3,960,000 Units NGAS RESOURCES, INC. UNDERWRITING AGREEMENT
Exhibit 1.1
3,960,000 Units
NGAS RESOURCES, INC.
May 11, 2010
LAZARD CAPITAL MARKETS LLC
▇▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
c/o Lazard Capital Markets LLC
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
c/o Lazard Capital Markets LLC
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
1. Introduction. NGAS Resources, Inc., a corporation organized under the
laws of the Province of British Columbia (the “Company”), proposes to issue and sell to the several
Underwriters (as defined below) as set forth in Schedule C hereto, pursuant to the terms
and conditions of this Underwriting Agreement (this “Agreement”) in connection with a public
offering (the “Offering”), an aggregate of 3,960,000 units (the “Units”) with each Unit consisting
of (i) one share of common stock (a “Share”), no par value (the “Common Stock”) of the Company and
(ii) one warrant (a “Warrant”) to purchase 0.40 of a share of Common Stock (a “Warrant Share”) for
an aggregate purchase price of $5,187,600. Units will not be issued or certificated. The Shares
and Warrants are immediately separable and will be issued separately. The terms and conditions of
the Warrants are set forth in the form of Exhibit A attached hereto. The Company hereby
confirms that Lazard Capital Markets LLC (“LCM”) and ▇▇▇▇▇▇▇▇▇▇ Securities, Inc. (“▇▇▇▇▇▇▇▇▇▇” and
together with LCM, the “Underwriters”) have been engaged to act as the Underwriters in accordance
with the terms and conditions hereof. LCM is acting as the representative of the Underwriters, and
in such capacity is hereinafter referred to as the “Representative.” The Warrants, the Warrant
Shares and the Shares, are hereinafter collectively referred to as the “Securities.”
2. Delivery and Payment. On the basis of the representations, warranties
and agreements of the Company herein contained, and subject to all the terms and conditions set
forth in this Agreement:
2.1 The Company agrees to issue and sell and the Underwriters, severally and not
jointly, agree to purchase from the Company an aggregate of 3,960,000 Units at a purchase
price of $1.2183 per Unit (the “Purchase Price”). The Company has been advised by you that
you propose to make a public offering of the Units as soon after this Agreement has become
effective as in your judgment is advisable. The Company is further advised by you that the
Units are to be offered to the public initially at $1.31 per Unit.
2.2 Payment of the Purchase Price for, and delivery of, the Shares and Warrants
contained in the Units shall be made at the time and date of closing and delivery of the
documents required to be delivered to the Underwriters pursuant to Sections 4 and
6 hereof shall be at 10:00 A.M., New York time, on May 17, 2010 (the “Closing Date”)
at the office of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
or at such other time and date as the Representative and the Company determine pursuant to
Rule 15c6-1(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and upon satisfaction of the other conditions set forth in this Agreement. The Company
shall deliver the Shares and Warrants, which shall be registered in the name or names and
shall be in such denominations as the Representative may request at least one (1) business
day before the Closing Date, to the Representative, which delivery, (a) with respect to the
Shares shall be made through the facilities of the Depository Trust Company’s DWAC delivery
system, and (b) with respect to the Warrants, shall be made by physical delivery to be
received by the Underwriter no later than one (1) business day following the Closing Date.
2.3 Prior to the Closing Date, the Company shall not, without the prior written
consent of the Representative, solicit or accept offers to purchase Units or securities
convertible into, exchangeable or exercisable for shares of Common Stock (other than
pursuant to the exercise of options or warrants to purchase shares of Common Stock that are
outstanding at the date hereof) otherwise than through the Underwriters in accordance
herewith.
2.4 No Units which the Company has agreed to sell pursuant to this Agreement shall be
deemed to have been purchased and paid for, or sold by the Company, until the Shares and
Warrants contained in the Units shall have been delivered to the Underwriters thereof
against payment by each of the Underwriters. If the Company shall default in its
obligations to deliver any Shares or Warrants contained in the Units to the Underwriters,
the Company shall indemnify and hold each Underwriter harmless against any loss, claim,
damage or expense arising from or as a result of such default by the Company in accordance
with the procedures set forth in Section 7(c) herein.
3. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriters that:
(a) The Company has prepared and filed in conformity with the requirements of the
Securities Act of 1933, as amended (the “Securities Act”), and published rules and
regulations thereunder (the “Rules and Regulations”) adopted by the Securities and Exchange
Commission (the “Commission”) a “shelf” Registration Statement (as hereinafter defined) on
Form S-3 (File No. 333-144417), which became effective as of November 7, 2007 (the
“Effective Date”), including a base prospectus relating to the Securities (the “Base
Prospectus”), and such amendments and supplements thereto as may have been required up to
the date of this Agreement. The term “Registration Statement” as used in this Agreement
means the registration statement (including all exhibits, financial schedules and all
documents and information deemed to be a part of the Registration Statement pursuant to Rule
430A of the Rules and Regulations), as amended and/or supplemented to the date of this
Agreement, including the Base Prospectus. The Registration Statement is effective under the
Securities Act, the Company has responded to all requests, if any, of the Commission for
additional or supplemental information, and no stop order preventing or suspending the
effectiveness of the Registration Statement or suspending or preventing the use of the
Prospectus has been issued by the Commission and no proceedings for that purpose have been
instituted or, to the knowledge of the Company, are threatened by the Commission. The
Company, if required by the Rules and Regulations of the Commission, will file the
Prospectus (as defined below), with the Commission pursuant to Rule 424(b) of the Rules and
Regulations. The term “Prospectus” as used in this Agreement means the Prospectus, in the
form in which it is to be filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations, or, if the Prospectus is not to be filed with the Commission pursuant to Rule
424(b), the Prospectus in the form included as part of the Registration Statement as of the
Effective Date, except that if any revised prospectus or prospectus supplement shall be
provided to the Underwriters by the Company for use in connection with the offering and sale
of the Units which differs from the Prospectus (whether or not such revised prospectus or
prospectus supplement is required to be filed by the Company pursuant to Rule 424(b) of the
Rules and Regulations), the term “Prospectus” shall refer to such revised prospectus or
prospectus supplement, as the case may be, from and after the time it is first provided to
the Underwriters for such use (or in the form first made available to the Underwriters by
the Company to meet the requests of prospective purchasers pursuant to Rule 173 under the
Securities Act). Any preliminary prospectus or prospectus subject to completion included in
the Registration Statement or filed with the Commission pursuant to Rule 424 of the Rules
and Regulations is hereafter called a “Preliminary Prospectus.” Any reference herein to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 which were filed under the Exchange Act, on or before the last to occur of the
Effective Date, the date of the Preliminary Prospectus, or the date of the Prospectus, and
any reference herein to the terms “amend,” “amendment,” or “supplement” with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include (i) the filing of any document under the Exchange Act after the
Effective Date, the date of such Preliminary Prospectus or the date of the Prospectus, as
the case may be, which is incorporated by reference and (ii) any such document so filed. If
the Company has filed an abbreviated registration statement to register additional
securities pursuant to Rule 462(b) under the Rules and Regulations (the
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“462(b) Registration Statement”), then any reference herein to the Registration
Statement shall also be deemed to include such 462(b) Registration Statement.
(b) As of the Applicable Time (as defined below) and as of the Closing Date, neither
(i) any General Use Free Writing Prospectus (as defined below) issued at or prior to the
Applicable Time, and the Pricing Prospectus (as defined below) and the information included
on Schedule A hereto, all considered together (collectively, the “General Disclosure
Package”), (ii) any individual Limited Use Free Writing Prospectus (as defined below), nor
(iii) the bona fide electronic road show (as defined in Rule 433(h)(5) of the Rules and
Regulations), if any, that has been made available without restriction to any person, when
considered together with the General Disclosure Package, included or will include, any
untrue statement of a material fact or omitted or as of the Closing Date will omit, to state
a material fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to information contained in or omitted
from any Issuer Free Writing Prospectus, in reliance upon, and in conformity with, written
information furnished to the Company by the Representative by or on behalf of the
Underwriters specifically for inclusion therein, which information the parties hereto agree
is limited to the Underwriters’ Information (as defined in Section 16). As used in
this paragraph (b) and elsewhere in this Agreement:
“Applicable Time” means 5:00 P.M., New York time, on the date of this Agreement.
“General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is
identified on Schedule A to this Agreement.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in
Rule 433 of the Rules and Regulations relating to the Units in the form filed or required to
be filed with the Commission or, if not required to be filed, in the form retained in the
Company’s records pursuant to Rule 433(g) of the Rules and Regulations.
“Limited Use Free Writing Prospectuses” means any Issuer Free Writing Prospectus that is not
a General Use Free Writing Prospectus.
“Pricing Prospectus” means the Preliminary Prospectus, if any, and the Base Prospectus, each
as amended and supplemented immediately prior to the Applicable Time, including any document
incorporated by reference therein and any prospectus supplement deemed to be a part thereof.
(c) No order preventing or suspending the use of any Preliminary Prospectus, any Issuer
Free Writing Prospectus or the Prospectus relating to the Offering has been issued by the
Commission, and no proceeding for that purpose or pursuant to Section 8A of the Securities
Act has been instituted or threatened by the Commission, and each Preliminary Prospectus (if
any), at the time of filing thereof, conformed in all material respects to the requirements
of the Securities Act and the Rules and Regulations, and 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, however, that the Company makes no representations or
warranties as to information contained in or omitted from any Preliminary Prospectus, in
reliance upon, and in conformity with, written information furnished to the Company by the
Representative by or on behalf of the Underwriters specifically for inclusion therein, which
information the parties hereto agree is limited to the Underwriters’ Information (as defined
in Section 16).
(d) The information set forth in the Registration Statement, the Pricing Prospectus and
the Prospectus relating to oil and natural gas reserves, oil and natural gas ▇▇▇▇▇ and any
other oil and natural gas related information required to be disclosed in such Registration
Statement, Pricing Prospectus and Prospectus pursuant to the Securities Act and the rules
and regulations thereunder has been prepared by the Company in accordance with methods
generally applied in the oil and natural gas industry and conforms, in all material
respects, to the requirements of the Securities Act and the rules and regulations
thereunder.
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(e) The participation, joint development, joint operating, farm-out and other
agreements relating to rights of the Company and its subsidiaries, and to which the Company
and any of its subsidiaries is a party, with respect to the ownership, lease or operation of
oil and natural gas properties or the exploration for, development of or production of oil
and natural gas reserves thereon, constitute valid and binding agreements of and are
enforceable against the Company and its subsidiaries party thereto and, to the knowledge of
the Company, the other parties thereto.
(f) At the time the Registration Statement became or becomes effective, at the date of
this Agreement and on the Closing Date, the Registration Statement conformed and will
conform in all material respects to the requirements of the Securities Act and the Rules and
Regulations and did not and will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make the statements
therein not misleading; the Prospectus, at the time the Prospectus was issued and on the
Closing Date, conformed and will conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations and did not and will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing representations and warranties in this
paragraph (d) shall not apply to information contained in or omitted from the
Registration Statement or the Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by the Representative by or on behalf of the
Underwriters specifically for inclusion therein, which information the parties hereto agree
is limited to the Underwriters’ Information (as defined in Section 16).
(g) Each Issuer Free Writing Prospectus, if any, as of its issue date and at all
subsequent times through the completion of the public offer and sale of the Units or until
any earlier date that the Company notified or notifies the Representative as described in
Section 4(e), did not, does not and will not include any information that
conflicted, conflicts or will conflict with the information contained in the Registration
Statement, Pricing Prospectus or the Prospectus, including any document incorporated by
reference therein and any prospectus supplement deemed to be a part thereof that has not
been superseded or modified, or includes an untrue statement of a material fact or omitted
or would omit to state a material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which they were
made, not misleading. The foregoing sentence does not apply to statements in or omissions
from any Issuer Free Writing Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by the Representative by or on behalf of the
Underwriters specifically for inclusion therein, which information the parties hereto agree
is limited to the Underwriters’ Information (as defined in Section 16).
(h) The documents incorporated by reference in the Prospectus, when they became
effective or were filed with the Commission, as the case may be, conformed in all material
respects to the requirements of the Securities Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder and none of such documents contained
any untrue statement of a material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; and any further documents so filed and
incorporated by reference in the Prospectus, when such documents become effective or are
filed with the Commission, as the case may be, will conform in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they were made,
not misleading.
(i) At the earliest time after the filing of the Registration Statement relating to the
Securities 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 and (ii) as of the date of the
execution and delivery of this Agreement (with such date being used as the determination
date for purposes of this clause (ii)), the Company was not, is not and will not be as a
result of the Offering an “ineligible issuer” (as defined in Rule 405 and 433 of the Rules
and Regulations). The Company has not, directly or indirectly, distributed and will not
distribute any offering material in connection with the Offering other than any Preliminary
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Prospectus, the Prospectus and other materials, if any, permitted under the Securities
Act and consistent with Section 4(b) below. The Company will file with the
Commission all Issuer Free Writing Prospectuses (other than a “road show,” as defined in
Rule 433(d)(8) of the Rules and Regulations), if any, in the time and manner required under
Rules 163(b)(2) and 433(d) of the Rules and Regulations.
(j) The Company and each of its subsidiaries (as defined in Section 14) have been duly
organized and are validly existing as corporations or other legal entities in good standing
(or the foreign equivalent thereof) under the laws of their respective jurisdictions of
organization. The Company and each of its subsidiaries are duly qualified to do business
and are in good standing as foreign corporations or other legal entities in each
jurisdiction in which their respective ownership or lease of property or the conduct of
their respective businesses requires such qualification and have all power and authority
(corporate or other) necessary to own or hold their respective properties and to conduct the
businesses in which they are engaged, except where the failure to so qualify or have such
power or authority would not (i) have, singly or in the aggregate, a material adverse effect
on the condition (financial or otherwise), results of operations, assets, properties,
business or prospects of the Company and its subsidiaries, taken as a whole, or (ii) impair
in any material respect the ability of the Company to perform its obligations under this
Agreement or to consummate any transactions contemplated by this Agreement, the General
Disclosure Package or the Prospectus (any such effect as described in clauses (i) or (ii), a
“Material Adverse Effect”). The Company owns or controls, directly or indirectly, only the
following corporations, partnerships, limited liability partnerships, limited liability
companies, associations or other entities: (i) NGAS Production Co., a Kentucky corporation,
(ii) Sentra Corporation, a Kentucky corporation, (iii) NGAS Securities, Inc., a Kentucky
corporation, and (iv) NGAS Gathering, LLC, a Kentucky limited liability company.
(k) The Company has the full right, power and authority to enter into this Agreement,
and to perform and to discharge its obligations hereunder. This Agreement has been duly
authorized, executed and delivered by the Company, and constitutes the valid and binding
obligations of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affects the rights and remedies of creditors generally or subject
to general principles of equity.
(l) The Shares to be issued and sold by the Company to the Underwriters hereunder, and
the Warrant Shares issuable upon the exercise of the Warrants have been duly and validly
authorized and the Shares, when issued and delivered against payment therefor as provided
herein, and the Warrant Shares, when issued and delivered against payment therefor as
provided in the Warrants, will be duly and validly issued, fully paid and nonassessable and
free of any preemptive or similar rights and will conform to the description thereof
contained in the General Disclosure Package and the Prospectus. The Company has the full
right, power and authority to enter into the Warrants, and the Warrants conform, or when
issued will conform, to the description thereof contained in the General Disclosure Package
and the Prospectus and have been duly and validly authorized by the Company and upon
delivery to the Underwriter at the Closing Date will be valid and binding obligations of the
Company, enforceable in accordance with their terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affects the
rights and remedies of creditors generally or subject to general principles of equity.
(m) The authorized, issued and outstanding capital stock of the Company is as set forth
in the Registration Statement and the Pricing Prospectus, and all of the issued and
outstanding shares of capital stock of the Company have been duly authorized and validly
issued, are fully paid and non-assessable, have been issued in compliance with federal and
state securities laws, and conform to the description thereof contained in the General
Disclosure Package and the Prospectus. As of March 31, 2010, there were 33,521,512 shares
of Common Stock issued and outstanding and no shares of Preferred Stock, no par value, of
the Company issued and outstanding, and 19,088,843 shares of Common Stock are reserved for
issuance upon the exercise of all options, warrants and convertible securities outstanding
as of such date. Since such date, the Company has not issued any securities, other than
Common Stock of the Company issued pursuant to the exercise of stock options previously
outstanding under the Company’s stock option plans or the issuance of Common Stock pursuant
to employee stock purchase plans. 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 and were issued in compliance with US federal and state
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securities laws. None of the outstanding shares of Common Stock was issued in
violation of any preemptive rights, rights of first refusal or other similar rights to
subscribe for or purchase securities of the Company. There are no authorized or
outstanding shares of capital stock, options, warrants, preemptive rights, rights of first
refusal or other rights to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, any capital stock of the Company or any of its subsidiaries
other than those described above or accurately described in the General Disclosure Package.
The description of the Company’s stock option, stock bonus and other stock plans or
arrangements, and the stock options or other rights granted thereunder, as described in the
General Disclosure Package and the Prospectus, accurately and fairly present the information
required to be shown with respect to such plans, arrangements, stock options and rights.
(n) All of the issued and outstanding shares of capital stock or other equity interests
of each subsidiary of the Company have been duly authorized and validly issued, are fully
paid and non-assessable and, except to the extent set forth in the General Disclosure
Package or the Prospectus, are owned by the Company directly or indirectly through one or
more wholly-owned subsidiaries, free and clear of any claim, lien, encumbrance, security
interest, restriction upon voting or transfer or any other claim of any third party.
(o) The execution, delivery and performance of this Agreement by the Company, the
issuance and sale of Shares and Warrants included in the Units by the Company and the
consummation of the transactions contemplated hereby and thereby will not (with or without
notice or lapse of time or both) conflict with or result in a breach or violation of any of
the terms or provisions of, constitute a default or Debt Repayment Triggering Event (as
defined below) under, give rise to any right of termination or other right or the
cancellation or acceleration of any right or obligation or loss of a benefit under, or give
rise to the creation or imposition of any lien, encumbrance, security interest, claim or
charge upon any property or assets of the Company or any subsidiary pursuant to, any
indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such actions result in any violation of the provisions of
the charter or by-laws (or analogous governing instruments, as applicable) of the Company or
any of its subsidiaries or any law, statute, rule, regulation, judgment, order or decree of
any court or governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or any of their properties or assets. A “Debt Repayment
Triggering Event” means any event or condition that gives, or with the giving of notice or
lapse of time would give the holder of any note, debenture or other evidence of indebtedness
(or any person acting on such holder’s behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the Company or any of
its subsidiaries.
(p) Except for the registration of the Securities under the Securities Act and such
consents, approvals, authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state or foreign securities laws, the Financial
Industry Regulatory Authority (“FINRA”) and the Nasdaq Global Select Market (the “NASDAQ
GM”) in connection with the offering and sale of the Units by the Company, and the listing
of the Common Stock and the Warrant Shares on the Nasdaq GM, no consent, approval,
authorization or order of, or filing, qualification or registration with, any court or
governmental agency or body, foreign or domestic, which has not been made, obtained or taken
and is not in full force and effect, is required for the execution, delivery and performance
of this Agreement and the Warrants by the Company, the offer or sale of the Units or the
consummation of the transactions contemplated hereby or thereby.
(q) Hall, ▇▇▇▇▇▇▇ & Company, LLP has certified certain financial statements included or
incorporated by reference in the Registration Statement, the General Disclosure Package and
the Prospectus, has audited the Company’s internal control over financial reporting and
management’s assessment thereof, and is an independent registered public accounting firm as
required by the Securities Act and the Rules and Regulations and the Public Company
Accounting Oversight Board (United States) (the “PCAOB”). Except as pre-approved in
accordance with the requirements set forth in Section 10A of the Exchange Act, Hall, ▇▇▇▇▇▇▇
& Company, LLP has not been engaged by the Company to perform any “prohibited activities”
(as defined in Section 10A of the Exchange Act). The statements included in the
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Registration Statement with respect to Hall, ▇▇▇▇▇▇▇ & Company, LLP pursuant to Rule
509 of Regulation S-K of the Rules and Regulations are true and correct in all material
respects.
(r) The financial statements, together with the related notes, included or incorporated
by reference in the General Disclosure Package, the Prospectus and in the Registration
Statement present fairly the consolidated financial position and the results of operations
and changes in financial position of the Company and the Subsidiaries as of the respective
dates thereof and the consolidated results of operations and cash flows of the Company and
the Subsidiaries for the respective periods covered thereby, all in conformity with
generally accepted accounting principles applied on a consistent basis throughout the entire
period involved, except as otherwise disclosed in the Prospectus. The financial statements,
together with the related notes, included or incorporated by reference in the General
Disclosure Package and the Prospectus comply in all material respects with the Securities
Act, the Exchange Act, and the Rules and Regulations and the rules and regulations under the
Exchange Act. No other financial statements, schedules or “non-GAAP financial measures” (as
such term is defined by the rules and regulations of the Commission) of the Company are
required by the Act, the Exchange Act and the Rules and Regulations of the Exchange Act or
the Rules and Regulations to be included in the Registration Statement or the Prospectus.
There is no pro forma or as adjusted financial information which is required to be included
in the Registration Statement, the General Disclosure Package, or and the Prospectus or a
document incorporated by reference therein in accordance with the Securities Act and the
Rules and Regulations which has not been included or incorporated as so required.
(s) Neither the Company nor any of its subsidiaries has sustained, since the date of
the latest audited financial statements included or incorporated by reference in the General
Disclosure Package, any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set forth or
contemplated in the General Disclosure Package; 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 material adverse changes, or any development involving a prospective material adverse
change, in or affecting the business, assets, general affairs, management, financial
position, prospects, stockholders’ equity or results of operations of the Company and its
subsidiaries taken as a whole, otherwise than as set forth or contemplated in the General
Disclosure Package.
(t) Except as set forth or incorporated by reference in the General Disclosure Package,
there are no actions, suits, claims or proceedings pending, or to the Company’s knowledge,
threatened against or affecting, the Company or any of the Subsidiaries or any of their
respective officers in their capacity as such, before or by any federal or state court,
commission, regulatory body including FINRA and the NASDAQ Stock Market, Inc.,
administrative agency or other governmental body, domestic or foreign, wherein an
unfavorable ruling, decision or finding would reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any of the Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any authorization, approval,
order, license, certificate, franchise or permit. There are no pending investigations known
to the Company involving the Company or any of the Subsidiaries by any governmental agency
having jurisdiction over the Company or any of the Subsidiaries or their respective
businesses or operations wherein an unfavorable ruling, decision or finding would reasonably
be expected to have a Material Adverse Effect.
(u) Neither the Company nor any of its subsidiaries is in (i) violation of its charter
or by-laws (or analogous governing instrument, as applicable), (ii) default in any respect,
and no event has occurred which, 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, lease or other agreement or
instrument to which it is a party or by which it is bound or to which any of its property or
assets is subject or (iii) violation in any respect of any law, ordinance, governmental
rule, regulation or court order, decree or judgment to which it or its property or assets
may be subject except, in the case of clauses (ii) and (iii) of this paragraph (u), for any
violations or defaults which, singly or in the aggregate, would not have a Material Adverse
Effect.
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(v) The Company and each of its subsidiaries possess all licenses, certificates,
authorizations and permits issued by, and have made all declarations and filings with, the
appropriate local, state, federal or foreign regulatory agencies or bodies (including
without limitation, those relating to the Federal Energy Regulatory Commission) which are
necessary or desirable for the ownership of their respective properties or the conduct of
their respective businesses as described in the General Disclosure Package and the
Prospectus (collectively, the “Governmental Permits”) except where any failure to do so,
singly or in the aggregate, would not have a Material Adverse Effect. The Company and its
subsidiaries are in material compliance with all such Governmental Permits; all such
Governmental Permits are valid and in full force and effect, except where the invalidity or
failure to be in full force and effect would not, singly or in the aggregate, have a
Material Adverse Effect. All such Governmental Permits are free and clear of any
restriction or condition that are in addition to, or materially different from those
normally applicable to similar licenses, certificates, authorizations and permits. Neither
the Company nor any subsidiary has received written notification of any revocation or
modification (or proceedings related thereto) of any such Governmental Permit and to the
Company’s knowledge, any renewal of such Governmental Permit will be granted when requested.
(w) Neither the Company nor any of its subsidiaries is or, after giving effect to the
offering of the Units and the application of the proceeds thereof as described in the
General Disclosure Package and the Prospectus, will become an “investment company” within
the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations
of the Commission thereunder.
(x) Neither the Company, its subsidiaries nor, to the Company’s knowledge, any of the
Company’s or its subsidiaries’ officers, directors or affiliates has taken or will take,
directly or indirectly, any action designed or intended to stabilize or manipulate the price
of any security of the Company, or which caused or resulted in, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation of the price of
any security of the Company.
(y) Except as set forth or incorporated by reference in the General disclosure Package
and the Prospectus, each of the Company and its subsidiaries owns, is licensed or otherwise
has adequate rights to use Company technology (including but not limited to patented,
patentable and unpatented inventions and unpatentable proprietary or confidential
information, systems or procedures), designs, processes, trademarks, trade secrets, know
how, copyrights and other works of authorship, computer programs and technical data and
information (collectively, the “Intellectual Property”) that are or could reasonably be
expected to be material to its business as currently conducted or proposed to be conducted
or to the development, manufacture, operation and sale of any products and services sold or
proposed to be sold by any of the Company or any of its subsidiaries. Neither the Company
nor any of its subsidiaries has received any threat of or notice of infringement or
misappropriation of, or conflict with, asserted rights of others with respect to any
Intellectual Property. Neither the Company nor any of its subsidiaries has received any
threat or notice of a claim challenging the Company’s ownership of, or the validity or
enforceability of, any Company Intellectual Property. No Company Intellectual Property is
being infringed or misappropriated by any third party Except as set forth or incorporated
by reference in the General disclosure Package and the Prospectus, neither the Company nor
any of its subsidiaries is obligated or under any liability whatsoever to make any material
payment by way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any Intellectual Property, with respect to the use thereof or in connection
with the conduct of their respective businesses or otherwise.
(z) The Company and each of its subsidiaries own, or are licensed or otherwise have the
full exclusive right to use, all material trademarks and trade names that are used in or
reasonably necessary for the conduct of their respective businesses as described in the
General disclosure Package and the Prospectus,. Neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict with asserted rights of
others with respect to any such trademarks or trade names, or challenging or questioning the
validity or effectiveness of any such trademark or trade name. The use, in connection with
the business and operations of the Company and each of its subsidiaries of such trademarks
and trade names does not, to the Company’s knowledge, infringe on the rights of any person.
Except as set forth in the General disclosure Package and the Prospectus, the Company and
its subsidiaries are not obligated or under any liability whatsoever to make any payment by
way of royalties, fees or otherwise to any owner or
8
licensee of, or other claimant to, any trademark, service ▇▇▇▇ or trade name with
respect to the use thereof or in connection with the conduct of their respective businesses
or otherwise.
(aa) Each of the Company and its subsidiaries has taken reasonable security measures to
protect the secrecy, confidentiality and value of all their Intellectual Property in all
material aspects. The Company and its subsidiaries have complied with all duty of disclosure
requirements before the U.S. Patent and Trademark Office and any other non-U.S. Patent
Offices as appropriate, and have no reason to believe that such Intellectual Property is not
or, if not yet patented or registered, would not be, valid and enforceable against an
unauthorized user.
(bb) The Company and each of its subsidiaries has good and marketable title to all
properties and assets described in the Prospectus or in documents incorporated by reference
in the Prospectus as being owned respectively by it, free and clear of all liens, charges,
encumbrances or restrictions, except as set forth or incorporated by reference in the
Prospectus or are not, singly or in the aggregate, material to the business of the Company
or its subsidiaries. Each of the Company and its subsidiaries has valid, subsisting and
enforceable leases, subleases or farmouts for the properties described or incorporated by
reference in the Prospectus as leased or controlled by it, with such exceptions as are not
material and do not materially interfere with the use made and proposed to be made of such
properties by the Company; and neither the Company nor any subsidiary has received any
notice of any material claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any subsidiary under any of the leases or subleases mentioned
above, 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.
(cc) The Company is not involved in any material labor dispute with its or its
subsidiaries’ employees, nor, to the knowledge of the Company, is any such dispute
threatened or is imminent or that could reasonably be expected, singly or in the aggregate,
to have a Material Adverse Effect.
(dd) No “prohibited transaction” (as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder (“ERISA”), or Section 4975 of the Internal Revenue Code of 1986,
as amended from time to time (the “Code”)) or “accumulated funding deficiency” (as defined
in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other
than events with respect to which the thirty (30)-day notice requirement under Section 4043
of ERISA has been waived) has occurred or could reasonably be expected to occur with respect
to any employee benefit plan of the Company or any of its subsidiaries which could, singly
or in the aggregate, have a Material Adverse Effect. Each employee benefit plan of the
Company or any of its subsidiaries is in compliance in all material respects with applicable
law, including ERISA and the Code. The Company and its subsidiaries have not incurred and
are not reasonably expected to incur liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any pension plan (as defined in ERISA). Each pension
plan for which the Company or any of its subsidiaries would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified, and no facts have
occurred, whether by action or by failure to act, which, if known to the Internal Revenue
Service, would, singly or in the aggregate, reasonably be expected to cause the loss of such
qualification.
(ee) The Company and its subsidiaries are in compliance with all foreign, federal,
state and local statute, law (including the common law), ordinance, rule, regulation,
order, judgment, decree or Governmental Permit, relating to the use, treatment, storage and
disposal of hazardous or toxic substances, materials or wastes and the protection of health
and safety or the environment which are applicable to their businesses (“Environmental
Laws”), except where the failure to comply would not, singly or in the aggregate, have a
Material Adverse Effect. There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission, or other release of any kind of hazardous or toxic
substances, materials or wastes by, due to, or caused by the Company or any of its
subsidiaries (or, to the Company’s knowledge, any other entity for whose acts or omissions
the Company or any of its subsidiaries is or may otherwise be liable) upon any of the
property now or previously owned or leased by the Company or any of its subsidiaries, or
upon any other property, in violation of, or which would give rise to any liability under,
any Environmental Law, except for any violation or liability which would not have, singly or
in the aggregate with all such violations and liabilities, a Material Adverse Effect; and
there has been no disposal,
9
discharge, emission or other release of any kind onto such property or into the
environment surrounding such property of any hazardous or toxic substances, materials or
wastes with respect to which the Company has knowledge, except for any such disposal,
discharge, emission, or other release of any kind which would not have, singly or in the
aggregate with all such discharges and other releases, a Material Adverse Effect. In the
ordinary course of business, the Company and its subsidiaries conduct reviews of the effect
of Environmental Laws on their businesses and assets, as part of which they identify and
evaluate associated costs and liabilities (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or compliance with
Environmental Laws and Governmental Permits issued thereunder, any related constraints on
operating activities and any potential liabilities to third parties). On the basis of such
reviews, the Company and its subsidiaries have reasonably concluded that such associated
costs and liabilities would not have, singly or in the aggregate, a Material Adverse Effect.
(ff) The Company and its subsidiaries are in compliance in all respects with all
applicable provisions of the Occupational Safety and Health Act of 1970, as amended,
including all applicable regulations thereunder, except for such noncompliance as would not,
singly or in the aggregate, have a Material Adverse Effect.
(gg) The Company and its subsidiaries, each (i) has timely filed all necessary federal,
state, local and foreign tax returns, and all such returns were true, complete and correct,
(ii) has paid all federal, state, local and foreign taxes, assessments, governmental or
other charges that are due and payable for which it is liable, including, without
limitation, all sales and use taxes and all taxes which the Company or any of its
subsidiaries is obligated to withhold from amounts owing to employees, creditors and third
parties, and (iii) does not have any tax deficiency or claims outstanding or assessed or, to
the Company’s knowledge, proposed against any of them (other than as disclosed in the
General Disclosure Package or the Prospectus), except those, in each of the cases described
in clauses (i), (ii) and (iii) of this paragraph (hh), that would not, singly or in
the aggregate, have a Material Adverse Effect. The Company and its subsidiaries, each has
not engaged in any transaction which is a corporate tax shelter or which would reasonably be
expected to be characterized as such by the Internal Revenue Service or any other taxing
authority. The accruals and reserves on the books and records of the Company and its
subsidiaries in respect of tax liabilities for any taxable period not yet finally determined
are adequate to meet any assessments and related liabilities for any such period, and since
December 31, 2009 the Company and its subsidiaries each has not incurred any liability for
taxes other than in the ordinary course.
(hh) The Company and each of its subsidiaries carries, or is covered by, insurance in
such amounts and covering such risks as it believes is adequate for the conduct of its
business and the value of its properties and is customary for companies engaged in similar
industries.
(ii) The Company maintains (i) effective internal control over financial reporting as
defined in Rules 13a-15 and 15d-15 under the Exchange Act, and (ii) a system of internal
accounting controls sufficient to provide reasonable assurance that (A) transactions are
executed in accordance with management’s general or specific authorizations; (B)
transactions are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability; (C) access to assets is permitted only in accordance with management’s
general or specific authorization; and (D) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. Except as disclosed in the General Disclosure Package and
the Prospectus, or in any document incorporated by reference therein, since the end of the
Company’s most recent audited fiscal year, there has been (i) no material weakness in the
Company’s internal control over financial reporting (whether or not remediated) and (ii) no
change in the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal control over
financial reporting.
(jj) The Company is not aware of (A) any significant deficiency in the design or
operation of its internal control over financial reporting which are reasonably likely to
adversely affect the Company’s ability to record, process, summarize and report financial
data or any material weaknesses in internal controls, except as disclosed in the General
Disclosure Package and the Prospectus, or in any document incorporated by reference therein,
since the end of the Company’s most recent audited fiscal year; or (B)
10
any fraud, whether or not material, that involves management or other employees who
have a significant role in the Company’s internal controls.
(kk) Except as described in the General Disclosure Package and the Prospectus, there
are no material off-balance sheet transactions (including, without limitation, transactions
related to, and the existence of, “variable interest entities” within the meaning of
Financial Accounting Standards Board Interpretation No. 46), arrangements, obligations
(including contingent obligations), or any other relationships with unconsolidated entities
or other persons, that may have a material current or future effect on the Company’s
financial condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues or expenses.
(ll) The Company’s Board of Directors has validly appointed an audit committee whose
composition satisfies the requirements of Rule 4350(d)(2) of the Rules of NASDAQ and Section
10A-3 of the Exchange Act and the Board of Directors and/or the audit committee has adopted
a charter that satisfies the requirements of Rule 4350(d)(1) of the Rules of NASDAQ and
Section 10A-3 of the Exchange Act. The audit committee has reviewed the adequacy of its
charter within the past twelve months. Neither the Board of Directors nor the audit
committee has been informed, nor is any director of the Company aware, of (i) any
significant deficiencies in the design or operation of the Company’s internal controls that
could adversely affect the Company’s ability to record, process, summarize and report
financial data or any material weakness in the Company’s internal controls; or (ii) any
fraud, whether or not material, that involves management or other employees of the Company
who have a significant role in the Company’s internal controls.
(mm) The minute books of the Company and each of its subsidiaries that would be a
“significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X under the
Exchange Act (such a significant subsidiary of the Company, a “Significant Subsidiary”) have
been made available to the Underwriters and counsel for the Underwriters, and such books (i)
contain a complete summary of all meetings and actions of the board of directors (including
each board committee) and shareholders of the Company (or analogous governing bodies and
interest holders, as applicable), and each of its Significant Subsidiaries since April 1,
2007 through the date of the latest meeting and action, and (ii) accurately in all material
respects reflect all transactions referred to in such minutes.
(nn) There is no franchise, lease, contract, agreement or document required by the
Securities Act or by the Rules and Regulations to be described in the General Disclosure
Package and in the Prospectus or a document incorporated by reference therein or to be filed
as an exhibit to the Registration Statement or a document incorporated by reference therein
which is not described or filed therein as required; and all descriptions of any such
franchises, leases, contracts, agreements or documents contained in the Registration
Statement or in a document incorporated by reference therein are accurate and complete
descriptions of such documents in all material respects. Other than as described in the
General Disclosure Package, no such franchise, lease, contract or agreement has been
suspended or terminated for convenience or default by the Company or any of its subsidiaries
or any of the other parties thereto, and neither the Company nor any of its subsidiaries has
received notice nor does the Company have any other knowledge of any such pending or
threatened suspension or termination, except for such pending or threatened suspensions or
terminations that would not reasonably be expected to, singly or in the aggregate, have a
Material Adverse Effect.
(oo) No person or entity has the right to require registration of shares of Common
Stock or other securities of the Company or any of its subsidiaries because of the filing or
effectiveness of the Registration Statement or otherwise, except for persons and entities
who have expressly waived such right in writing or who have been given timely and proper
written notice and have failed to exercise such right within the time or times required
under the terms and conditions of such right. Except as described in the General Disclosure
Package, there are no persons with registration rights or similar rights to have any
securities registered or to include such securities with the shares of Common Stock
registered by the Company or any of its subsidiaries under the Securities Act.
11
(pp) Neither the Company nor any of its subsidiaries owns any “margin securities” as
that term is defined in Regulation U of the Board of Governors of the Federal Reserve System
(the “Federal Reserve Board”), and none of the proceeds of the sale of any of the Units will
be used, directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which might cause
any of the Units to be considered a “purpose credit” within the meanings of Regulation T, U
or X of the Federal Reserve Board.
(qq) Neither the Company nor any of its subsidiaries is a party to any contract,
agreement or understanding (other than this Agreement) with any person that would give rise
to a valid claim against the Company or the Underwriters for a brokerage commission,
finder’s fee or like payment in connection with the offering and sale of the Units or any
transaction contemplated by this Agreement, the Registration Statement, the General
Disclosure Package or the Prospectus.
(rr) No forward-looking statement (within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act) contained in either the General Disclosure Package
or the Prospectus has been made or reaffirmed without a reasonable basis or has been
disclosed other than in good faith.
(ss) The Company is subject to and in compliance in all material respects with the
reporting requirements of Section 13 or Section 15(d) of the Exchange Act. The Common Stock
is registered pursuant to Section 12(g) of the Exchange Act and is listed on the NASDAQ GM,
and the Company has taken no action designed to, or reasonably likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or delisting the
Common Stock from the NASDAQ GM, nor has the Company received any notification that the
Commission, FINRA or the NASDAQ GM is contemplating terminating such registration or
listing. No consent, approval, authorization or order of, or filing, notification or
registration with, the NASDAQ GM is required for the listing and trading of the Common Stock
on the NASDAQ GM, except for (i) a Notification Form: Listing of Additional Shares; and (ii)
a Notification Form: Change in the Number of Shares Outstanding.
(tt) The Company is, and after giving effect to the offering and sale of the Units will
be, in compliance in all material respects with all applicable effective provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and regulations of the Commission promulgated
thereunder or implementing the provisions thereof (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act”).
(uu) The Company is in compliance with all applicable corporate governance requirements
set forth in the NASDAQ GM Rules.
(vv) Neither the Company nor any of its subsidiaries nor, to the Company’s knowledge,
any employee or agent of the Company or any subsidiary, has made any contribution or other
payment to any official of, or candidate for, any federal, state, local or foreign office in
violation of any law (including the Foreign Corrupt Practices Act of 1977, as amended) or of
the character required to be disclosed in the Registration Statement, the General Disclosure
Package or the Prospectus or a document incorporated by reference therein.
(ww) All statistical or market-related data included in the Registration Statement, the
General Disclosure Package and the Prospectus are based on or derived from sources that the
Company believes to be reliable and accurate, and the Company has obtained the written
consent to the use of such data from such sources to the extent required. No statement,
representation, warranty or covenant made by the Company in this Agreement or made in any
certificate or document required by this Agreement to be delivered to the Underwriter was or
will be, when made, inaccurate, untrue or incorrect.
(xx) 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, applicable money
laundering statutes and applicable rules and regulations thereunder (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
12
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.
(yy) 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.
(zz) Neither the Company nor any subsidiary nor any of their affiliates (within the
meaning of FINRA Conduct Rule 2720(b)(1)(a)) directly or indirectly controls, is are
controlled by, or is under common control with, or is an associated person (within the
meaning of Article I, Section 1(ee) of the By-laws of FINRA) of, any member firm of FINRA.
(aaa) No approval of the shareholders of the Company under the rules and regulations of
NASDAQ is required for the Company to issue and deliver to the Underwriters the Shares.
(bbb) The oil and gas reserve estimates of the Company contained or incorporated by
reference in the General Disclosure Package and the Prospectus are derived from reports that
have been prepared by the petroleum consulting firm as set forth therein, such reserve
estimates fairly reflect, in all material respects, the oil and gas reserves of the Company
and its subsidiaries at the dates indicated therein and are in accordance with the
guidelines applicable thereto.
(ccc) ▇▇▇▇▇▇ & Company, Inc. (“▇▇▇▇▇▇ & Co.”), independent petroleum engineers meeting
the standards of Society of Petroleum Engineers for estimating and auditing reserves, whose
report of February 11, 2010 appears in the Company’s annual report filed with the Commission
on March 11, 2010, which is incorporated by reference into the General Disclosure Package
and the Prospectus, whose estimates of the proved oil and gas reserves and future net cash
flows of NGAS Production Co. (formerly named ▇▇▇▇▇▇▇▇▇ Petroleum, Inc.), a Kentucky
corporation wholly owned by the Company (“NGAS Production”) are included therein and who
has delivered the letter (the “Reserve Report”) referred to in Section 6(h) hereof,
was, as of the date of such report, and is, as of the date hereof, an independent petroleum
engineer with respect to NGAS Production. The estimates as of December 31, 2009 were
prepared in accordance with ASU 2010-03 and Subpart 1200 of Regulation S-K under the
Exchange Act (collectively, “current reserve rules”), which current reserve rules went into
effect at year-end 2009. The Reserve Report accurately reflects in all material respects
the ownership interests of the Company and its subsidiaries in the properties evaluated
therein; the information furnished by NGAS Production to ▇▇▇▇▇▇ & Co. for purposes of
preparing the Reserve Report, including, without limitation, production, costs of operation
and development, prices for production, agreements relating to contemporaneous 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.
(ddd) The Company is not subject to regulation as a “public utility”, “public service
company”, “holding company” or similar designation by any governmental or regulatory
authority, including under the Federal Power Act, as amended or any applicable state utility
laws; and the Company is not required to file with any applicable state or local
commissions, governmental authorities or regulatory bodies that regulate utilities any
forms, statements, reports, registrations or documents required to be filed by the Company
under such applicable state or local laws to which the Company is subject.
(eee) No approval of the shareholders of the Company under the rules and regulations of
Nasdaq (including Rule 5635 of the Nasdaq Global Marketplace Rules) is required for the
Company to issue and deliver the Securities under this Agreement.
(fff) At the time the Registration Statement was filed or, if later, the time of any
deemed post-effective amendment for purposes of updating the Registration Statement under
section 10(a)(3) of the
13
Securities Act, the Company satisfied the requirements for the use of a registration
statement on Form S-3 in connection with the Offering contemplated thereby.
Any certificate signed by or on behalf of the Company and delivered to the Representative or
to counsel for the Underwriters shall be deemed to be a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
4. Further Agreements of the Company. The Company agrees with the
Underwriters:
(a) To prepare the Rule 462(b) Registration Statement, if necessary, in a form approved
by the Representative and file such Rule 462(b) Registration Statement with the Commission
on the date hereof; to prepare the Prospectus in a form approved by the Representative
containing information previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rules 430A, 430B and 430C of the Rules and Regulations and to file
such Prospectus pursuant to Rule 424(b) of the Rules and Regulations not later than the
second (2nd) business day following the execution and delivery of this Agreement
or, if applicable, such earlier time as may be required by Rule 430A of the Rules and
Regulations; to notify the Representative immediately of the Company’s intention to file or
prepare any supplement or amendment to the Registration Statement or to the Prospectus and
to make no amendment or supplement to the Registration Statement, the General Disclosure
Package or to the Prospectus to which the Representative shall reasonably object by notice
to the Company after a reasonable period to review; to advise the Representative, promptly
after it receives notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the General Disclosure
Package or the Prospectus or any amended Prospectus has been filed and to furnish the
Representative copies thereof; to file promptly all material required to be filed by the
Company with the Commission pursuant to Rule 433(d) or 163(b)(2), as the case may be; to
file promptly all reports and any definitive proxy or information statements required to be
filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of
a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) of the Rules and
Regulations) is required in connection with the offering or sale of the Units; to advise the
Representative, 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 any Preliminary
Prospectus, any Issuer Free Writing Prospectus or the Prospectus, of the suspension of the
qualification of the Units for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by the Commission for
the amending or supplementing of the Registration Statement, the General Disclosure Package
or the 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 any Preliminary Prospectus,
any Issuer Free Writing Prospectus or the Prospectus or suspending any such qualification,
and promptly to use its reasonable best efforts to obtain the withdrawal of such order.
(b) The Company represents and agrees that, unless it obtains the prior consent of the
Representative (which consent shall not be unreasonably withheld), it has not made and will
not, make any offer relating to the Shares that would constitute a “free writing prospectus”
as defined in Rule 405 of the Rules and Regulations (each, a “Permitted Free Writing
Prospectus”); provided that the prior written consent of the Representative hereto shall be
deemed to have been given in respect of the Issuer Free Writing Prospectus(es) included in
Schedule A hereto. The Company represents that it has treated and agrees that it
will treat each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus,
comply with the requirements of Rules 164 and 433 of the Rules and Regulations applicable to
any Issuer Free Writing Prospectus, including the requirements relating to timely filing
with the Commission, legending and record keeping and will not take any action that would
result in any Underwriter or the Company being required to file with the Commission pursuant
to Rule 433(d) of the Rules and Regulations a free writing prospectus prepared by or on
behalf of such Underwriter that such Underwriter otherwise would not have been required to
file thereunder.
(c) If at any time when a Prospectus relating to the Units is required to be delivered
under the Securities Act, any event occurs or condition exists as a result of which the
Prospectus, as then amended or supplemented, would include any untrue statement of a
material fact or omit to state a material fact
14
necessary in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, or the Registration Statement, as then amended or
supplemented, would include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading, or if for any other
reason it is necessary at any time to amend or supplement any Registration Statement or the
Prospectus to comply with the Securities Act or the Exchange Act, the Company will promptly
notify the Representative, and upon the Representative’s request, the Company will promptly
prepare and file with the Commission, at the Company’s expense, an amendment to the
Registration Statement or an amendment or supplement to the Prospectus that corrects such
statement or omission or effects such compliance and will deliver to the Underwriters,
without charge, such number of copies thereof as the Underwriters may reasonably request.
The Company consents to the use of the Prospectus or any amendment or supplement thereto by
the Underwriters.
(d) If the General Disclosure Package is being used to solicit offers to buy the Units
at a time when the Prospectus is not yet available to prospective purchasers and any event
shall occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Representative, it becomes necessary to amend or supplement the General
Disclosure Package in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or to make the statements therein
not conflict with the information contained or incorporated by reference in the Registration
Statement then on file and not superseded or modified, or if it is necessary at any time to
amend or supplement the General Disclosure Package to comply with any law, the Company
promptly will either (i) prepare, file with the Commission (if required) and furnish to the
Underwriters and any dealers an appropriate amendment or supplement to the General
Disclosure Package or (ii) prepare and file with the Commission an appropriate filing under
the Exchange Act which shall be incorporated by reference in the General Disclosure Package
so that the General Disclosure Package as so amended or supplemented will not, in the light
of the circumstances under which they were made, be misleading or conflict with the
Registration Statement then on file, or so that the General Disclosure Package will comply
with law.
(e) If at any time following issuance of an Issuer Free Writing Prospectus there
occurred or occurs an event or development as a result of which such Issuer Free Writing
Prospectus conflicted or will conflict with the information contained in the Registration
Statement, Pricing Prospectus or Prospectus, including any document incorporated by
reference therein and any prospectus supplement deemed to be a part thereof and not
superseded or modified or included or would include an untrue statement of a material fact
or omitted or would omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under which they
were made, not misleading, the Company has promptly notified or will promptly notify the
Representative so that any use of the Issuer Free Writing Prospectus may cease until it is
amended or supplemented and has promptly amended or will promptly amend or supplement, at
its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict,
untrue statement or omission. The foregoing sentence does not apply to statements in or
omissions from any Issuer Free Writing Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by the Representative by or on behalf of the
Underwriters specifically for inclusion therein, which information the parties hereto agree
is limited to the Underwriters’ Information (as defined in Section 16).
(f) To the extent not available on the Commission’s ▇▇▇▇▇ system or any successor
system, to furnish promptly to the Underwriters and to counsel for the Underwriters a signed
copy of the Registration Statement as originally filed with the Commission, and of each
amendment thereto filed with the Commission, including all consents and exhibits filed
therewith.
(g) To the extent not available on the Commission’s ▇▇▇▇▇ system or any successor
system, to deliver promptly to the Representative in New York City such number of the
following documents as the Representative shall reasonably request: (i) conformed copies of
the Registration Statement as originally filed with the Commission (in each case excluding
exhibits), (ii) each Preliminary Prospectus, (iii) any Issuer Free Writing Prospectus, (iv)
the Prospectus (the delivery of the documents referred to in clauses (i), (ii), (iii) and
(iv) of this paragraph (g) to be made not later than 10:00 A.M., New York time, on
the business day following the execution and delivery of this Agreement), (v) conformed
copies of any amendment to the Registration Statement (excluding exhibits), (vi) any
amendment or
15
supplement to the General Disclosure Package or the Prospectus (the delivery of the
documents referred to in clauses (v) and (vi) of this paragraph (g) to be made not
later than 10:00 A.M., New York City time, on the business day following the date of such
amendment or supplement) and (vii) any document incorporated by reference in the General
Disclosure Package or the Prospectus (excluding exhibits thereto) (the delivery of the
documents referred to in clause (vi) of this paragraph (g) to be made not later than
10:00 A.M., New York City time, on the business day following the date of such document).
(h) To make generally available to its shareholders as soon as practicable, but in any
event not later than eighteen (18) months after the effective date of each Registration
Statement (as defined in Rule 158(c) of the Rules and Regulations), 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); and to furnish to its shareholders as soon as practicable after the end of each
fiscal year an annual report (including a balance sheet and statements of income,
shareholders’ equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and as soon as possible after each of the first
three fiscal quarters of each fiscal year (beginning with the first fiscal quarter after the
effective date of such Registration Statement), consolidated summary financial information
of the Company and its subsidiaries for such quarter in reasonable detail.
(i) To take promptly from time to time such actions as the Representative may
reasonably request to qualify the Securities for offering and sale under the securities or
Blue Sky laws of such jurisdictions (domestic or foreign) as the Representative may
designate and to continue such qualifications in effect, and to comply with such laws, for
so long as required to permit the offer and sale of the Securities in such jurisdictions;
provided that the Company and its subsidiaries shall not be obligated to qualify as foreign
corporations in any jurisdiction in which they are not so qualified or to file a general
consent to service of process in any jurisdiction.
(j) Upon request, during the period of five (5) years from the date hereof, to the
extent not available on the Commission’s ▇▇▇▇▇ system or any successor system, to deliver to
the Underwriters, (i) as soon as they are available, copies of all reports or other
communications furnished to shareholders, and (ii) as soon as they are available, copies of
any reports and financial statements furnished or filed with the Commission or any national
securities exchange or automatic quotation system on which the Common Stock is listed or
quoted.
(k) That the Company will not, for a period of ninety (90) days from the date of the
Prospectus, (the “Lock-Up Period”) without the prior written consent of LCM, directly or
indirectly offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of,
any shares of Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, other than the Company’s sale of the Shares and Warrants hereunder and the
issuance of restricted Common Stock or options to acquire Common Stock pursuant to the
Company’s employee benefit plans, qualified stock option plans or other employee
compensation plans as such plans are in existence on the date hereof and described in the
Prospectus and the issuance of Common Stock pursuant to the valid exercises of options,
warrants or rights outstanding on the date hereof. The Company will cause each executive
officer, director, shareholder, optionholder and warrantholder listed in Schedule B
to furnish to the Representative, prior to the Closing Date, a letter, substantially in the
form of Exhibit B hereto, pursuant to which each such person shall agree, among
other things, not to directly or indirectly offer, sell, assign, transfer, pledge, contract
to sell, or otherwise dispose of, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, not to engage in any swap or other
agreement or arrangement that transfers, in whole or in part, directly or indirectly, the
economic risk of ownership of Common Stock or any such securities and not to engage in any
short selling of any Common Stock or any such securities, during the Lock-Up Period, without
the prior written consent of LCM. The Company also agrees that during such period, the
Company will not file any registration statement, preliminary prospectus or prospectus, or
any amendment or supplement thereto, under the Securities Act for any such transaction or
which registers, or offers for sale, Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, except for a registration statement on Form
S-8 relating to employee benefit plans. The Company hereby agrees that (i) if it issues an
earnings release or material news, or if a
16
material event relating to the Company occurs, during the last seventeen (17) days of
the Lock-Up Period, or (ii) if prior to the expiration of the Lock-Up Period, the Company
announces that it will release earnings results during the sixteen (16)-day period beginning
on the last day of the Lock-Up Period, the restrictions imposed by this paragraph
(k) or the letter shall continue to apply until the expiration of the eighteen (18)-day
period beginning on the issuance of the earnings release or the occurrence of the material
news or material event.
(l) To supply the Representative with copies of all correspondence to and from, and all
documents issued to and by, the Commission in connection with the registration of the
Securities under the Securities Act or the Registration Statement, any Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto or document
incorporated by reference therein.
(m) Prior to the Closing Date, to furnish to the Representative, as soon as they have
been prepared, copies of any unaudited interim consolidated financial statements of the
Company for any periods subsequent to the periods covered by the financial statements
appearing in the Registration Statement and the Prospectus.
(n) Prior to the Closing Date, not to issue any press release or other communication
directly or indirectly or hold any press conference with respect to the Company, its
condition, financial or otherwise, or earnings, business affairs or business prospects
(except for routine oral marketing communications in the ordinary course of business and
consistent with the past practices of the Company and of which the Representative is
notified), without the prior written consent of the Representative, unless in the judgment
of the Company and its counsel, and after notification to the Representative, such press
release or communication is required by law.
(o) Until the Representative shall have notified the Company of the completion of the
offering of the Units, that the Company will not, and will cause its affiliated purchasers
(as defined in Regulation M under the Exchange Act) not to, either alone or with one or more
other persons, bid for or purchase, for any account in which it or any of its affiliated
purchasers has a beneficial interest, any Units, or attempt to induce any person to purchase
any Units; and not to, and to cause its affiliated purchasers not to, make bids or purchases
for the purpose of creating actual, or apparent, active trading in or of raising the price
of the Units.
(p) Not to take any action prior to the Closing Date which would require the Prospectus
to be amended or supplemented pursuant to Section 4.
(q) To at all times comply with all applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act in
effect from time to time.
(r) To apply the net proceeds from the sale of the Units as set forth in the
Registration Statement, the General Disclosure Package and the Prospectus under the heading
“Use of Proceeds.”
(s) To use its reasonable best efforts to list, subject to notice of issuance, effect
and maintain the listing of the Common Stock on the NASDAQ GM.
(t) To use its reasonable best efforts to assist the Representative with any filings
with FINRA and obtaining clearance from FINRA as to the amount of compensation allowable or
payable to the Underwriters.
(u) To use its reasonable best efforts to do and perform all things required to be done
or performed under this Agreement by the Company prior to the Closing Date, and to satisfy
all conditions precedent to the delivery of the Shares and Warrants included in the Units.
5. Payment of Expenses. The Company agrees to pay, or reimburse if paid by
the Underwriters, upon consummation of the transactions contemplated hereby: (a) the costs
incident to the authorization, issuance,
17
sale, preparation and delivery of the Shares and Warrants to the Underwriters and any taxes
payable in that connection, including any original issue tax stamps and transfer taxes; (b) the
costs incident to the registration of the Securities under the Securities Act; (c) the costs
incident to the preparation, printing and distribution of the Registration Statement, the Base
Prospectus, any Preliminary Prospectus, any Issuer Free Writing Prospectus, the General Disclosure
Package, the Prospectus, any amendments, supplements and exhibits thereto or any document
incorporated by reference therein and the costs of printing, reproducing and distributing any
transaction document by mail, telex or other means of communications; (d) the fees and expenses
(including related reasonable fees and expenses of counsel for the Underwriters not to exceed
$10,000 in the aggregate) incurred in connection with securing any required review by FINRA of the
terms of the sale of the Securities and any filings made with FINRA; (e) any applicable listing,
quotation or other fees; (f) the fees and expenses (including related fees and expenses of counsel
to the Underwriters) of qualifying the Securities under the securities laws of the several
jurisdictions as provided in Section 4(i) and of preparing, printing and distributing
wrappers, blue sky memoranda and legal investment surveys; (g) the cost of preparing and printing
stock certificates and Warrants, if any; (h) all fees and expenses of the registrar and transfer
agent of the Shares; (i) the fees, disbursements and expenses of counsel to the Underwriters, not
to exceed $40,000 (inclusive of paragraphs (d) and (f) above), and (j) all other costs and expenses
incident to the offering of the Units or the performance of the obligations of the Company under
this Agreement (including, without limitation, the fees and expenses of the Company’s counsel and
the Company’s independent accountants and the travel and other expenses actually incurred by
Company’s and Underwriters’ personnel in connection with a “road show”, if any, including, without
limitation, any expenses advanced by the Underwriters on the Company’s behalf (which will be
promptly reimbursed)).
6. Conditions to the Obligations of the Underwriters, and the Sale of the Units. The
obligations of the Underwriters hereunder, and the closing of the sale of the Units are subject to
the accuracy, when made and as of the Applicable Time and on the Closing Date, of the
representations and warranties of the Company contained herein, to the accuracy of the statements
of the Company made in any certificates pursuant to the provisions hereof, to the performance by
the Company of its obligations hereunder, and to each of the following additional terms and
conditions:
(a) No stop order suspending the effectiveness of the Registration Statement or any
part thereof, preventing or suspending the use of any Base Prospectus, any Preliminary
Prospectus, the Prospectus or any Permitted Free Writing Prospectus or any part thereof
shall have been issued and no proceedings for that purpose or pursuant to Section 8A under
the Securities Act shall have been initiated or threatened by the Commission, and all
requests for additional information on the part of the Commission (to be included or
incorporated by reference in the Registration Statement or the Prospectus or otherwise)
shall have been complied with to the reasonable satisfaction of the Representative; the Rule
462(b) Registration Statement, if any, each Issuer Free Writing Prospectus, if any, and the
Prospectus shall have been filed with the Commission within the applicable time period
prescribed for such filing by, and in compliance with, the Rules and Regulations and in
accordance with Section 4(a), and the Rule 462(b) Registration Statement, if any,
shall have become effective immediately upon its filing with the Commission; and FINRA shall
have raised no objection to the fairness and reasonableness of the terms of this Agreement
or the transactions contemplated hereby.
(b) The Representative shall not have discovered and disclosed to the Company on or
prior to the Closing Date that the Registration Statement or any amendment or supplement
thereto contains an untrue statement of a fact which, in the opinion of counsel for the
Underwriters, is material or omits to state any 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, or that the General Disclosure Package, any Issuer Free Writing
Prospectus or the Prospectus or any amendment or supplement thereto contains an untrue
statement of fact which, in the opinion of such counsel, is material or omits to state any
fact which, in the opinion of such counsel, is material and is necessary in order to make
the statements, in the light of the circumstances in which they were made, not misleading.
(c) All corporate proceedings and other legal matters incident to the authorization,
form and validity of each of this Agreement, the Securities, the Registration Statement, the
General Disclosure Package, each Issuer Free Writing Prospectus, if any, and the Prospectus
and all other legal matters relating to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory in all material
18
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) ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇ shall have furnished to the Representative such counsel’s
written opinion and negative assurances statement, as United States counsel to the Company,
addressed to the Underwriters, dated the Closing Date, in the form and substance reasonably
satisfactory to the Representative.
(e) Maitland & Company shall have furnished to the Representative such counsel’s
written opinion, as Canadian counsel to the Company, addressed to the Underwriters, dated
the Closing Date, in the form and substance reasonably satisfactory to the Representative.
(f) The Underwriters shall have received from Proskauer Rose LLP, counsel for the
Underwriters, such opinion or opinions and negative assurances statement, dated the Closing
Date, with respect to such matters as the Representative may reasonably require, and the
Company shall have furnished to such counsel such documents as they request for enabling
them to pass upon such matters.
(g) At the time of the execution of this Agreement, the Representative shall have
received from Hall, ▇▇▇▇▇▇▇ & Company, LLP a letter, addressed to the Underwriters, executed
and dated such date, in form and substance satisfactory to the Representative (i) confirming
that they are an independent registered accounting firm with respect to the Company and its
subsidiaries within the meaning of the Securities Act and the Rules and Regulations and
PCAOB and (ii) stating the conclusions and findings of such firm, of the type ordinarily
included in accountants’ “comfort letters” to underwriters, with respect to the financial
statements and certain financial information contained or incorporated by reference in the
Registration Statement, the General Disclosure Package and the Prospectus.
(h) On the effective date of any post-effective amendment to any Registration Statement
and on the Closing Date, the Representative shall have received a letter (the “Bring-Down
Letter”) from Hall, ▇▇▇▇▇▇▇ & Company, LLP addressed to the Underwriters and dated the
Closing Date confirming, 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 General Disclosure Package and the Prospectus, as the
case may be, as of a date not more than three (3) business days prior to the date of the
Bring-Down Letter), the conclusions and findings of such firm, of the type ordinarily
included in accountants’ “comfort letters” to underwriters, with respect to the financial
information and other matters covered by its letter delivered to the Underwriters
concurrently with the execution of this Agreement pursuant to paragraph (g) of this
Section 6.
(i) On or before the execution of this Agreement, the Representative shall have
received from ▇▇▇▇▇▇ & Co. a letter addressed to the Underwriters and in the form and
substance reasonably satisfactory to the Representative containing statements and
information with respect to the oil and gas reserves of the Company as reported in the
General Disclosure Package and the Prospectus and, as of the Closing, such letter shall not
have been withdrawn by ▇▇▇▇▇▇ & Co. or amended by ▇▇▇▇▇▇ & Co. in any material respect.
(j) The Company shall have furnished to the Representative a certificate, dated the
Closing Date, of its Chairman of the Board or its Chief Executive Officer and its Chief
Financial Officer, its President or a Vice President of Finance, each in his capacity as an
officer of the Company stating that (i) such officers have carefully examined the
Registration Statement, the General Disclosure Package, any Permitted Free Writing
Prospectus and the Prospectus and, in their opinion, the Registration Statement and each
amendment thereto, at the Applicable Time and as of the date of this Agreement and as of the
Closing Date did not include any untrue statement of a material fact and did not omit to
state a material fact required to be stated therein or necessary to make the statements
therein not misleading, and the General Disclosure Package, as of the Applicable Time and as
of the Closing Date, any Permitted Free Writing Prospectus as of its date and as of the
Closing Date, the Prospectus and each amendment or supplement thereto, as of the respective
date thereof and as of the Closing Date, did not include any untrue statement of a material
fact and did not omit to state a material fact necessary in order to make the statements
therein, in
19
the light of the circumstances in which they were made, not misleading, (ii) since the
effective date of the initial Registration Statement, no event has occurred which should
have been set forth in a supplement or amendment to the Registration Statement, the General
Disclosure Package or the Prospectus that is not so set forth therein, (iii) to the best of
their knowledge after reasonable investigation, as of the Closing Date, the representations
and warranties of the Company in this Agreement are true and correct and the Company has
complied with all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date, and (iv) there has not been, subsequent
to the date of the most recent audited financial statements included or incorporated by
reference in the General Disclosure Package, any material adverse change in the financial
position or results of operations of the Company and its subsidiaries, or any change or
development that, singly or in the aggregate, would involve a material adverse change or a
prospective material adverse change, in or affecting the condition (financial or otherwise),
results of operations, business, assets or prospects of the Company and its subsidiaries
taken as a whole, except as set forth in the Prospectus.
(k) Since the date of the latest audited financial statements included in the General
Disclosure Package or incorporated by reference in the General Disclosure Package as of the
date hereof, (i) neither the Company nor any of its subsidiaries shall have sustained 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, otherwise than as set forth in the General Disclosure Package, and
(ii) there shall not have been any change in the capital stock or long-term debt of the
Company nor any of its subsidiaries, or any change, or any development involving a
prospective change, in or affecting the business, general affairs, management, financial
position, stockholders’ equity or results of operations of the Company and its subsidiaries,
otherwise than as set forth in the General Disclosure Package, the effect of which, in any
such case described in clause (i) or (ii) of this paragraph (k), is, in the judgment
of the Representative, so material and adverse as to make it impracticable or inadvisable to
proceed with the sale or delivery of the Shares and Warrants on the terms and in the manner
contemplated in the General Disclosure Package.
(l) No action shall have been taken and no law, statute, rule, regulation or order
shall have been enacted, adopted or issued by any governmental agency or body which would
prevent the issuance or sale of the Securities or materially and adversely affect or
potentially materially and adversely affect the business or operations of the Company or its
subsidiaries; and no injunction, restraining order or order of any other nature by any
federal or state court of competent jurisdiction shall have been issued which would prevent
the issuance or sale of the Securities or materially and adversely affect or potentially
materially and adversely affect the business or operations of the Company or its
subsidiaries.
(m) 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, the Nasdaq or the American Stock Exchange 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 minimum or maximum prices or maximum
range for prices shall have been established on any such exchange or such market by the
Commission, by such exchange or market or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal
or state authorities or a material disruption has occurred in commercial banking or
securities settlement or clearance services in the United States, (iii) the United States
shall have become engaged in hostilities, or the subject of an act of terrorism, or there
shall have been an outbreak of or 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 (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 Representative,
impracticable or inadvisable to proceed with the sale or delivery of the Shares and Warrants
on the terms and in the manner contemplated in the General Disclosure Package and the
Prospectus.
(n) The Company shall have filed a Notification Form: Listing of Additional Shares with
the NASDAQ GM and shall have received no objection thereto from the NASDAQ GM.
20
(o) The Representative shall have received the written agreements, substantially in the
form of Exhibit B hereto, of the executive officers and directors of the Company
listed in Schedule B to this Agreement.
(p) The Company shall have received a conditional no objections letter from FINRA, and
FINRA shall not have raised any objection to the Offering or the Underwriters’ discounts and
commissions as described in the Pricing Prospectus.
(q) The Company shall have caused the Shares and Warrants to be delivered in accordance
with Section 2.2 of this Agreement.
(r) Prior to the Closing Date, the Company shall have furnished to the Representative
such further information, opinions, certificates, letters or documents as the Representative
shall have reasonably requested.
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.
7. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Underwriter, each of its
affiliates and each of its and their respective directors, officers, members, employees,
representatives and agents (including, without limitation Lazard Frères & Co. LLC, (which
will provide services to LCM) and its affiliates, and each of its and their respective
directors, officers, members, employees, representatives and agents and each person, if any,
who controls Lazard Frères & Co. LLC within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and each person, if any, who controls such Underwriter
within the meaning of Section 15 of the Securities Act of or Section 20 of the Exchange Act
(collectively, the “Underwriter Indemnified Parties,” and each a “Underwriter Indemnified
Party”) against any loss, claim, damage, expense or liability whatsoever (or any action,
investigation or proceeding in respect thereof), joint or several, to which such Underwriter
Indemnified Party may become subject, under the Securities Act or otherwise, insofar as such
loss, claim, damage, expense, liability, action, investigation or proceeding arises out of
or is based upon (A) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, any Issuer Free Writing Prospectus, any “issuer
information” filed or required to be filed pursuant to Rule 433(d) of the Rules and
Regulations, any Registration Statement or the Prospectus, or in any amendment or supplement
thereto or document incorporated by reference therein, (B) the omission or alleged omission
to state in any Preliminary Prospectus, any Issuer Free Writing Prospectus, any “issuer
information” filed or required to be filed pursuant to Rule 433(d) of the Rules and
Regulations, any Registration Statement or the Prospectus, or in any amendment or supplement
thereto or document incorporated by reference therein, a material fact required to be stated
therein or necessary to make the statements therein not misleading or (C) any breach of the
representations and warranties of the Company contained herein, the failure of the Company
to perform its obligations hereunder or pursuant to any law, any act or failure to act, or
any alleged act or failure to act, by the Placement Agent in connection with, or relating in
any manner to, the Stock, the Escrow Agreement or the Offering, and which is included as
part of or referred to in any loss, claim, damage, expense, liability, action, investigation
or proceeding arising out of or based upon matters covered by subclause (A), (B) or (C)
above of this Section 7(a) (provided that the Company shall not be liable in the
case of any matter covered by this subclause (C) to the extent that it is determined in a
final judgment by a court of competent jurisdiction that such loss, claim, damage, expense
or liability resulted directly from any such act or failure to act undertaken or omitted to
be taken by such Placement Agent through its gross negligence or willful misconduct), and
shall reimburse the Underwriter Indemnified Party promptly upon demand for any legal fees or
other expenses reasonably incurred by that Underwriter Indemnified Party in connection with
investigating, preparing to defend, or defending against, settling, compromising, appearing
as a third party witness in respect of, or otherwise incurred in connection with, any such
loss, claim, damage, expense, liability, action, investigation or proceeding, as such fees
and expenses are incurred; provided, however, that the Company shall not be liable in any
such case to the extent that any such loss,
21
claim, damage, expense or liability arises out of or is based upon an untrue statement
or alleged untrue statement in, or omission or alleged omission from any Preliminary
Prospectus, any Registration Statement or the Prospectus, or any such amendment or
supplement thereto, or any Issuer Free Writing Prospectus made in reliance upon and in
conformity with written information furnished to the Company by the Representative by or on
behalf of the Underwriters specifically for use therein, which information the parties
hereto agree is limited to the Underwriters’ Information (as defined in Section 16).
This indemnity agreement is not exclusive and will be in addition to any liability, which
the Company might otherwise have and shall not limit any rights or remedies which may
otherwise be available at law or in equity to each Underwriter Indemnified Party.
(b) Each Underwriter, severally and not jointly, shall indemnify and hold harmless the
Company and its directors, its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act (collectively, the “Company Indemnified Parties,” and
each a “Company Indemnified Party”) against any loss, claim, damage, expense or liability
whatsoever (or any action, investigation or proceeding in respect thereof), joint or
several, to which such Company Indemnified Party may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, expense, liability, action,
investigation or proceeding arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary Prospectus, any
Issuer Free Writing Prospectus, any “issuer information” filed or required to be filed
pursuant to Rule 433(d) of the Rules and Regulations, any Registration Statement or the
Prospectus, or in any amendment or supplement thereto, or (ii) the omission or alleged
omission to state in any Preliminary Prospectus, any Issuer Free Writing Prospectus, any
“issuer information” filed or required to be filed pursuant to Rule 433(d) of the Rules and
Regulations, any Registration Statement or the Prospectus, or in any amendment or supplement
thereto, a 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 furnished to the Company by the Representative by or on
behalf of such Underwriter specifically for use therein, which information the parties
hereto agree is limited to the Underwriters’ Information as defined in Section 16,
and shall reimburse the Company Indemnified Party for any legal or other expenses reasonably
incurred by such party in connection with investigating or preparing to defend or defending
against or appearing as third party witness in connection with any such loss, claim, damage,
liability, action, investigation or proceeding, as such fees and expenses are incurred.
Notwithstanding the provisions of this Section 7(b), in no event shall any indemnity
by any Underwriter under this Section 7(b) exceed the total discount and commission
received by such Underwriter in connection with the Offering.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, the indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
such indemnifying party in writing of 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 7 except to the extent it has been materially
prejudiced by such failure; and, provided, further, that the failure to notify an
indemnifying party shall not relieve it from any liability which it may have to an
indemnified party otherwise than under this Section 7. If any such 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
of such action with counsel reasonably satisfactory to the indemnified party (which counsel
shall not, except with the written consent of the indemnified party, be counsel to the
indemnifying party). After notice from the indemnifying party to the indemnified party of
its election to assume the defense of such action, except as provided herein, the
indemnifying party shall not be liable to the indemnified party under Section 7 for
any legal or other expenses subsequently incurred by the indemnified party in connection
with the defense of such action other than reasonable costs of investigation; provided,
however, that any indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense of such action but the fees and expenses of
such counsel (other than reasonable costs of investigation) shall be at the expense of such
indemnified party unless (i) the employment thereof has been specifically authorized in
writing by the Company in the case of a claim for indemnification under Section 7(a)
or Section 2.4 or
22
LCM in the case of a claim for indemnification under Section 7(b), (ii) such
indemnified party shall have been advised by its counsel that there may be one or more legal
defenses available to it which are different from or additional to those available to the
indemnifying party, or (iii) the indemnifying party has failed to assume the defense of such
action and employ counsel reasonably satisfactory to the indemnified party within a
reasonable period of time after notice of the commencement of the action or the indemnifying
party does not diligently defend the action after assumption of the defense, in which case,
if such indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the indemnifying party
shall not have the right to assume the defense of (or, in the case of a failure to
diligently defend the action after assumption of the defense, to continue to defend) such
action on behalf of such indemnified party and the indemnifying party shall be responsible
for legal or other expenses subsequently incurred by such indemnified party in connection
with the defense of such action; provided, however, that the indemnifying party shall not,
in connection with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one separate firm
of attorneys at any time for all such indemnified parties (in addition to any local
counsel), which firm shall be designated in writing by LCM if the indemnified parties under
this Section 7 consist of any Underwriter Indemnified Party or by the Company if the
indemnified parties under this Section 7 consist of any Company Indemnified Parties.
Subject to this Section 7(c), the amount payable by an indemnifying party under
Section 7 shall include, but not be limited to, (x) reasonable legal fees and
expenses of counsel to the indemnified party and any other expenses in investigating, or
preparing to defend or defending against, or appearing as a third party witness in respect
of, or otherwise incurred in connection with, any action, investigation, proceeding or
claim, and (y) all amounts paid in settlement of any of the foregoing. No indemnifying
party shall, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of judgment with respect to any pending or threatened
action or any claim whatsoever, in respect of which indemnification or contribution could be
sought under this Section 7 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party in form and substance reasonably
satisfactory to such indemnified party from all liability arising out of such action or
claim and (ii) does not include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party. Subject to the provisions of the
following sentence, no indemnifying party shall be liable for settlement of any pending or
threatened action or any claim whatsoever that is effected without its written consent
(which consent shall not be unreasonably withheld or delayed), but if settled with its
written consent, if its consent has been unreasonably withheld or delayed or if there be a
judgment for the plaintiff in any such matter, the indemnifying party agrees to indemnify
and hold harmless any indemnified party from and against any loss or liability by reason of
such settlement or judgment. In addition, if at any time an indemnified party shall have
requested that an indemnifying party reimburse the indemnified party for fees and expenses
of counsel, such indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated herein effected without its written consent if (i) such settlement is
entered into more than forty-five (45) days after receipt by such indemnifying party of the
request for reimbursement, (ii) such indemnifying party shall have received notice of the
terms of such settlement at least thirty (30) days prior to such settlement being entered
into and (iii) such indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(d) If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under Section 7(a) or Section
7(b), then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid, payable or otherwise incurred by such indemnified
party as a result of such loss, claim, damage, expense or liability (or any action,
investigation or proceeding in respect thereof), as incurred, (i) in such proportion as
shall be appropriate to reflect the relative benefits received by the Company on the one
hand and each of the Underwriters on the other hand from the offering of the Units, or (ii)
if the allocation provided by clause (i) of this Section 7(d) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) of this Section 7(d) but also the relative fault
of the Company on the one hand and the Underwriters on the other with respect to the
statements, omissions, acts or failures to act which resulted in such loss, claim, damage,
expense or liability (or any action, investigation or proceeding in respect thereof) as well
as any other relevant equitable considerations. The relative benefits received by
23
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 Units purchased under this Agreement (before deducting expenses) received by
the Company bear to the total underwriting discounts and commissions received by the
Underwriters in connection with the Offering, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company on the one hand and the
Underwriters on the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company on the one
hand or the Underwriters on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such untrue
statement, omission, act or failure to act; provided that the parties hereto agree that the
written information furnished to the Company by the Representative by or on behalf of any
Underwriter for use in any Preliminary Prospectus, any Registration Statement or the
Prospectus, or in any amendment or supplement thereto, consists solely of the Underwriters’
Information as defined in Section 16. The Company and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section 7(d)
were to be determined by pro rata allocation 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, expense, liability,
action, investigation or proceeding referred to above in this Section 7(d) shall be
deemed to include, for purposes of this Section 7(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating, preparing to
defend or defending against or appearing as a third party witness in respect of, or
otherwise incurred in connection with, any such loss, claim, damage, expense, liability,
action, investigation or proceeding. Notwithstanding the provisions of this Section
7(d), no Underwriter shall be required to contribute any amount in excess of the total
discount and commission received by such Underwriter in connection with the Offering, less
the amount of any damages which such Underwriter has otherwise paid or become liable to pay
by reason of any untrue or alleged untrue statement, omission or alleged omission, act or
alleged act or failure to act or alleged failure to act. 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.
8. Termination. The obligations of the Underwriters hereunder may be terminated by the
Representative, in its absolute discretion by notice given to the Company prior to delivery of and
payment for the Units if, prior to that time, any of the events described in Sections 6(j),
6(k) or 6(l) have occurred or if the Underwriters shall decline to purchase the
Units for any reason permitted under this Agreement.
9. Reimbursement of Underwriters’ Expenses. Notwithstanding anything to the contrary in
this Agreement, if (a) this Agreement shall have been terminated pursuant to Section 8, (b)
the Company shall fail to tender the Shares and Warrants for delivery to the Underwriters for any
reason not permitted under this Agreement, (c) the Underwriters shall decline to purchase the Units
for any reason permitted under this Agreement or (d) the sale of the Units is not consummated
because any condition to the obligations of the Underwriters set forth herein is not satisfied or
because of the refusal, inability or failure on the part of the Company to perform any agreement
herein or to satisfy any condition or to comply with the provisions hereof, then, in addition to
the payment of out-of-pocket expenses in accordance with Section 5 (but not in duplication
thereof), the Company shall reimburse the Underwriters for the reasonable fees and expenses of the
Underwriters’ counsel and for such other accountable out-of-pocket expenses as shall have been
reasonably incurred by them in connection with this Agreement and the proposed purchase of the
Units, and upon demand the Company shall pay the full amount thereof to the Representative on
behalf of the Underwriters.
10. Absence of Fiduciary Relationship. The Company acknowledges and agrees that:
(a) each Underwriter’s responsibility to the Company is solely contractual in nature,
each Underwriter has been retained solely to act as an underwriter in connection with the
Offering and no fiduciary, advisory or agency relationship between the Company and such
Underwriter has been created in respect of any of the transactions contemplated by this
Agreement, irrespective of whether LCM, ▇▇▇▇▇▇▇▇▇▇ or Lazard Frères & Co. LLC has advised or
is advising the Company on other matters;
24
(b) the price of the Units set forth in this Agreement was established by the Company
following discussions and arms-length negotiations with the Representative, and the Company
is capable of evaluating and understanding, and understands and accepts, the terms, risks
and conditions of the transactions contemplated by this Agreement;
(c) it has been advised that LCM, ▇▇▇▇▇▇▇▇▇▇ and Lazard Frères & Co. LLC and each of
their affiliates are engaged in a broad range of transactions which may involve interests
that differ from those of the Company and that the Underwriters have no obligation to
disclose such interests and transactions to the Company by virtue of any fiduciary, advisory
or agency relationship; and
(d) it waives, to the fullest extent permitted by law, any claims it may have against
the Underwriters for breach of fiduciary duty or alleged breach of fiduciary duty and agrees
that the Underwriters shall have no liability (whether direct or indirect) to the Company in
respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on
behalf of or in right of the Company, including stockholders, employees or creditors of the
Company.
11. Successors; Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of and be binding upon the several Underwriters, the Company, and their respective
successors and assigns. This Agreement shall also inure to the benefit of Lazard Frères & Co. LLC,
and each of its respective successors and assigns, which shall be third party beneficiaries hereof.
Notwithstanding the foregoing, the determination as to whether any condition in Section 6
hereof shall have been satisfied, and the waiver of any condition in Section 6 hereof, may
be made by the Representative in its sole discretion, and any such determination or waiver shall be
binding on each of the Underwriters and shall not require the consent of any Underwriter. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to give any person,
other than the persons mentioned in the preceding sentences, any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person; except that the representations,
warranties, covenants, agreements and indemnities of the Company contained in this Agreement shall
also be for the benefit of the Underwriter Indemnified Parties and the several indemnities of the
Underwriters shall be for the benefit of the Company Indemnified Parties. It is understood that
each Underwriter’s responsibility to the Company is solely contractual in nature and the
Underwriters do not owe the Company, or any other party, any fiduciary duty as a result of this
Agreement.
12. Survival of Indemnities, Representations, Warranties, etc. The respective
indemnities, covenants, agreements, representations, warranties and other statements of the Company
and the several Underwriters, as set forth in this Agreement or made by them respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter, the Company or any person controlling any of them and shall
survive delivery of and payment for the Shares. Notwithstanding any termination of this Agreement,
including without limitation any termination pursuant to Section 8, the indemnity and
contribution and reimbursement agreements contained in Sections 7 and 9 and the
covenants, representations, warranties set forth in this Agreement shall not terminate and shall
remain in full force and effect at all times.
13. Notices. All statements, requests, notices and agreements hereunder shall be in
writing, and:
(a) if to the Representative, shall be delivered or sent by mail, telex, facsimile
transmission or email to Lazard Capital Markets LLC, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel, Fax: ▇▇▇-▇▇▇-▇▇▇▇; and
(b) if to the Company, shall be delivered or sent by mail, telex, facsimile
transmission or email to: NGAS Resources, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Executive Officer, with a copy to (which shall not
constitute notice hereunder): ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
provided, however, that any notice to the Underwriters pursuant to Section 7 shall be
delivered or sent by mail, email or facsimile transmission to the Representative at its address set
forth in its acceptance email to the Representative, which address will be supplied to any other
party hereto by the Representative upon request. Any
25
such statements, requests, notices or agreements shall take effect at the time of receipt thereof,
except that any such statement, request, notice or agreement delivered or sent by email shall take
effect at the time of confirmation of receipt thereof by the recipient thereof.
14. Definition of Certain Terms. For purposes of this Agreement, (a) “business day”
means any day on which the New York Stock Exchange, Inc. is open for trading, (b) “knowledge” means
the knowledge of the directors and officers of the Company after reasonable inquiry and (c)
“subsidiary” has the meaning set forth in Rule 405 of the Rules and Regulations, but excluding any
inactive or immaterial subsidiaries.
15. Governing Law, Agent for Service and Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York, including without limitation
Section 5-1401 of the New York General Obligations Law. No legal proceeding may be commenced,
prosecuted or continued in any court other than the courts of the State of New York located in the
City and County of New York or in the United States District Court for the Southern District of New
York, which courts shall have jurisdiction over the adjudication of such matters, and the Company
and the Underwriters each hereby consent to the jurisdiction of such courts and personal service
with respect thereto. The Company and the Underwriters each hereby waive all right to trial by
jury in any legal proceeding (whether based upon contract, tort or otherwise) in any way arising
out of or relating to this Agreement. The Company agrees that a final judgment in any such legal
proceeding brought in any such court shall be conclusive and binding upon the Company and the
Underwriters and may be enforced in any other courts in the jurisdiction of which the Company is or
may be subject, by suit upon such judgment.
16. Underwriters’ Information. The parties hereto acknowledge and agree that, for all
purposes of this Agreement, the “Underwriters’ Information” consists solely of the following
information in the Prospectus: (i) the last paragraph on the front cover page concerning the terms
of the offering; and (ii) the statements concerning the Underwriters contained in the first
paragraph concerning the Underwriters and Lazard Frères & Co. LLC, in the eighth paragraph, the
thirteenth paragraph concerning stabilization by the Underwriters, in each case under the heading
“Underwriting.”
17. Partial Unenforceability. The invalidity or unenforceability of any section,
paragraph, clause or provision of this Agreement shall not affect the validity or enforceability of
any other section, paragraph, clause or provision hereof. If any section, paragraph, clause or
provision of this Agreement is for any reason determined to be invalid or unenforceable, there
shall be deemed to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
18. General. This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof. In this Agreement, the
masculine, feminine and neuter genders and the singular and the plural include one another. The
section headings in this Agreement are for the convenience of the parties only and will not affect
the construction or interpretation of this Agreement. This Agreement may be amended or modified,
and the observance of any term of this Agreement may be waived, only by a writing signed by the
Company and the Representative.
19. Counterparts. This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto and hereto were upon
the same instrument and such signatures may be delivered by facsimile.
26
If the foregoing is in accordance with your understanding of the agreement between the Company
and the Underwriters, kindly indicate your acceptance in the space provided for that purpose below.
| Very truly yours, NGAS RESOURCES, INC. |
||||
| By: | /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, | ||||
| President and Chief Executive Officer | ||||
Accepted as of the date
first above written:
first above written:
LAZARD CAPITAL MARKETS LLC
| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. | |||
| ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., | ||||
| Managing Director | ||||
| ▇▇▇▇▇▇▇▇▇▇ SECURITIES, INC. |
||||
| By: | /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ | |||
| ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, | ||||
| Senior Vice President | ||||
27
SCHEDULE A
General Use Free Writing Prospectuses
None.
SCHEDULE B
List of officers, directors and shareholders subject to Section 4
Directors
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Officers
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ III
D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ III
D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
SCHEDULE C
| Number of Units To Be | ||||
| Underwriter | Purchased | |||
Lazard Capital Markets LLC |
3,564,000 | |||
▇▇▇▇▇▇▇▇▇▇ Securities, Inc. |
396,000 | |||
EXHIBIT A
FORM OF WARRANT
EXHIBIT B
FORM OF LOCK-UP AGREEMENT
May ___, 2010
LAZARD CAPITAL MARKETS LLC
▇▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
c/o Lazard Capital Markets LLC
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
c/o Lazard Capital Markets LLC
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: NGAS Resources, Inc. 3,960,000 Units
Dear Sirs:
In order to induce Lazard Capital Markets LLC (“LCM” or the “Representative”) and ▇▇▇▇▇▇▇▇▇▇
Securities, Inc. (“▇▇▇▇▇▇▇▇▇▇”, and together with LCM, the “Underwriters”), to enter in to a
certain Underwriting Agreement with NGAS Resources, Inc., a corporation organized under the laws of
the Province of British Columbia (the “Company”), with respect to the public offering of units (the
“Units”), with each Unit consisting of (i) one share of Common Stock, no par value per share (the
“Common Stock”) of the Company and (ii) one warrant to purchase 0.40 of a share of Common Stock,
the undersigned hereby agrees that for a period (the “Lock-up Period”) of ninety (90) days
following the date of the final prospectus filed by the Company with the Securities and Exchange
Commission in connection with such public offering, the undersigned will not, without the prior
written consent of the Representative, directly or indirectly, (i) offer, sell, assign, transfer,
pledge, contract to sell, or otherwise dispose of, any shares of Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock (including, without limitation,
shares of Common Stock or any such securities which may be deemed to be beneficially owned by the
undersigned in accordance with the rules and regulations promulgated under the Securities Act of
1933, as the same may be amended or supplemented from time to time (such shares or securities, the
“Beneficially Owned Shares”)), (ii) enter into any swap, hedge or other agreement or arrangement
that transfers in whole or in part, the economic risk of ownership of any Beneficially Owned
Shares, Common Stock or securities convertible into or exercisable or exchangeable for Common
Stock, or (iii) engage in any short selling of any Beneficially Owned Shares, Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock.
If (i) the Company issues an earnings release or material news or a material event relating to
the Company occurs during the last seventeen (17) days of the Lock-up Period, or (ii) prior to the
expiration of the Lock-up Period, the Company announces that it will release earnings results
during the sixteen (16)-day period beginning on the last day of the Lock-up Period, the
restrictions imposed by this Agreement shall continue to apply until the expiration of the eighteen
(18)-day period beginning on the issuance of the earnings release or the occurrence of the material
news or material event.
Anything contained herein to the contrary notwithstanding, any person to whom shares of Common
Stock, securities convertible into or exercisable or exchangeable for Common Stock or Beneficially
Owned Shares are transferred from the undersigned shall be bound by the terms of this Agreement.
In addition, the undersigned hereby waives, from the date hereof until the expiration of the
ninetieth (90th) day following the date of the Company’s final prospectus, any and all
rights, if any, to request or demand registration pursuant to the Securities Act of 1933, as
amended, of any shares of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock that are registered in the name of the undersigned or that are
Beneficially Owned Shares. In order to enable the aforesaid covenants to be enforced, the
undersigned hereby consents to the placing of legends and/or stop transfer orders with the transfer
agent of the Common Stock with respect to any shares of Common Stock, securities convertible into
or exercisable or exchangeable for Common Stock or Beneficially Owned Shares.
| [Signatory] |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||