Code; (ii) with respect to each Plan
subject to Title IV of ERISA (a) no “reportable event” (within the meaning of Section
4043(c) of ERISA) has occurred or is reasonably expected to occur for which the Company or
any member of its Controlled Group would have any liability, (b) no “accumulated funding
deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether
or not waived, has occurred or is reasonably expected to occur, (c) the fair market value of
the assets under each Plan exceeds the present value of all benefits accrued under such Plan
(determined based on those assumptions used to fund such Plan) and (d) neither the Company
nor any member of its Controlled Group has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA (other than contributions to the Plan or premiums to the
PBGC in the
9
ordinary course and without default) in respect of a Plan (including a “multiemployer
plan”, within the meaning of Section 4001(c)(3) of ERISA); and (iii) each Plan that is
intended to be qualified under Section 401(a) of the Code is so qualified and nothing has
occurred, whether by action or by failure to act, which would cause the loss of such
qualification, except in the case of clauses (i), (ii) and (iii) would not reasonably be
expected to have a Material Adverse Effect.
(ff) The Company and each of its subsidiaries have filed all federal, state, local and
foreign income and franchise tax returns required to be filed through the date hereof,
subject to permitted extensions, and have paid all taxes due thereon except for taxes being
contested in good faith, taxes currently payable without penalty or interests and
assessments for which appeals have been taken or which adequate reserves have been taken,
and no tax deficiency has been determined adversely to the Company or any of its
subsidiaries, nor does the Company have any knowledge of any tax deficiencies that could, in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(gg) [Intentionally omitted.]
(hh) Neither the Company nor any of its subsidiaries (i) is in violation of its charter
or by-laws (or similar organizational documents), (ii) is in default, and no event has
occurred that, with notice or lapse of time or both, would constitute such a default, in the
due performance or observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, license or other agreement or instrument to which
it is a party or by which it is bound or to which any of its properties or assets is subject
and that is required to be filed by the Company with the Commission under Item 601 of
Regulation S-K or (iii) is in violation of any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over it or its property or
assets or has failed to obtain any license, permit, certificate, franchise or other
governmental authorization or permit necessary to the ownership of its property or to the
conduct of its business, except in the case of clauses (ii) and (iii), to the extent any
such conflict, breach, violation or default could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(ii) The Company and each of its subsidiaries (i) make and keep accurate books and
records and (ii) maintain and has maintained effective internal control over financial
reporting as defined in Rule 13a-15 under the Exchange Act and a system of internal
accounting controls sufficient to provide reasonable assurance that (A) transactions are
executed in accordance with management’s general or specific authorization, (B) transactions
are recorded as necessary to permit preparation of the Company’s financial statements in
conformity with accounting principles generally accepted in the United States and to
maintain accountability for its assets, (C) access to the Company’s assets is permitted only
in accordance with management’s general or specific authorization and (D) the recorded
accountability for the Company’s assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
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(jj) (i) The Company has established and maintains disclosure controls and procedures
(as such term is defined in Rule 13a-15 under the Exchange Act), (ii) such disclosure
controls and procedures are designed to ensure that the information required to be disclosed
by the Company in the reports it files or submits under the Exchange Act is accumulated and
communicated to management of the Company, including its principal executive officer and
principal financial officer, as appropriate, to allow timely decisions regarding required
disclosure to be made and (iii) such disclosure controls and procedures are effective in all
material respects to perform the functions for which they were established.
(kk) Since the date of the most recent balance sheet of the Company and its
consolidated subsidiaries reviewed or audited by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and the audit committee
of the board of directors of the Company, (i) the Company has not been advised of (A) any
significant deficiencies in the design or operation of internal controls that could
adversely affect the ability of the Company and each of its subsidiaries to record, process,
summarize and report financial data, or any material weaknesses in internal controls and (B)
any fraud, whether or not material, that involves management or other employees who have a
significant role in the internal controls of the Company and each of its subsidiaries, and
(ii) since that date, there have been no significant changes in internal controls or in
other factors that could significantly affect internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.
(ll) There is and has been no failure on the part of the Company and, to the knowledge
of the Company, any of the Company’s directors or officers, in their capacities as such, to
comply with the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and regulations
promulgated in connection therewith.
(mm) The section entitled “Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Critical Accounting Policies” in the most recent Preliminary
Prospectus accurately and fully describes (A) the accounting policies that the Company
believes are the most important in the portrayal of the Company’s financial condition and
results of operations and that require management’s most difficult, subjective or complex
judgments (“Critical Accounting Policies”); (B) the judgments and uncertainties affecting
the application of critical accounting policies; and (C) the likelihood that materially
different amounts would be reported under different conditions or using different
assumptions and an explanation thereof.
(nn) The Company and each of its subsidiaries have such permits, licenses, patents,
franchises, certificates of need and other approvals or authorizations of governmental or
regulatory authorities (“Permits”) as are necessary under applicable law to own their
properties and conduct their businesses in the manner described in the most recent
Preliminary Prospectus, except for any of the foregoing that could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect; each of the Company and its
subsidiaries has fulfilled and performed all of its obligations with respect to the Permits
in all material respects, and no event has occurred that allows, or after notice or lapse of
time would allow, revocation or termination thereof or result in
11
any other impairment of the rights of the holder of any such Permits, except for any of
the foregoing that could not reasonably be expected to have a Material Adverse Effect.
(oo) The Company and each of its subsidiaries own or possess adequate rights to use all
material patents, patent applications, trademarks, service marks, trade names, trademark
registrations, service ▇▇▇▇ registrations, copyrights, licenses, know-how, software, systems
and technology (including trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures) necessary for the conduct of their
respective businesses and have no reason to believe that the conduct of their respective
businesses will conflict with, and have not received any notice of any claim of conflict
with, any such rights of others.
(pp) Except as described in the most recent Preliminary Prospectus, the Company and
each of its subsidiaries (i) are, and at all times prior hereto were, in compliance with all
laws, regulations, ordinances, rules, orders, judgments, decrees, permits or other legal
requirements of any governmental authority, including without limitation any international,
national, state, provincial, regional, or local authority, relating to the protection of
human health or safety, the environment, or natural resources, or to hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”) applicable to such
entity, which compliance includes, without limitation, obtaining, maintaining and complying
with all permits and authorizations and approvals required by Environmental Laws to conduct
their respective businesses, and (ii) have not received notice of any actual or alleged
violation of Environmental Laws, or of any potential liability for or other obligation
concerning the presence, disposal or release of hazardous or toxic substances or wastes,
pollutants or contaminants, except in the case of clause (i) or (ii) where such
non-compliance, violation, liability, or other obligation could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect. Except as described in the most
recent Preliminary Prospectus, (A) there are no proceedings that are pending, or known to be
contemplated, against the Company or any of its subsidiaries under Environmental Laws in
which a governmental authority is also a party, other than such proceedings regarding which
it is reasonably believed no monetary sanctions of $100,000 or more will be imposed, (B) the
Company and its subsidiaries are not aware of any issues regarding compliance with
Environmental Laws, or liabilities or other obligations under Environmental Laws or
concerning hazardous or toxic substances or wastes, pollutants or contaminants, that could
reasonably be expected to have a material effect on the capital expenditures, earnings or
competitive position of the Company and its subsidiaries, and (C) none of the Company and
its subsidiaries anticipates material capital expenditures relating to Environmental Laws.
(qq) Intentionally omitted.
(rr) No subsidiary of the Company is currently prohibited, directly or indirectly, from
paying any dividends to the Company, from making any other distribution on such subsidiary’s
capital stock to the Company, from repaying to the Company any loans or advances to such
subsidiary from the Company or from transferring any of such subsidiary’s property or assets
to the Company or any other
12
subsidiary of the Company, except as described in the most recent Preliminary
Prospectus.
(ss) Neither the Company nor any of its subsidiaries, nor, to the knowledge of the
Company, any director, officer, agent, employee or other person associated with or acting on
behalf of the Company or any of its subsidiaries, has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or is in violation of
any provision of the U.S. Foreign Corrupt Practices Act of 1977; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment.
(tt) The operations of the Company and its subsidiaries are and have been conducted at
all times in compliance 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, except, in each
case, as would not reasonably be expected to have a Material Adverse Effect.
(uu) 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, for the purpose of financing the activities of any person currently subject to any
U.S. sanctions administered by OFAC.
(vv) The Company has not distributed and, prior to the later to occur of any Delivery
Date and completion of the distribution of the Stock, will not distribute any offering
material in connection with the offering and sale of the Stock other than any Preliminary
Prospectus, the Prospectus, any Issuer Free Writing Prospectus to which the Representatives
have consented in accordance with Section 1(i) or 5(a)(vi) and any Issuer Free Writing
Prospectus set forth on Schedule 3 hereto.
(ww) The Company has not taken and will not take, directly or indirectly, any action
designed to or that has constituted or that could reasonably be expected to cause or result
in the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the shares of the Stock.
(xx) The Stock has been approved for inclusion, subject to official notice of issuance
and evidence of satisfactory distribution, in The NASDAQ Global Market.
13
(yy) As of the date hereof, (i) all royalties, rentals, deposits and other amounts owed
under the oil and gas leases constituting the oil and gas properties of the Company and its
subsidiaries have been properly and timely paid (other than amounts held in suspense
accounts pending routine payments or related to disputes about the proper identification of
royalty owners and except where the failure to timely pay or pay such amounts could not,
individually or in the aggregate, have a Material Adverse Effect on the Company or any of
its subsidiaries); and no material amount of proceeds from the sale or production
attributable to the oil and gas properties of the Company and its subsidiaries are currently
being held in suspense by any purchaser thereof, except where such amounts due could not,
individually or in the aggregate, have a Material Adverse Effect on the Company or any of
the subsidiaries, and (ii) there are no claims under take-or-pay contracts pursuant to which
natural gas purchasers have any make-up rights affecting the interests of the Company or its
subsidiaries in their oil and gas properties, except where such claims could not,
individually or in the aggregate, have a Material Adverse Effect on the Company or any of
its subsidiaries.
Any certificate signed by any officer of the Company and delivered to the Representatives or
counsel for the Underwriters in connection with the offering of the Stock shall be deemed a
representation and warranty by the Company, as to matters covered thereby, to each Underwriter.
2. Purchase of the Stock by the Underwriters. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this Agreement, the Company
agrees to sell 20,000,000 shares of the Firm Stock to the several Underwriters, and each of the
Underwriters, severally and not jointly, agrees to purchase the number of shares of the Firm Stock
set forth opposite that Underwriter’s name in Schedule 1 hereto. The respective purchase
obligations of the Underwriters with respect to the Firm Stock shall be rounded among the
Underwriters to avoid fractional shares, as the Representatives may determine.
In addition, the Company grants to the Underwriters an option to purchase up to 3,000,000
additional shares of Option Stock. Such option is exercisable in the event that the Underwriters
sell more shares of Common Stock than the number of Firm Stock in the offering and as set forth in
Section 4 hereof. Each Underwriter agrees, severally and not jointly, to purchase the number of
shares of Option Stock (subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total number of shares of
Option Stock to be sold on such Delivery Date as the number of shares of Firm Stock set forth in
Schedule 1 hereto opposite the name of such Underwriter bears to the total number of shares
of Firm Stock.
The price of both the Firm Stock and any Option Stock purchased by the Underwriters shall be
$4.70 per share.
The Company shall not be obligated to deliver any of the Firm Stock or Option Stock to be
delivered on the applicable Delivery Date, except upon payment for all such Stock to be purchased
on such Delivery Date as provided herein.
14
3. Offering of Stock by the Underwriters. Upon authorization by the Representatives of the
release of the Firm Stock, the several Underwriters propose to offer the Firm Stock for sale upon
the terms and conditions to be set forth in the Prospectus.
4. Delivery of and Payment for the Stock. Delivery of and payment for the Firm Stock shall be
made at 10:00 A.M., New York City time, on the third full business day following the date of this
Agreement or at such other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to as the “Initial
Delivery Date.” Delivery of the Firm Stock shall be made to the Representatives for the account of
each Underwriter against payment by the several Underwriters through the Representatives and of the
respective aggregate purchase prices of the Firm Stock being sold by the Company to or upon the
order of the Company of the purchase price by wire transfer in immediately available funds to the
accounts specified by the Company. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of each Underwriter
hereunder. The Company shall deliver the Firm Stock through the facilities of The Depository Trust
Company (“DTC”) unless the Representatives shall otherwise instruct.
The option granted in Section 2 will expire 30 days after the date of this Agreement and may
be exercised in whole or from time to time in part by written notice being given to the Company by
the Representatives; provided that if such date falls on a day that is not a business day, the
option granted in Section 2 will expire on the next succeeding business day. Such notice shall set
forth the aggregate number of shares of Option Stock as to which the option is being exercised, the
names in which the shares of Option Stock are to be registered, the denominations in which the
shares of Option Stock are to be issued and the date and time, as determined by the
Representatives, when the shares of Option Stock are to be delivered; provided, however, that this
date and time shall not be earlier than the Initial Delivery Date nor earlier than the second
business day after the date on which the option shall have been exercised nor later than the fifth
business day after the date on which the option shall have been exercised. Each date and time the
shares of Option Stock are delivered is sometimes referred to as an “Option Stock Delivery Date,”
and the Initial Delivery Date and any Option Stock Delivery Date are sometimes each referred to as
a “Delivery Date.”
Delivery of the Option Stock by the Company and payment for the Option Stock by the several
Underwriters through the Representatives shall be made at 10:00 A.M., New York City time, on the
date specified in the corresponding notice described in the preceding paragraph or at such other
date or place as shall be determined by agreement between the Representatives and the Company. On
the Option Stock Delivery Date, the Company shall deliver or cause to be delivered the Option Stock
to the Representatives for the account of each Underwriter against payment by the several
Underwriters through the Representatives and of the respective aggregate purchase prices of the
Option Stock being sold by the Company to or upon the order of the Company of the purchase price by
wire transfer in immediately available funds to the accounts specified by the Company. Time shall
be of the essence, and delivery at the time and place specified pursuant to this Agreement is a
further condition of the obligation of each Underwriter hereunder. The Company shall deliver the
Option Stock through the facilities of DTC unless the Representatives shall otherwise instruct.
15
5. Further Agreements of the Company and the Underwriters. (a) The Company agrees:
(i) To prepare the Prospectus in a form approved by the Representatives and to file
such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the
Commission’s close of business on the second business day following the execution and
delivery of this Agreement; to make no further amendment or any supplement to the
Registration Statement or the Prospectus prior to the last Delivery Date except as provided
herein; to advise the Representatives, promptly after it receives notice thereof, of the
time when any amendment or supplement to the Registration Statement or the Prospectus has
been filed and to furnish the Representatives with copies thereof; to advise the
Representatives, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the use of the
Prospectus or any Issuer Free Writing Prospectus, of the suspension of the qualification of
the Stock for offering or sale in any jurisdiction, of the initiation or threatening of any
proceeding or examination for any such purpose or of any request by the Commission for the
amending or supplementing of the Registration Statement, the Prospectus or any Issuer Free
Writing Prospectus or for additional information; and, in the event of the issuance of any
stop order or of any order preventing or suspending the use of the Prospectus or any Issuer
Free Writing Prospectus or suspending any such qualification, to use promptly its best
efforts to obtain its withdrawal;
(ii) To furnish promptly to the Representatives and to counsel for the Underwriters a
signed copy of the Registration Statement as originally filed with the Commission, and each
amendment thereto filed with the Commission, including all consents and exhibits filed
therewith, except in each case to the extent available on the Commission’s Interactive Data
Electronic Applications website;
(iii) To deliver promptly to the Representatives such number of the following documents
as the Representatives shall reasonably request: (A) conformed copies of the Registration
Statement as originally filed with the Commission and each amendment thereto (in each case
excluding exhibits other than this Agreement and the computation of per share earnings), (B)
each Preliminary Prospectus, the Prospectus and any amended or supplemented Prospectus, (C)
each Issuer Free Writing Prospectus and (D) any document incorporated by reference in any
Preliminary Prospectus or the Prospectus; and, if the delivery of a prospectus is required
at any time after the date hereof in connection with the offering or sale of the Stock or
any other securities relating thereto and if at such time any events shall have occurred as
a result of which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason it shall be
necessary to amend or supplement the Prospectus in order to comply with the Securities Act,
to notify the Representatives and, upon its request, to file such document and to prepare
and furnish without charge to each Underwriter and to any dealer in securities as many
copies as the Representatives may from time to time reasonably request of an amended or
supplemented Prospectus that will correct such statement or omission or effect such
compliance;
16
(iv) To file promptly with the Commission any amendment or supplement to the
Registration Statement or the Prospectus that may, in the judgment of the Company or the
Representatives, be required by the Securities Act or requested by the Commission;
(v) Prior to filing with the Commission any amendment or supplement to the Registration
Statement, the Prospectus, any document incorporated by reference in the Prospectus or any
amendment to any document incorporated by reference in the Prospectus, to furnish a copy
thereof to the Representatives and counsel for the Underwriters and obtain the consent of
the Representatives to the filing (such consent not to be unreasonably withheld, conditioned
or delayed);
(vi) Not to make any offer relating to the Stock that would constitute an Issuer Free
Writing Prospectus without the prior written consent of the Representatives.
(vii) To comply with all applicable requirements of Rule 433 with respect to any Issuer
Free Writing Prospectus; and if at any time after the date hereof any events shall have
occurred as a result of which any Issuer Free Writing Prospectus, as then amended or
supplemented, would conflict with the information in the Registration Statement, the most
recent Preliminary Prospectus or the Prospectus or would include an untrue statement of a
material fact or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading, or,
if for any other reason it shall be necessary to amend or supplement any Issuer Free Writing
Prospectus, to notify the Representatives and, upon its request, to file such document and
to prepare and furnish without charge to each Underwriter as many copies as the
Representatives may from time to time reasonably request of an amended or supplemented
Issuer Free Writing Prospectus that will correct such conflict, statement or omission or
effect such compliance;
(viii) As soon as practicable after the Effective Date (it being understood that the
Company shall have until at least 410 or, if the fourth quarter following the fiscal quarter
that includes the Effective Date is the last fiscal quarter of the Company’s fiscal year,
455 days after the end of the Company’s current fiscal quarter), to make generally available
to the Company’s security holders and to deliver to the Representatives an earnings
statement of the Company and its subsidiaries (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option
of the Company, Rule 158);
(ix) Promptly from time to time to take such action as the Representatives may
reasonably request to qualify the Stock for offering and sale under the securities laws of
Canada and such other jurisdictions as the Representatives may reasonably request and to
comply with such laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of the Stock;
provided that in connection therewith the Company shall not be required to (i) qualify as a
foreign corporation in any jurisdiction in which it would not otherwise be required to so
qualify, (ii) file a general consent to service of process in any such jurisdiction or (iii)
subject itself to taxation in any jurisdiction in which it would not otherwise be subject;
17
(x) For a period commencing on the date hereof and ending on the 180th day after the
date of the Prospectus (the “Lock-Up Period”), not to, directly or indirectly, (1) offer for
sale, sell, pledge or otherwise dispose of (or enter into any transaction or device that is
designed to, or could be expected to, result in the disposition by any person at any time in
the future of) any shares of Common Stock or securities convertible into or exchangeable for
Common Stock (other than the Stock and shares issued pursuant to employee benefit plans,
qualified stock option plans or other employee compensation plans existing on the date
hereof or pursuant to currently outstanding options, warrants or rights not issued under one
of those plans), or sell or grant options, rights or warrants with respect to any shares of
Common Stock or securities convertible into or exchangeable for Common Stock (other than the
grant of options pursuant to option plans existing on the date hereof), (2) enter into any
swap or other derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of such shares of Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of Common
Stock or other securities, in cash or otherwise, (3) file or cause to be filed a
registration statement, including any amendments, with respect to the registration of any
shares of Common Stock or securities convertible, exercisable or exchangeable into Common
Stock or any other securities of the Company (other than any registration statement on Form
S-8) or (4) publicly disclose the intention to do any of the foregoing, in each case without
the prior written consent of Barclays Capital Inc., on behalf of the Underwriters, and to
cause each officer, director and stockholder of the Company set forth on Schedule 2
hereto to furnish to the Representatives, prior to the Initial Delivery Date, a letter or
letters, substantially in the form of Exhibit A hereto (the “Lock-Up Agreements”);
provided, however, that the foregoing restrictions shall not apply to (A) the issuance of
Common Stock pursuant to the exercise by directors, officers or employees (or their estates
or other permitted successors in interest) of stock options or other equity awards
outstanding on the date hereof, (B) grants of stock options, restricted stock or other
equity awards pursuant to the terms of a plan in effect on the date hereof covering
directors, officers and employees, (C) the withholding or repurchase by the Company of
shares of Common Stock for the purpose of satisfying tax liabilities associated with the
vesting or exercise of awards granted pursuant to an equity plan of the Company existing as
of the date hereof and (D) issuances of securities by the Company in transactions not
involving a public offering in connection with acquisitions (provided the recipients of such
securities agree in writing to be subject to similar restrictions). Notwithstanding the
foregoing, if (1) during the last 17 days of the Lock-Up 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 Lock-Up Period, the Company announces that it will release
earnings results during the 16-day period beginning on the last day of the Lock-Up Period,
then the restrictions imposed in this paragraph shall continue to apply until the expiration
of the 18-day period beginning on the issuance of the earnings release or the announcement
of the material news or the occurrence of the material event, unless Barclays Capital Inc.,
on behalf of the Underwriters, waives such extension in writing;
(xi) To apply the net proceeds from the sale of the Stock being sold by the Company as
set forth in the Prospectus.
18
(b) Each Underwriter severally agrees that such Underwriter shall not include any “issuer
information” (as defined in Rule 433) in any “free writing prospectus” (as defined in Rule 405)
used or referred to by such Underwriter without the prior consent of the Company (any such issuer
information with respect to whose use the Company has given its consent, “Permitted Issuer
Information”); provided that (i) no such consent shall be required with respect to any such issuer
information contained in any document filed by the Company with the Commission prior to the use of
such free writing prospectus and (ii) “issuer information,” as used in this Section 5(b), shall not
be deemed to include information prepared by or on behalf of such Underwriter on the basis of or
derived from issuer information.
6. Expenses. The Company agrees, whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, to pay all costs, expenses, fees and
taxes incident to and in connection with (a) the authorization, issuance, sale and delivery of the
Stock and any stamp duties or other taxes payable in that connection, and the preparation and
printing of certificates for the Stock; (b) the preparation, printing and filing under the
Securities Act of the Registration Statement (including any exhibits thereto), any Preliminary
Prospectus, the Prospectus, any Issuer Free Writing Prospectus and any amendment or supplement
thereto; (c) the distribution of the Registration Statement (including any exhibits thereto), any
Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus and any amendment or
supplement thereto, or any document incorporated by reference therein, all as provided in this
Agreement; (d) the production and distribution of this Agreement, any supplemental agreement among
Underwriters, and any other related documents in connection with the offering, purchase, sale and
delivery of the Stock; (e) any required review by FINRA of the terms of sale of the Stock
(including related fees and expenses of counsel to the Underwriters in an amount that is not
greater than $10,000); (f) the inclusion of the Stock on The NASDAQ Global Market and/or any other
exchange; (g) the qualification of the Stock under the securities laws of the several jurisdictions
as provided in Section 5(a)(ix) and the preparation, printing and distribution of a Blue Sky
Memorandum (including related fees and expenses of counsel to the Underwriters); (h) the
preparation, printing and distribution of one or more versions of the Preliminary Prospectus and
the Prospectus for distribution in Canada, often in the form of a Canadian “wrapper” (including
related fees and expenses of Canadian counsel to the Underwriters); (i) the fees and expenses of
the Company in connection with any investor presentations on any “road show” undertaken in
connection with the marketing of the Stock, including, without limitation, expenses associated with
any electronic roadshow, travel and lodging expenses of the representatives and officers of the
Company and 50% of the cost of any aircraft chartered in connection with the roadshow; and (j) all
other costs and expenses incident to the performance of the obligations of the Company under this
Agreement; provided that, except as provided in this Section 6 and in Section 11, the Underwriters
shall pay their own costs and expenses, including the costs and expenses of their counsel, any
transfer taxes on the Stock which they may sell and the expenses of advertising any offering of the
Stock made by the Underwriters.
7. Conditions of Underwriters’ Obligations. The respective obligations of the Underwriters
hereunder are subject to the accuracy, when made and on each Delivery Date, of the representations
and warranties of the Company contained herein, to the performance by the Company of its
obligations hereunder, and to each of the following additional terms and conditions:
19
(a) The Prospectus shall have been timely filed with the Commission in accordance with
Section 5(a)(i); the Company shall have complied with all filing requirements applicable to
any Issuer Free Writing Prospectus used or referred to after the date hereof; no stop order
suspending the effectiveness of the Registration Statement or preventing or suspending the
use of the Prospectus or any Issuer Free Writing Prospectus shall have been issued and no
proceeding or examination for such purpose shall have been initiated or threatened by the
Commission; and any request of the Commission for inclusion of additional information in the
Registration Statement or the Prospectus or otherwise shall have been complied with.
(b) No Underwriter shall have discovered and disclosed to the Company on or prior to
such Delivery Date that the Registration Statement, the Prospectus or the Pricing Disclosure
Package, or any amendment or supplement thereto, contains an untrue statement of a fact
which, in the opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel for the Underwriters, is material or
omits to state a fact which, in the opinion of such counsel, is material and is required to
be stated therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the authorization,
form and validity of this Agreement, the Stock, the Registration Statement, the Prospectus
and any Issuer Free Writing Prospectus, and all other legal matters relating to this
Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all
material respects to counsel for the Underwriters, and the Company shall have furnished to
such counsel all documents and information that they may reasonably request to enable them
to pass upon such matters.
(d) Akin Gump ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP and ▇▇▇▇▇ ▇▇▇▇▇▇▇, Manager, Marketing and Legal
of the Company, shall have furnished to the Representatives their written opinions, as
counsel to the Company, addressed to the Underwriters and dated such Delivery Date, in form
and substance reasonably satisfactory to the Representatives, substantially in the form
attached hereto as Exhibits B-1 and B-2.
(e) The Representatives shall have received from ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel for the
Underwriters, such opinion or opinions, dated such Delivery Date, with respect to the
issuance and sale of the Stock, the Registration Statement, the Prospectus and the Pricing
Disclosure Package and other related matters as the Representatives may reasonably require,
and the Company shall have furnished to such counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.
(f) At the time of execution of this Agreement, the Representatives shall have received
from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP a letter, in form and substance satisfactory to the Representatives,
addressed to the Underwriters and dated the date hereof (i) confirming that they are
independent public accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the qualification of accountants
under Rule 2-01 of Regulation S-X of the Commission, and (ii) stating, as of the date hereof
(or, with respect to matters involving changes or developments since the
20
respective dates as of which specified financial information is given in the most
recent Preliminary Prospectus, as of a date not more than three days prior to the date
hereof), the conclusions and findings of such firm with respect to the financial information
and other matters ordinarily covered by accountants’ “comfort letters” to underwriters in
connection with registered public offerings.
(g) With respect to the letter of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP referred to in the preceding
paragraph and delivered to the Representatives concurrently with the execution of this
Agreement (the “initial letter”), the Company shall have furnished to the Representatives a
letter (the “bring-down letter”) of such accountants, addressed to the Underwriters and
dated such Delivery Date (i) confirming that they are independent public accountants within
the meaning of the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date of the bring-down letter (or, with respect to
matters involving changes or developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not more than three days
prior to the date of the bring-down letter), the conclusions and findings of such firm with
respect to the financial information and other matters covered by the initial letter and
(iii) confirming in all material respects the conclusions and findings set forth in the
initial letter.
(h) At the time of execution of this Agreement, the Representatives shall have received
from NSAI an initial letter (the “initial expert letter”), in form and substance
satisfactory to the Representatives, addressed to the Underwriters and dated the date hereof
and a subsequent letter dated as of the Delivery Date, which such letter shall cover the
period from any initial expert letter to the Delivery Date, stating the conclusions and
findings of such firm with respect to matters pertaining to the Company’s use of NSAI’s
reports on proved reserves of the Company as of December 31, 2006, 2007 and 2008 and
September 30, 2009 as is customary to underwriters in connection with registered public
offerings.
(i) The Company shall have furnished to the Representatives a certificate, dated such
Delivery Date, of its Chief Executive Officer and its Chief Financial Officer stating that:
(i) The representations, warranties and agreements of the Company in Section 1
are true and correct on and as of such Delivery Date, and the Company has complied
with all its agreements contained herein and satisfied all the conditions on its
part to be performed or satisfied hereunder at or prior to such Delivery Date;
(ii) No stop order suspending the effectiveness of the Registration Statement
has been issued; and no proceedings or examination for that purpose have been
instituted or, to the knowledge of such officers, threatened; and
(iii) They have carefully examined the Registration Statement, the Prospectus
and the Pricing Disclosure Package, and, in their opinion, (A) (1) the Registration
Statement, as of the Effective Date, (2) the Prospectus, as of its date
21
and on the applicable Delivery Date, or (3) the Pricing Disclosure Package, as
of the Applicable Time, did not and do not contain any untrue statement of a
material fact and did not and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein (except in the case of
the Registration Statement, in the light of the circumstances under which they were
made) not misleading, and (B) since the Effective Date, no event has occurred that
should have been set forth in a supplement or amendment to the Registration
Statement, the Prospectus or any Issuer Free Writing Prospectus that has not been so
set forth;
(j) Except as described in the most recent Preliminary Prospectus, (i) neither the
Company nor any of its subsidiaries shall have sustained, since the date of the latest
audited financial statements included in the most recent Preliminary 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 or (ii) since such date there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the condition (financial or otherwise),
results of operations, stockholders’ equity, properties, management, business or business
prospects of the Company and its subsidiaries taken as a whole, the effect of which, in any
such case described in clause (i) or (ii), is, in the judgment of the Representatives, so
material and adverse as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Stock being delivered on such Delivery Date on the terms and
in the manner contemplated in the Prospectus.
(k) [Intentionally omitted]
(l) Subsequent to the execution and delivery of this Agreement there shall not have
occurred any of the following: (i) trading in securities generally on the New York Stock
Exchange or the NASDAQ Global Market or in the over-the-counter market, or trading in any
securities of the Company on any exchange or in the over-the-counter market, shall have been
suspended or materially limited or the settlement of such trading generally shall have been
materially disrupted or minimum prices shall have been established on any such exchange or
such market by the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall have been
declared by federal or state authorities, (iii) the United States shall have become engaged
in hostilities, there shall have been an escalation in hostilities involving the United
States or there shall have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse change in general economic,
political or financial conditions, including, without limitation, as a result of terrorist
activities after the date hereof (or the effect of international conditions on the financial
markets in the United States shall be such), as to make it, in the judgment of the
Representatives, impracticable or inadvisable to proceed with the public offering or
delivery of the Stock being delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
22
(m) The NASDAQ Global Market shall have approved the Stock for inclusion, subject only
to official notice of issuance and evidence of satisfactory distribution.
(n) The Lock-Up Agreements between the Representatives and the officers, directors and
stockholders of the Company set forth on Schedule 2, delivered to the
Representatives on or before the date of this Agreement, shall be in full force and effect
on such Delivery Date.
(o) (i) The Certificate of Amendment to the Certificate of Designation, Preferences and
Rights of Series G Convertible Preferred Stock, as filed by the Company with the Delaware
Secretary of State on December 7, 2009, shall not have been amended or modified prior to the
Initial Delivery Date; and (ii) the Conversion shall have been consummated and the shares of
Common Stock issuable upon the Conversion shall have been issued prior to such Initial
Delivery Date.
All opinions, letters, evidence and certificates mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to counsel for the Underwriters.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Underwriter, its directors,
officers and employees and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including, but not limited
to, any loss, claim, damage, liability or action relating to purchases and sales of Stock),
to which that Underwriter, director, officer, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in (A) any Preliminary Prospectus, the
Registration Statement, the Prospectus or in any amendment or supplement thereto, (B) any
Issuer Free Writing Prospectus or in any amendment or supplement thereto or (C) any
Permitted Issuer Information used or referred to in any “free writing prospectus” (as
defined in Rule 405) used or referred to by any Underwriter, (D) any “road show” (as defined
in Rule 433) not constituting an Issuer Free Writing Prospectus (a “Non-Prospectus Road
Show”) or (E) any Blue Sky application or other document prepared or executed by the Company
(or based upon any written information furnished by the Company for use therein)
specifically for the purpose of qualifying any or all of the Stock under the securities laws
of any state or other jurisdiction (any such application, document or information being
hereinafter called a “Blue Sky Application”) or (ii) the omission or alleged omission to
state in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer
Free Writing Prospectus or in any amendment or supplement thereto or in any Permitted Issuer
Information, any Non-Prospectus Road Show or any Blue Sky Application, any material fact
required to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse each Underwriter and each such director, officer, employee or
controlling person promptly upon demand for any legal or other expenses reasonably incurred
by that Underwriter,
23
director, officer, employee or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability or action
as such expenses are incurred; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement, the
Prospectus, any Issuer Free Writing Prospectus or in any such amendment or supplement
thereto or in any Permitted Issuer Information, any Non-Prospectus Road Show or any Blue Sky
Application, in reliance upon and in conformity with written information concerning such
Underwriter furnished to the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein, which information consists solely of the
information specified in Section 8(e). The foregoing indemnity agreement is in addition to
any liability which the Company may otherwise have to any Underwriter or to any director,
officer, employee or controlling person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall indemnify and hold harmless the
Company, its directors, officers and employees, and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof (including,
but not limited to, any loss, claim, damage, liability or action relating to purchases and
sales of Stock), to which the Company or any such director, officer, employee or controlling
person may become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement
or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any
amendment or supplement thereto or in any Non-Prospectus Road Show or Blue Sky Application,
or (ii) the omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any
amendment or supplement thereto or in any Non-Prospectus Road Show or Blue Sky Application,
any material fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and in conformity
with written information concerning such Underwriter furnished to the Company through the
Representatives by or on behalf of that Underwriter specifically for inclusion therein,
which information is limited to the information set forth in Section 8(e) and shall
reimburse the Company and any such director, officer, employee or controlling person for any
legal or other expenses reasonably incurred by the Company or any such director, officer,
employee or controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action. The foregoing indemnity
agreement is in addition to any liability that any Underwriter may otherwise have to the
Company or any such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this Section 8 of notice of
any claim or the commencement of any action, the indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under this Section 8,
24
notify the indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have under this Section 8 except to the extent it
has been materially prejudiced by such failure and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 8. If any such claim or action shall
be brought against an indemnified party, and it shall notify the indemnifying party thereof,
the indemnifying party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the defense of
such claim or action, the indemnifying party shall not be liable to the indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that the indemnified party shall have the right to employ
counsel to represent jointly the indemnified party and those other indemnified parties and
their respective directors, officers, employees and controlling persons who may be subject
to liability arising out of any claim in respect of which indemnity may be sought under this
Section 8 if (i) the indemnified party and the indemnifying party shall have so mutually
agreed; (ii) the indemnifying party has failed within a reasonable time to retain counsel
reasonably satisfactory to the indemnified party; (iii) the indemnified party and its
directors, officers, employees and controlling persons shall have reasonably concluded
(based on advice of counsel to the indemnified party) that there may be legal defenses
available to them that are different from or in addition to those available to the
indemnifying party; or (iv) the named parties in any such proceeding (including any
impleaded parties) include both the indemnified parties or their respective directors,
officers, employees or controlling persons, on the one hand, and the indemnifying party, on
the other hand, and representation of both sets of parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, and in any such
event the fees and expenses of such separate counsel shall be paid by the indemnifying
party. No indemnifying party shall (i) without the prior written consent of the indemnified
parties (which consent shall not be unreasonably withheld), settle or compromise or consent
to the entry of any judgment with respect to any pending or threatened claim, action, suit
or proceeding in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an unconditional release of
each indemnified party from all liability arising out of such claim, action, suit or
proceeding and does not include any findings of fact or admissions of fault or culpability
as to the indemnified party, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably withheld), but
if settled with the consent of the indemnifying party or if there be a final judgment for
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.
(d) If the indemnification provided for in this Section 8 shall for any reason be
unavailable to or insufficient to hold harmless an indemnified party under Section 8(a),
25
8(b), 8(c) or 8(g) in respect of any loss, claim, damage or liability, or any action in
respect thereof, referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Underwriters, on the other, from the
offering of the Stock or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of the
Company, on the one hand, and the Underwriters, on the other, with respect to the statements
or omissions that resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative benefits
received by the Company, on the one hand, and the Underwriters, on the other, with respect
to such offering shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Stock purchased under this Agreement (before deducting expenses)
received by the Company, as set forth in the table on the cover page of the Prospectus, on
the one hand, and the total underwriting discounts and commissions received by the
Underwriters with respect to the shares of the Stock purchased under this Agreement, as set
forth in the table on the cover page of the Prospectus, on the other hand. The relative
fault shall be determined by reference to whether the untrue or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation that does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to above in this
Section 8(d) shall be deemed to include, for purposes of this Section 8(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the provisions of this
Section 8(d), no Underwriter shall be required to contribute any amount in excess of the
amount by which the net proceeds from the sale of the Stock underwritten by it exceeds the
amount of any damages that such Underwriter has otherwise paid or become liable to pay by
reason of any 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
Securities Act) shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters’ obligations to contribute as provided in
this Section 8(d) are several in proportion to their respective underwriting obligations and
not joint.
(e) The Underwriters severally confirm and the Company acknowledges and agrees that the
statements regarding delivery of shares by the Underwriters set forth on the cover page of,
and the concession and reallowance figures and the paragraph relating to stabilization by
the Underwriters appearing under the caption “Underwriting” in, the most recent Preliminary
Prospectus and the Prospectus are correct and constitute the only
26
information concerning
such Underwriters furnished in writing to the Company by or on behalf of the Underwriters
specifically for inclusion in any Preliminary Prospectus, the Registration Statement, the
Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or
in any Non-Prospectus Road Show.
9. Defaulting Underwriters. If, on any Delivery Date, any Underwriter defaults in the
performance of its obligations under this Agreement, the remaining non-defaulting
Underwriters shall be obligated to purchase the Stock that the defaulting Underwriter agreed
but failed to purchase on such Delivery Date in the respective proportions which the number of
shares of the Firm Stock set forth opposite the name of each remaining non-defaulting Underwriter
in Schedule 1 hereto bears to the total number of shares of the Firm Stock set forth
opposite the names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
provided, however, that the remaining non-defaulting Underwriters shall not be obligated to
purchase any of the Stock on such Delivery Date if the total number of shares of the Stock that the
defaulting Underwriter or Underwriters agreed but failed to purchase on such date exceeds 9.09% of
the total number of shares of the Stock to be purchased on such Delivery Date, and any remaining
non-defaulting Underwriter shall not be obligated to purchase more than 110% of the number of
shares of the Stock that it agreed to purchase on such Delivery Date pursuant to the terms of
Section 2. If the foregoing maximums are exceeded, the remaining non-defaulting Underwriters, or
those other underwriters satisfactory to the Representatives who so agree, shall have the right,
but shall not be obligated, to purchase, in such proportion as may be agreed upon among them, all
the Stock to be purchased on such Delivery Date. If the remaining Underwriters or other
underwriters satisfactory to the Representatives do not elect to purchase the shares that the
defaulting Underwriter or Underwriters agreed but failed to purchase on such Delivery Date, this
Agreement (or, with respect to any Option Stock Delivery Date, the obligation of the Underwriters
to purchase, and of the Company to sell, the Option Stock) shall terminate without liability on the
part of any non-defaulting Underwriter or the Company, except that the Company will continue to be
liable for the payment of expenses to the extent set forth in Sections 6 and 11. As used in this
Agreement, the term “Underwriter” includes, for all purposes of this Agreement unless the context
requires otherwise, any party not listed in Schedule 1 hereto that, pursuant to this
Section 9, purchases Stock that a defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have
to the Company for damages caused by its default. If other Underwriters are obligated or agree to
purchase the Stock of a defaulting or withdrawing Underwriter, either the Representatives or the
Company may postpone the Delivery Date for up to seven full business days in order to effect any
changes that in the opinion of counsel for the Company or counsel for the Underwriters may be
necessary in the Registration Statement, the Prospectus or in any other document or arrangement.
10. Termination. The obligations of the Underwriters hereunder may be terminated by the
Representatives by notice given to and received by the Company prior to delivery of and payment for
the Firm Stock if, prior to that time, any of the events described in Sections 7(j), 7(k) and 7(l)
shall have occurred or if the Underwriters shall decline to purchase the Stock for any reason
permitted under this Agreement.
27
11. Reimbursement of Underwriters’ Expenses. If (a) the Company shall fail to tender the
Stock for delivery to the Underwriters for any reason or (b) the Underwriters shall decline to
purchase the Stock for any reason permitted under this Agreement (other than pursuant to Section
7(l)), the Company will reimburse the Underwriters for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of counsel) incurred by the Underwriters in connection
with this Agreement and the proposed purchase of the Stock, and upon demand the Company shall pay
the full amount thereof to the Representatives. If this Agreement is terminated pursuant to
Section 9 by reason of the default of one or more Underwriters, the Company shall not be obligated
to reimburse any defaulting Underwriter on account of those expenses.
12. Research Analyst Independence. The Company acknowledges that the Underwriters’ research
analysts and research departments are required to be independent from their respective investment
banking divisions and are subject to certain regulations and internal policies, and that such
Underwriters’ research analysts may hold views and make statements or investment recommendations
and/or publish research reports with respect to the Company and/or the offering that differ from
the views of their respective investment banking divisions. The Company hereby waives and
releases, to the fullest extent permitted by law, any claims that the Company may have against the
Underwriters with respect to any conflict of interest that may arise from the fact that the views
expressed by their independent research analysts and research departments may be different from or
inconsistent with the views or advice communicated to the Company by such Underwriters’ investment
banking divisions. The Company acknowledges that each of the Underwriters is a full service
securities firm and as such from time to time, subject to applicable securities laws, may effect
transactions for its own account or the account of its customers and hold long or short positions
in debt or equity securities of the companies that may be the subject of the transactions
contemplated by this Agreement.
13. No Fiduciary Duty. The Company acknowledges and agrees that in connection with this
offering, sale of the Stock or any other services the Underwriters may be deemed to be providing
hereunder, notwithstanding any preexisting relationship, advisory or otherwise, between the parties
or any oral representations or assurances previously or subsequently made by the Underwriters: (i)
no fiduciary or agency relationship between the Company and any other person, on the one hand, and
the Underwriters, on the other, exists; (ii) the Underwriters are not acting as advisors, expert or
otherwise, to the Company, including, without limitation, with respect to the determination of the
public offering price of the Stock, and such relationship between the Company, on the one hand, and
the Underwriters, on the other, is entirely and solely commercial, based on arms-length
negotiations; (iii) any duties and obligations that the Underwriters may have to the Company shall
be limited to those duties and obligations specifically stated herein; and (iv) the Underwriters
and their respective affiliates may have interests that differ from those of the Company. The
Company hereby waives any claims that the Company may have against the Underwriters with respect to
any breach of fiduciary duty in connection with this offering.
14. Notices, Etc. All statements, requests, notices and agreements hereunder shall be in
writing, and:
28
(a) if to the Underwriters, shall be delivered or sent by mail or facsimile
transmission to (i) Barclays Capital Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: Syndicate Registration (Fax: ▇▇▇-▇▇▇-▇▇▇▇) and (ii) Credit Suisse
Securities (USA) LLC, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention:
LCD-IBD, with a copy, in the case of any notice pursuant to Section 8(c), to the
Director of Litigation, Office of the General Counsel, Barclays Capital Inc., ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇;
(b) if to the Company, shall be delivered or sent by mail or facsimile
transmission to the address of the Company set forth in the Registration Statement,
Attention: E. ▇▇▇▇▇▇ ▇▇▇▇▇ (Fax: ▇▇▇-▇▇▇-▇▇▇▇).
Any such statements, requests, notices or agreements shall take effect at the time of receipt
thereof. The Company shall be entitled to act and rely upon any request, consent, notice or
agreement given or made on behalf of the Underwriters by the Representatives.
15. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of
and be binding upon the Underwriters, the Company, and their respective successors.
This Agreement and the terms and provisions hereof are for the sole benefit of only those
persons, except that (A) the representations, warranties, indemnities and agreements of the Company
contained in this Agreement shall also be deemed to be for the benefit of the directors, officers
and employees of the Underwriters and each person or persons, if any, who control any Underwriter
within the meaning of Section 15 of the Securities Act and (B) the indemnity agreement of the
Underwriters contained in Section 8(b) of this Agreement shall be deemed to be for the benefit of
the directors of the Company, the officers of the Company who have signed the Registration
Statement and any person controlling the Company within the meaning of Section 15 of the Securities
Act. Nothing in this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section 17, any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provision contained herein.
16. Survival. The respective indemnities, representations, warranties and agreements of the
Company and the Underwriters contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Stock
and shall remain in full force and effect, regardless of any investigation made by or on behalf of
any of them or any person controlling any of them.
17.
Definition of the Terms “Business Day” and
“Subsidiary”. For purposes of this Agreement,
(a) “business day” means each Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on
which banking institutions in New York are generally authorized or obligated by law or executive
order to close and (b) “subsidiary” has the meaning set forth in Rule 405.
18. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
19. Counterparts. This Agreement may be executed in one or more counterparts and, if
executed in more than one counterpart, the executed counterparts shall each be deemed to be an
original but all such counterparts shall together constitute one and the same instrument.
29
20. 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.
30
If the foregoing correctly sets forth the agreement between the Company and the Underwriters,
please indicate your acceptance in the space provided for that purpose below.
| Very truly yours, CRIMSON EXPLORATION INC. |
||||
| By: | /s/ E. ▇▇▇▇▇▇ ▇▇▇▇▇ | |||
| Name: | E. ▇▇▇▇▇▇ ▇▇▇▇▇ | |||
| Title: | Senior Vice President and Chief Financial Officer |
|||
31
Accepted:
Barclays
Capital Inc.
Credit Suisse Securities (USA) LLC
Credit Suisse Securities (USA) LLC
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
of the several Underwriters named
in Schedule 1 hereto
| By: | Barclays Capital Inc. | |||
| By: | /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||
| Authorized Representative | ||||
| By: | Credit Suisse Securities (USA) LLC | |||
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |||
| Authorized Representative | ||||
32
SCHEDULE 1
| Number of Shares of | ||||
| Underwriters | Firm Stock | |||
Barclays Capital Inc. |
8,500,000 | |||
Credit Suisse Securities (USA) LLC |
4,000,000 | |||
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc. |
4,000,000 | |||
▇▇▇▇▇▇▇▇▇
Capital Partners, LLC |
1,000,000 | |||
RBS Securities Inc. |
1,000,000 | |||
▇▇▇▇▇▇▇ Rice
& Company L.L.C. |
500,000 | |||
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLC |
500,000 | |||
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated |
500,000 | |||
Total |
20,000,000 | |||
1
SCHEDULE 2
PERSONS DELIVERING LOCK-UP AGREEMENTS
Directors
B. ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Officers
▇▇▇▇▇ ▇. ▇▇▇▇
E. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇
Stockholders
OCM GW Holdings, LLC
OCM Crimson Holdings, LLC
2
SCHEDULE 3
Issuer Free Writing Prospectus
Filed Pursuant to Rule 433
December 16, 2009
Registration Statement No. 333-163277
Filed Pursuant to Rule 433
December 16, 2009
Registration Statement No. 333-163277
Final Term Sheet
Issuer:
|
Crimson Exploration Inc. | |
Common stock offered by issuer:
|
20,000,000 shares | |
Public offering price:
|
$5.00 per share | |
Net proceeds to the issuer, after
deducting underwriting discounts and
commissions and estimated offering
expenses:
|
$93.1 million | |
Common stock outstanding immediately
following the offering:
|
38,501,889 shares of common stock (excluding 3,000,000 shares that will be sold to the underwriters if they exercise their option to purchase additional shares), including 12,085,488 shares of common stock that will be issued pursuant to the Preferred Stock Conversion, 11,516,334 of which will be issued to Oaktree Holdings and OCM Crimson. | |
| Oaktree Holdings is expected to purchase 2,000,000 shares of our common stock in this offering and as a result will beneficially own, together with OCM Crimson, approximately 40% of our common stock. | ||
NASDAQ Symbol:
|
CXPO | |
Trade date:
|
December 16, 2009 | |
Settlement date:
|
December 22, 2009 |
The following restates (i) the “Capitalization” section and the (ii) “Prospectus Summary—Pro Forma
Net Income (Loss) Per Share Data” section contained in our preliminary prospectus dated December 8,
2009 in order to reflect the public offering price set forth above, the application of the net
proceeds as described in “Use of proceeds” and the Preferred Stock Conversion. A copy of our
preliminary prospectus can be accessed through the following link:
▇▇▇.▇▇▇.▇▇▇/▇▇▇▇▇▇▇▇/▇▇▇▇▇/▇▇▇▇/▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
3
Capitalization
The following table sets forth cash and cash equivalents and capitalization as of September 30,
2009:
| • | on a historical basis; | ||
| • | on a pro forma basis to give effect to the Preferred Stock Conversion, the issuance of $12 million in unsecured promissory notes and the repayment of loans under our revolving credit facility with proceeds of one of such promissory notes; and | ||
| • | on a pro forma basis as further adjusted to give effect to this offering and the application of the estimated net proceeds of this offering. |
This table should be read together with “Use of Proceeds,” “Selected Historical Consolidated
Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and the consolidated financial statements and notes to those statements, in each case,
included elsewhere in this prospectus.
| As of September 30, 2009 | ||||||||||||
| Pro Forma | ||||||||||||
| As Further | ||||||||||||
| Historical | Pro Forma | Adjusted | ||||||||||
| (In thousands, except per share data) | ||||||||||||
Cash and cash equivalents |
$ | — | $ | — | $ | — | ||||||
Total current debt
|
||||||||||||
Unsecured promissory note |
— | 10,000 | — | |||||||||
Current portion of long-term debt |
1,526 | — | — | |||||||||
| $ | 1,526 | $ | 10,000 | $ | — | |||||||
Total long-term debt, net of current portion
|
||||||||||||
Revolving credit facility(1) |
140,000 | 131,526 | 48,381 | |||||||||
Second lien term loan agreement |
150,000 | 150,000 | 150,000 | |||||||||
Subordinated unsecured promissory note |
— | 2,000 | 2,000 | |||||||||
| $ | 290,000 | $ | 283,526 | $ | 200,381 | |||||||
Total debt |
$ | 291,526 | $ | 293,526 | $ | 200,381 | ||||||
Stockholders’ equity
|
||||||||||||
Series G Preferred Stock |
$ | 1 | $ | — | $ | — | ||||||
Series H Preferred Stock |
— | — | — | |||||||||
Common stock |
7 | 19 | 39 | |||||||||
Additional paid-in capital |
97,566 | 97,554 | 190,679 | |||||||||
Retained earnings |
9,353 | 9,353 | 9,353 | |||||||||
Treasury stock |
(384 | ) | (384 | ) | (384 | ) | ||||||
Total stockholders’ equity |
$ | 106,543 | $ | 106,542 | $ | 199,687 | ||||||
Total capitalization |
$ | 398,069 | $ | 400,068 | $ | 400,068 | ||||||
| (1) | As of December 4, 2009, and after application of proceeds from our $10 million unsecured promissory note, we had $129.5 million in aggregate indebtedness outstanding under our revolving credit facility. After this offering, we expect that we will have approximately $58.6 million in available borrowing capacity under our revolving credit facility. Also, if we close the sale of substantially all of our Southwest Louisiana properties, we expect to pay down our revolving credit facility by an additional $10.2 million. Effective December 7, 2009, we entered into an amendment to our revolving credit facility that, among other things, amended certain of our financial covenants and our debt incurrence covenant and provided for redetermination of our borrowing base at January 1, 2010. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital resources—Revolving Credit Facility.” |
4
Pro Forma Net Income (Loss) Per Share Data
The pro forma data presented in the following table gives effect to the Preferred Stock
Conversion as of the beginning of the period presented.
| Year Ended | Nine Months Ended | |||||||
| December 31, | September 30, | |||||||
| 2008 | 2009 | |||||||
| (In thousands, | ||||||||
| except per share data) | ||||||||
Pro forma preferred stock dividends |
$ | — | $ | — | ||||
Pro forma net income (loss) available to common stockholders |
46,203 | (16,817 | ) | |||||
Pro forma basic net income (loss) per share: |
||||||||
Weighted average shares outstanding |
15,825 | 17,587 | ||||||
Net income (loss) per share |
$ | 2.92 | $ | (0.96 | ) | |||
Pro forma diluted net income (loss) per share: |
||||||||
Weighted average shares outstanding |
16,030 | 17,587 | ||||||
Net income (loss) per share |
$ | 2.88 | $ | (0.96 | ) | |||
Other Information
Pursuant to the fourth amendment to our revolving credit facility, if we close an offering of our
common stock that results in less than $100 million in proceeds to the Company, our revolving
credit agreement provides that the ratio of our current assets to current liabilities (“Current
Ratio”), calculated as of the last day of any fiscal quarter, may not be less than 0.60 to 1.00 for
the period ending December 31, 2009 (and 1.0 to 1.0 for all periods thereafter) and the ratio of
our total debt to Adjusted EBITDAX (“Leverage Ratio”) for any four trailing fiscal quarters may not
be greater than 4.00x for such period ending December 31, 2009 and 3.75x for any such period ending
March 31, 2010 and thereafter. If we close an offering of our common stock that results in $100
million or more in proceeds to the Company, our revolving credit agreement provides that our
Current Ratio may not be less than 1.0 to 1.0, calculated as of the last day of any fiscal quarter,
and our Leverage Ratio may not be greater than 3.50x for any such period ending on or prior to
December 31, 2010 and 3.25x thereafter.
Crimson Exploration Inc., the issuer, has filed a registration statement (including a prospectus)
with the SEC for the offering to which this communication relates. Before you invest, you should
read the prospectus in that registration statement and other documents the issuer has filed with
the SEC for more complete information about the issuer and this offering. You may get these
documents for free by visiting ▇▇▇▇▇ on the SEC Web site at ▇▇▇.▇▇▇.▇▇▇. Alternatively, the issuer,
any underwriter or any dealer participating in the offering will arrange to send you the prospectus
if you request it by calling toll-free ▇-▇▇▇-▇▇▇-▇▇▇▇.
5
EXHIBIT A
LOCK-UP LETTER AGREEMENT
Barclays Capital Inc.
Credit Suisse Securities (USA) LLC
As Representatives of the several
Underwriters named in Schedule 1,
c/o Barclays Capital Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Credit Suisse Securities (USA) LLC
As Representatives of the several
Underwriters named in Schedule 1,
c/o Barclays Capital Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned understands that you and certain other firms (the “Underwriters”) propose to
enter into an Underwriting Agreement (the “Underwriting Agreement”) providing for the purchase by
the Underwriters of shares (the “Stock”) of Common Stock, par value $0.001 per share (the “Common
Stock”), of Crimson Exploration Inc., a Delaware corporation (the “Company”), and that the
Underwriters propose to reoffer the Stock to the public (the “Offering”).
In consideration of the execution of the Underwriting Agreement by the Underwriters, and for
other good and valuable consideration, the undersigned hereby irrevocably agrees that, without the
prior written consent of Barclays Capital Inc., on behalf of the Underwriters, the undersigned will
not, directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter
into any transaction or device that is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any shares of Common Stock (including,
without limitation, shares of Common Stock that may be deemed to be beneficially owned by the
undersigned in accordance with the rules and regulations of the Securities and Exchange Commission
and shares of Common Stock that may be issued upon exercise of any options or warrants) or
securities convertible into or exercisable or exchangeable for Common Stock, (2) enter into any
swap or other derivatives transaction that transfers to another, in whole or in part, any of the
economic benefits or risks of ownership of shares of Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, (3) make any demand for or exercise any right or cause to be
filed a registration statement, including any amendments thereto, with respect to the registration
of any shares of Common Stock or securities convertible into or exercisable or exchangeable for
Common Stock or any other securities of the Company or (4) publicly disclose the intention to do
any of the foregoing, for a period commencing on the date hereof and ending on the 180th day after
the date of the Final Prospectus relating to the Offering (such 180-day period, the “Lock-Up
Period”) except (a) the exercise of awards granted under any equity plan of the Company existing as
of the date hereof, (b) transfers to family members or a trust, so long as such parties agree to be
bound by the foregoing restrictions for the remainder of the Lock-Up Period and (c) the sale to the
Company of shares of Common Stock
1
for the purpose of satisfying tax liabilities associated with the vesting or exercise of
awards granted pursuant to an equity plan of the Company existing as of the date hereof.
Notwithstanding the foregoing, if (1) during the last 17 days of the Lock-Up 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 Lock-Up Period, the Company announces that it will
release earnings results during the 16-day period beginning on the last day of the Lock-Up Period,
then the restrictions imposed by this Lock-Up Letter Agreement shall continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings release or the
announcement of the material news or the occurrence of the material event, unless Barclays Capital
Inc. waives such extension in writing (such waiver not to be unreasonably withheld, conditioned or
delayed). The undersigned hereby further agrees that, prior to engaging in any transaction or
taking any other action that is subject to the terms of this Lock-Up Letter Agreement during the
period from the date of this Lock-Up Letter Agreement to and including the 34th day
following the expiration of the Lock-Up Period, it will give notice thereof to the Company and will
not consummate such transaction or take any such action unless it has received written confirmation
from the Company that the Lock-Up Period (as such may have been extended pursuant to this
paragraph) has expired.
In furtherance of the foregoing, the Company and its transfer agent are hereby authorized to
decline to make any transfer of securities if such transfer would constitute a violation or breach
of this Lock-Up Letter Agreement.
It is understood that, if the Company notifies the Underwriters that it does not intend to
proceed with the Offering, if the Underwriting Agreement does not become effective, or if the
Underwriting Agreement (other than the provisions thereof which survive termination) shall
terminate or be terminated prior to payment for and delivery of the Stock, the undersigned will be
released from its obligations under this Lock-Up Letter Agreement.
The undersigned understands that the Company and the Underwriters will proceed with the
Offering in reliance on this Lock-Up Letter Agreement.
Whether or not the Offering actually occurs depends on a number of factors, including market
conditions. Any Offering will only be made pursuant to an Underwriting Agreement, the terms of
which are subject to negotiation between the Company and the Underwriters.
[Signature page follows]
2
The undersigned hereby represents and warrants that the undersigned has full power and
authority to enter into this Lock-Up Letter Agreement and that, upon request, the undersigned will
execute any additional documents necessary in connection with the enforcement hereof. Any
obligations of the undersigned shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
| Very truly yours, |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
Dated: _______________
3
EXHIBIT B-1
[See attached]
EXHIBIT B-2
[See attached]