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Exhibit 1.1
EXECUTION COPY
EVOLUTION PETROLEUM CORPORATION
Series A Preferred Stock
UNDERWRITING AGREEMENT
June 28,
2011
McNicoll,
Lewis & Vlak LLC
1251 Avenue of the Americas, 41st Floor
New York, NY 10020
Ladies
and Gentlemen:
Evolution
Petroleum Corporation, a Nevada corporation (the "Company"), proposes, subject to the terms and conditions of this Underwriting
Agreement (this "Agreement"), to issue and sell to the public through McNicoll, Lewis & Vlak LLC (the
"Underwriter"), on a best efforts basis, 220,000 shares of the Company's Series A Preferred Stock, par value $0.001 per share (the
"Securities").
1. Agreement to Act as Underwriter.
(a) On
the basis of the representations, warranties and agreements of the Company herein contained and subject to all of the terms and conditions of this Agreement, the
Company agrees to issue and sell to the public through the Underwriter, acting as agent, and the Underwriter agrees to offer and sell the Securities for the Company on a best efforts basis pursuant to
this Agreement (the "Offering").
(b) Subject
to the provisions of this Agreement, as compensation for the services rendered, on the Closing (as defined below), the Company shall cause to be paid to the
Underwriter by wire transfer of immediately available funds to one or more accounts designated by the Underwriter, an aggregate amount equal to 5% of the gross proceeds received by the Company for the
sale of the Securities. The Underwriter agrees that the foregoing compensation, together with any expense reimbursements payable hereunder, constitutes all of the compensation that the Underwriter
shall be entitled to receive in connection with the Offering (as defined below) contemplated hereby.
(c) The
Securities will be issued pursuant to a Certificate of Designation (the "Certificate of Designation"), adopted
pursuant to a resolution of the board of directors of the Company and to be filed with the Secretary of State of the State of Nevada.
(d) The
purchase price for each of the Securities shall be $23.00 per share (the "Per Share Price") and the Securities shall
each have a liquidation value of $25.00 per share. The Offering shall commence on the date hereof and shall expire upon the earlier to occur of (i) July 1, 2011, or
(ii) termination in accordance with Section 9 below.
(e) Subject
to the provisions of this Agreement and the performance by the Company of all of its obligations to be performed hereunder, the Underwriter agrees to offer and
sell the Securities for the Company on a best efforts basis. The Company recognizes that "best efforts" does not assure that the Offering will be consummated. It is understood and agreed that the
Underwriter shall not and is under no obligation to purchase any Securities for their own account and that this Agreement does not create any partnership, joint venture or other similar relationship
between or among the Underwriter and the Company.
2. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the
Underwriter that:
(a) Filing of Registration Statement. The Company has prepared and filed, in conformity with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and the
published
rules and regulations thereunder (the "Rules and Regulations") adopted by the Securities and Exchange Commission (the
"Commission"), a registration statement, including a prospectus, on Form S-3 (File No. 333-168107), which became
effective on September 2, 2010, relating to the securities of the Company as described therein and the offering thereof from time to time in accordance with Rule 415(a)(1)(x) of the
Rules and Regulations, and such amendments thereof as may have been required to the date of this Agreement. The term "Registration Statement" as used in
this Agreement means the aforementioned registration statement, at the time of effectiveness of such registration statement or any part thereof for purposes of Section 11 of the Securities Act
(the "Effective Time"), including (i) all amendments to the aforementioned registration statement filed with the Commission, (ii) all
documents filed as a part thereof or incorporated or deemed to be incorporated by reference therein and (iii) any information in the corresponding Base Prospectus (as defined below) or a
prospectus supplement filed with the Commission pursuant to Rule 424(b) under the Securities Act, to the extent such information is deemed pursuant to Rule 430A
("Rule 430A"), 430B ("Rule 430B") or 430C
("Rule 430C") under the Securities Act to be a part thereof at the Effective Time. For purposes of this Agreement, all references to the
Registration Statement, the Base Prospectus, any Preliminary Prospectus (as defined below), the Prospectus (as defined below) or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR"). All references in this
Agreement to amendments or supplements to the Registration Statement, the Base Prospectus, any Preliminary Prospectus or the Prospectus shall be deemed to mean and include the subsequent filing of any
document under the Exchange Act (as defined below) that is deemed to be incorporated therein by reference therein.
(b) Effectiveness of Registration Statement; Certain Defined Terms. The Company and the transactions
contemplated by this Agreement meet the requirements and comply with the conditions for the use of Form S-3 under the Securities Act. The Registration Statement meets, and the
offering and sale of the Securities by the Company as contemplated hereby complies with, the requirements of Rule 415 under the Securities Act (including, without limitation,
Rule 415(a)(4) and (a)(5) of the Rules and Regulations). The Company has complied, to the Commission's satisfaction, with all requests of the Commission for additional or supplemental
information. No stop order preventing or suspending use of the Registration Statement, any Preliminary Prospectus or the Prospectus or the effectiveness of the Registration Statement has been issued
by the Commission, and no proceedings for such purpose pursuant to Section 8A of the Securities Act against the Company or related to the Offering have been instituted or are pending or, to the
Company's knowledge, are contemplated or threatened by the Commission, and any request received by the Company on the part of the Commission for additional information with respect thereto has been
complied with. As used in this Agreement:
(1) "Base Prospectus" means the prospectus included in the Registration Statement at the Effective Time.
(2) "Disclosure Package" means (i) the Statutory Prospectus and (ii) each Issuer Free Writing Prospectus, if
any, filed or used by the Company on or before the Effective Time and listed on Schedule I hereto (other than a roadshow that is an Issuer Free Writing Prospectus but is not required to be
filed under Rule 433 of the Rules and Regulations), all considered together.
(3) "Issuer Free Writing Prospectus" means any "issuer free writing prospectus," as defined in Rule 433 of the Rules
and Regulations relating to the Securities 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.
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(4) "Preliminary Prospectus" means any preliminary prospectus supplement, subject to completion, relating to the Securities,
filed by the Company with the Commission pursuant to Rule 424(b) under the Securities Act for use in connection with the offering and sale of the Securities, together with the Base Prospectus
attached to or used with such preliminary prospectus supplement.
(5) "Prospectus" means the final prospectus supplement, relating to the Securities, filed by the Company with the Commission
pursuant to Rule 424(b) under the Securities Act on or before the second business day after the date hereof (or such earlier time as may be required under the Securities Act), in the form
furnished by the Company to the Underwriter, for use in connection with the
Offering that discloses the public offering price and other final terms of the Securities, together with the Base Prospectus attached to or used with such final prospectus supplement.
(6) "Statutory Prospectus" means the Preliminary Prospectus, if any, and the Base Prospectus, each as amended and
supplemented immediately prior to the Time of Sale, including any document incorporated by reference therein, and any prospectus supplement.
(7) "Time of Sale" means 4:30 p.m., New York City time, on the date of this Agreement.
(c) Conformity with the EDGAR filing. The Prospectus delivered by the Company to the Underwriter for use in
connection with the sale of the Securities pursuant to this Agreement will be identical to the versions of the Prospectus transmitted to the Commission for filing via EDGAR, except to the extent
permitted by Regulation S-T.
(d) Contents of Registration Statement. As of each Effective Time, the Registration Statement complied in all
material respects with 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 in order to make the statements therein not misleading, provided that the Company makes no representation or warranty in this subsection (d) with respect to
statements in or omissions from the Registration Statement in reliance upon, and in conformity with, written information furnished to the Company by or on behalf of the Underwriter or its
representatives specifically for inclusion therein, which information the parties hereto agree is limited to the Underwriter's Information (as defined in Section 8(b) hereof).
(e) Contents of Prospectus. The Prospectus, as of its date and as of the Closing (as defined in Section 4(a) hereof)
will comply in all material respects with the Rules and Regulations of the Securities Act and will not include an untrue
statement of a material fact or 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, provided that the Company makes no representation or warranty with respect to statements in or omissions from the Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of the Underwriter or its representatives specifically for inclusion therein, which information the parties hereto agree is limited to the
Underwriter's Information.
(f) Incorporated Documents. Except as previously disclosed in writing to the Underwriter, each of the documents
incorporated or deemed to be incorporated by reference in the Registration Statement, at the time such document was filed with the Commission or at the time such document became effective, as
applicable, complied, in all material respects, with the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), was filed
on a timely basis with the Commission and did not include an untrue statement of a material fact or 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.
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(g) Disclosure Package. The Disclosure Package, as of the Time of Sale, did not, and at the Closing will not,
contain any untrue statement of a material fact or omit to state any 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; provided that the Company makes no representations or warranties in this subsection (g) with respect to statements in or omissions from the
Disclosure Package in reliance upon, and in conformity with, written information furnished to the Company by the Underwriter specifically for inclusion therein, which information the parties hereto
agree is limited to the Underwriter's Information.
(h) Distributed Materials; Conflict with Registration Statement. Other than the Base Prospectus, any Preliminary
Prospectus and the Prospectus, the Company has not made, used, authorized, approved or referred to and will not make, use, authorize, approve or refer to any "written communication" (as defined in
Rule 405 under the Securities Act) that constitutes an offer to sell or a solicitation of an offer to buy the Securities other than (i) any document not constituting a prospectus
pursuant to Section 2(a)(10)(a) of the Securities Act or Rule 134 under the Securities Act or (ii) the documents listed on Schedule I hereto and other written
communications approved in advance by the Underwriter.
(i) Issuer Free Writing Prospectuses. Each Issuer Free Writing Prospectus, if any, conformed or will conform in
all material respects to the requirements of the Securities Act and the Rules and Regulations on the date of first use, and the Company has complied or will comply with any filing requirements
applicable to such Issuer Free Writing Prospectus pursuant to the Rules and Regulations. Each Issuer Free Writing Prospectus, if any, when considered together with the Disclosure Package, as of its
issue date and at all subsequent times through the completion of the Prospectus Delivery Period did not, does not and will not include any material information that conflicted, conflicts or will
conflict with the information contained in the Registration Statement, the Statutory 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 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 prevailing at the subsequent time, not misleading; provided that the Company makes no
representation or warranty with respect 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
or on behalf of the Underwriter or its representatives specifically for inclusion therein, which information the parties hereto agree is limited to the Underwriter's Information. As used herein, the
term "Prospectus Delivery Period" means such period of time after the first date of the Offering of the Securities as in the reasonable opinion of
counsel for the Underwriter a prospectus relating to the Securities is required by law to be delivered (or required to be delivered but for Rule 172 under the Securities Act) in connection with
sales of the Securities by the Underwriter or any Selected Dealers (as defined below).
(j) Not an Ineligible Issuer. (i) At the earliest time after the filing of the Registration Statement that the
Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the Securities and (ii) at the date hereof, the Company
was not and is not an "ineligible issuer," as defined in Rule 405 under the Securities Act ("Rule 405").
(k) Due Incorporation.
(1) The
Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Nevada, with the corporate power and
authority to own its properties and to conduct its business as it is currently being conducted and as described in the Registration Statement, the Prospectus and Disclosure Package. The
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Company
is duly qualified to transact business and is in good standing as a foreign corporation or other legal entity in each other jurisdiction in which its ownership or leasing of property or the
conduct of its business requires such qualification, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, have a
material adverse effect or would reasonably be expected to have a material adverse effect on the assets, business, operations, earnings, properties, condition (financial or otherwise), prospects,
stockholders' equity or results of operations of the Company and the subsidiaries taken as a whole, or prevent or materially interfere with consummation of the transactions contemplated hereby (a
"Material Adverse Effect").
(2) Each
of the subsidiaries of the Company has been duly incorporated or formed, as the case may be, and is validly existing and in good standing under the laws of its
respective jurisdiction of organization, each with full power and authority (corporate or otherwise) to own its properties and conduct its business as described in the Registration Statement, the
Prospectus and the Disclosure Package, and each has been duly qualified as a foreign corporation, limited liability company or limited partnership for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where the failure to be so qualified or in
good standing would not result in any Material Adverse Effect.
(l) Subsidiaries. Except for NGS Sub. Corp., Arkla Petroleum, L.L.C., NGS Technologies, Inc., Evolution
Operating Co. Inc., and Tertiaire Resources Company or as otherwise described in the Registration Statement, the Prospectus and the Disclosure Package, the Company has no subsidiaries
and does not own any beneficial interest, directly or indirectly, in any corporation, partnership, joint venture or other business entity.
(m) Due Authorization and Enforceability. The Company has the full right, power and authority to enter into this
Agreement and to perform and discharge its obligations hereunder; and this Agreement has been duly authorized, executed and delivered by the Company, and constitutes a valid, legal and
binding obligation of the Company, enforceable against the Company in accordance with its terms, except as rights to indemnity hereunder may be limited by federal or state securities laws and except
as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. The
Certificate of Designation has been duly authorized by the Company and will be filed with the Secretary of State of the State of Nevada on or before the Closing (as defined in Section 4(a) hereof).
(n) The Securities. The issuance of the Securities has been duly and validly authorized by the Company, and the
Securities, when issued, delivered and paid for in accordance with the terms of this Agreement, will have been duly and validly issued and will be fully paid and nonassessable, will not be subject to
any statutory or contractual preemptive rights or other rights to subscribe for or purchase or acquire any shares of capital stock of the Company which have not been waived or complied with, and will
conform in all material respects to the description thereof contained in the Disclosure Package and the Prospectus and such description conforms in all material respects to the rights set forth in the
instruments defining the same.
(o) Capitalization. The information set forth under the caption "Capitalization" in the Statutory Prospectus
(and any similar sections or information, if any, contained in the Disclosure Package) is fairly presented on a basis consistent with the Company's financial statements. The authorized capital stock
of the Company conforms as to legal matters to the description thereof contained in the Preliminary Prospectus and the Prospectus under the captions "Description of Series A Preferred Stock"
and "Description of Capital Stock" (and any similar sections or information, if any, contained in the Disclosure Package). The issued and outstanding shares of
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capital
stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable, and have been issued in compliance with all federal and state securities laws. None of the
outstanding shares of capital stock of the Company was issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase or acquire any
securities of the Company or any of its subsidiaries. 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 for, any capital stock of the Company or any of its subsidiaries other than as described in the Registration Statement, the
Prospectus and the Disclosure Package. The description of the Company's stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, as
described in the Prospectus and the Disclosure Package, accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights. The issued and
outstanding shares of capital stock of each of the Company's subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and, except to the extent set forth in the Disclosure Package and the Prospectus, are owned directly by the Company or by another wholly-owned subsidiary of the
Company, are free and clear of any lien, encumbrance, security interest, claim or charge, other than those described in, or incorporated by reference into, the Registration Statement and the
Prospectus.
(p) No Conflict. Except as described in the Preliminary Prospectus and the Prospectus, the execution, delivery
and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby, including the issuance and sale of the Securities by the Company, will not
(i) conflict with or result in a breach or violation of, or constitute a default under (nor constitute any event which with or without notice, lapse of time or both would result in any breach
or violation of or constitute a default 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 its subsidiaries 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 either the Company or its subsidiaries or any of their properties may
be bound or to which any of their property or assets is subject, (ii) result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries,
or (iii) result in any violation of 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 properties or assets, except, with respect to clauses (i), (ii) (only with respect to the Company's subsidiaries), and (iii), for any such conflict, breach,
violation or default as would not, individually or in the aggregate, have a Material Adverse Effect.
(q) No Consents Required. No approval, authorization, consent 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 of the Company in
connection with the Company's execution, delivery and performance of this Agreement, the consummation by the Company of the transactions contemplated hereby or the issuance and sale of the Securities
other than (i) such as have been obtained, (ii) the filing of the Certificate of Designation with the Secretary of State of the State of Nevada , (iii) such filings as may be
required under the Securities Act, (iv) any necessary qualification of the Securities under the securities or blue sky laws of the various jurisdictions in which the Securities are being
offered, (v) such filings as may be required by the New York Stock Exchange Amex Equities ("NYSE Amex"), or (vi) any required filing on
Form 8-K under the Exchange Act.
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(r) Preemptive Rights. There are no preemptive rights or other rights (other than rights which have been waived
in writing in connection with the transactions contemplated by this Agreement or otherwise satisfied or as described in the Prospectus) to subscribe for or to purchase any shares of capital stock of
the Company or other equity interests of the Company or any of its subsidiaries, or any agreement or arrangement between the Company and any of the Company's stockholders or between any of the
Company's subsidiaries and any of such subsidiary's stockholders, or to the Company's knowledge, between or among any of the Company's stockholders or any of its subsidiaries' stockholders, which
grant special rights with respect to any shares of the Company's or any of its subsidiaries' capital stock or which in any way affect any stockholder's ability or right to alienate freely or vote such
shares.
(s) Registration Rights. There are no contracts, agreements or understandings between the Company or any of its
subsidiaries and any person granting such person the right (other than rights which have been waived in writing in connection with the transactions contemplated by this Agreement or otherwise
satisfied) to require the Company or any of its subsidiaries to register any securities with the Commission.
(t) Independent Accountants. Hein & Associates LLP (the
"Auditor" or "Hein"), whose report on the consolidated financial statements of the Company is
incorporated by reference in the Registration Statement, the Prospectus and the Disclosure Package, is, and during the periods covered by its report, was (i) an independent registered public
accounting firm within the meaning of the Securities Act, (ii) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002 (the
"Sarbanes-Oxley Act")), and (iii) to the Company's knowledge, not in violation of the auditor independence requirements of the Sarbanes-Oxley
Act. Except as disclosed in the Registration Statement and as pre-approved in accordance with the requirements set forth in Section 10A of the Exchange Act, the Auditor has not been
engaged by the Company at any time to perform any "prohibited activities" (as defined in Section 10A of the Exchange Act).
(u) Financial Statements. The consolidated financial statements of the Company, together with the related
schedules and notes thereto, set forth or incorporated by reference in the Registration Statement, the Prospectus and the Disclosure Package comply in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as applicable, and present fairly in all material respects (i) the financial condition of the Company and its consolidated subsidiaries
as of the dates indicated and (ii) the consolidated results of operations, stockholders' equity and changes in cash flows of the Company and its consolidated subsidiaries for the periods
therein specified; and such financial statements and related schedules and notes thereto have been prepared in conformity with United States generally accepted accounting principles, consistently
applied throughout the periods involved (except as otherwise stated therein and subject, in the case of unaudited financial statements, to the absence of footnotes and normal year-end
adjustments). There are no other financial statements (historical or pro forma) that are required to be included or incorporated by reference in the Registration Statement, the Prospectus or the
Disclosure Package; and the Company does not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not disclosed in the
Registration Statement, the Disclosure Package and the Prospectus; and all disclosures contained in the Registration Statement, the Disclosure Package and the Prospectus regarding
"non-GAAP financial measures" (as such term is defined by the rules and regulations of the Commission) comply with Regulation G of the Exchange Act and Item 10(e) of
Regulation S-K under the Securities Act, to the extent applicable, and present fairly in all material respects the information shown therein and the Company's basis for using such
measures.
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(v) INTENTIONALLY OMITTED
(w) Absence of Material Changes. Subsequent to the respective dates as of which information is given in the
Registration Statement, the Prospectus and the Disclosure Package, and except as may be otherwise stated or incorporated by reference in the Registration Statement, the Prospectus and the Disclosure
Package, there has not been (i) any Material Adverse Effect, (ii) any transaction which is material to the Company or any of its subsidiaries, (iii) any obligation, direct or
contingent (including any off-balance sheet obligations), incurred by the Company or any of its subsidiaries, which is material to the Company or any of its subsidiaries, or
(iv) any change in the capital stock (other than a change in the number of outstanding shares of Common Stock due to the issuance of shares upon the exercise of outstanding options or warrants
or the conversion of convertible indebtedness), or material change in the short-term debt or long-term debt of the Company or any of its subsidiaries (other than upon
conversion of convertible indebtedness) or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock (other than grants of stock options under the
Company's stock option plans existing on the date hereof) of the Company or any of its subsidiaries.
(x) Legal Proceedings. Except as disclosed in the Company's filings with the Commission, there are no legal or
governmental actions, suits, claims or proceedings pending or, to the Company's knowledge, threatened or contemplated to which the Company or any of its subsidiaries is or would be a party or of which
any of their respective properties is or would be subject at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority or
agency, or before or by any self-regulatory organization or other non-governmental regulatory authority which are required to be described in the Registration Statement, the
Disclosure Package or the Prospectus or a document incorporated by reference therein and are not so described therein, or which, singularly or in the aggregate, if resolved adversely to the Company or
such subsidiary, would reasonably be likely to result in a Material Adverse Effect or prevent or materially and adversely affect the ability of the Company to consummate the transactions contemplated
hereby.
(y) No Violation. Neither the Company nor any of its subsidiaries is in breach or violation of or in default
(nor has any event occurred which with notice, lapse of time or both would result in any breach or violation of, or constitute a default) (i) under the provisions of its charter or bylaws (or
analogous governing instrument, as applicable) or (ii) in the performance or observance of any term, covenant, obligation, agreement or condition contained in any indenture, mortgage, deed of
trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which the Company or such subsidiary is a party or by which
any of its properties may be bound or affected, or (iii) in the performance or observance of any statute, law, rule, regulation, ordinance, judgment, order or decree of any court, regulatory
body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any of its properties, as applicable, except, with respect to
clauses (i) (only with respect to the Company's subsidiaries), (ii) and (iii) above, to the extent any such contravention has been waived or would not result in a Material Adverse
Effect.
(z) Permits. The Company and each of its subsidiaries have made all filings, applications and submissions
required by, and own or possess all material approvals, licenses, certificates, certifications, clearances, consents, exemptions, marks, notifications, orders, permits and other authorizations issued
by, the appropriate federal, state or foreign regulatory authorities necessary to conduct its business as described in the Disclosure Package (collectively,
"Permits"), and is in compliance in all material respects with the terms and conditions of all such Permits. Except as would not result in a Material
Adverse Effect, all such Permits are valid and in full force and effect. Neither the Company nor any of its subsidiaries has received any written notice of any
8
proceedings
relating to revocation or modification of, any such Permit, which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect. Except as may be required under the Securities Act and state and foreign Blue Sky laws, the rules and regulations of the Financial Industry Regulatory Authority, Inc.
("FINRA"), and the NYSE Amex, no other Permits are required of the Company for the Company or any of its subsidiaries to enter into, deliver and perform
this Agreement and to issue and sell the Securities to be issued and sold by the Company hereunder.
(aa) Not an Investment Company. The Company is not or, after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof as described in the Disclosure Package and the Prospectus, will not be (i) required to register as an "investment company" as defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules and regulations of the Commission thereunder or
(ii) a "business development company" (as defined in Section 2(a)(48) of the Investment Company Act).
(bb) No Price Stabilization. Neither the Company nor any of its subsidiaries, or any of their respective
officers, directors, affiliates or controlling persons has taken or will take, directly or indirectly, any action designed to or that would be reasonably expected to cause or result in, or which has
constituted or which would reasonably be expected to constitute the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.
(cc) Good Title to Property. The Company and each of its subsidiaries has (i) good and defensible title
to all of its oil and gas properties (including oil and gas wells, producing leasehold interests and appurtenant personal property), and title investigations having been carried out by the Company or
each of its subsidiaries consistent with the reasonable practice in the oil and gas industry in the areas in which the Company and each of its subsidiaries operate and (ii) good and marketable
title to all other real and personal property owned by the Company and each of its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the
Registration Statement and Prospectus or such as would not reasonably be expected to have a Material Adverse Effect; and all of the leases and subleases under which the Company or any of its
subsidiaries holds or uses properties described in the Registration Statement and Prospectus are in full force and effect, and neither the Company nor any of its subsidiaries has any notice of any
claim of any sort that has been asserted by anyone adverse to the rights of the Company or its subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights
of the Company or any subsidiary thereof to the continued possession or use of the leased or subleased premises, each with such exceptions and claims as would not reasonably be expected to have a
Material Adverse Effect. The working interests in oil, gas and mineral leases or mineral interests which constitute a portion of the real property held by the Company reflect in all material respects
the right of the Company and each of its subsidiaries to explore, develop or receive production from such real property, and the care taken by the Company and each of its subsidiaries with respect to
acquiring or otherwise procuring such leases or mineral interests was generally consistent with standard industry practices in the areas in which the Company and its subsidiaries operate for acquiring
or procuring leases and interests therein to explore, develop or produce for hydrocarbons. The Company and each of its subsidiaries have such consents, easements, rights-of-way
or licenses from any person ("rights-of-way") as are necessary to enable the Company and each of its subsidiaries to conduct its
business in the manner described in the Registration Statement and the Prospectus, subject to such qualifications as may be set forth in the Registration Statement and the Prospectus, and except for
such rights-of-way the lack of which would not have, individually or in the aggregate, a Material Adverse Effect.
(dd) Intellectual Property Rights. The Company and each of its subsidiaries owns or possesses the right to use
all patents, trademarks, trademark registrations, service marks, service
9
mark
registrations, trade names, copyrights, licenses, inventions, software, databases, know-how, Internet domain names, trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures, and other intellectual property (collectively, "Intellectual Property") necessary to carry on its
businesses as currently conducted, and as proposed to be conducted as described in the Disclosure Package and the Prospectus, and the Company is not aware of any claim to the contrary or any challenge
by any other person to the rights of the Company or any of its subsidiaries with respect to the foregoing except for those that could not have a Material Adverse Effect. The Intellectual Property
licenses described in the Disclosure Package and the Prospectus are, to the knowledge of the Company, valid, binding upon, and enforceable by or against the parties thereto in accordance with their
terms. The Company and each of its subsidiaries has complied in all material respects with, and is not in breach nor has received any asserted or threatened claim of breach of, any Intellectual
Property license, and the Company has no knowledge of any breach or anticipated breach by any other person of any Intellectual Property license. The Company's and each of its subsidiaries' business as
now conducted, does not and will not infringe or conflict with any patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses
or other Intellectual Property or franchise right of any person. Neither the Company nor any of its subsidiaries has received written notice of any claim against the Company or any of its subsidiaries
alleging the infringement by the Company or any of its subsidiaries of any patent, trademark, service mark, trade name, copyright, trade secret, license in or other intellectual property right or
franchise right of any person. The Company and each of its subsidiaries has taken all reasonable steps to protect, maintain and safeguard its rights in all Intellectual Property, including the
execution of appropriate nondisclosure and confidentiality agreements. The consummation of the transactions contemplated by this Agreement will not result in the loss or impairment of or payment of
any additional amounts with respect to, nor require the consent of any other person in respect of, the Company's or any of its subsidiaries' right to own, use, or hold for use any of the Intellectual
Property as owned, used or held for use in the conduct of the businesses as currently conducted. Neither the Company nor any of its subsidiaries owns any patents or has made application for the
issuance of a patent, except as disclosed in the Registration Statement, the Disclosure Package, or the Prospectus, or for such patents which are not material to the Company.
(ee) No Labor Disputes. No labor problem or dispute with the employees of the Company or any of the Company's
subsidiaries exists, or, to the Company's knowledge, is threatened or imminent, which would reasonably be expected to result in a Material Adverse Effect. The Company is not aware that any key
employee or significant group of employees of the Company or any of the Company's subsidiaries plans to terminate employment with the Company or any of the Company's subsidiaries. Except for matters
which would not, individually or in the aggregate, result in a Material Adverse Effect, (i) there is (A) no unfair labor practice complaint pending or, to the Company's knowledge,
threatened against the Company or any of its subsidiaries before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under collective bargaining agreements
is pending or to the Company's knowledge, threatened, (B) no strike, labor dispute, slowdown or stoppage pending or, to the Company's knowledge, threatened against the Company or any of its
subsidiaries and (C) no union representation dispute currently existing concerning the employees of the Company or any of its subsidiaries and (ii) to the Company's knowledge,
(A) no union organizing activities are currently taking place concerning the employees of the Company or any of its subsidiaries and (B) there has been no violation of any federal,
state, local or foreign law relating to discrimination in the hiring, promotion or pay of employees, any applicable wage or hour laws or any provision of the Employee Retirement Income Security Act of
1974 ("ERISA") or the rules and regulations promulgated thereunder concerning the employees of the Company or any of its subsidiaries.
10
(ff) Taxes. The Company and each of its subsidiaries (i) has timely filed all necessary federal, state,
local and foreign income and franchise tax returns (or timely filed applicable extensions therefor) that have been required to be filed and (ii) is not in default in the payment of any taxes
which were payable pursuant to such returns or any assessments with respect thereto, other than any which the Company or any of its subsidiaries is contesting in good faith and for which adequate
reserves have been provided and reflected in the Company's financial statements included in the Registration Statement, the Disclosure Package and the Prospectus. Neither the Company nor any of its
subsidiaries has any tax deficiency that has been or, to the knowledge of the Company, is reasonably likely to be asserted or threatened against it that would result in a Material Adverse Effect.
Neither the Company nor any of
its subsidiaries has engaged in any transaction which is a corporate tax shelter or which could be characterized as such by the Internal Revenue Service or any other taxing authority.
(gg) ERISA. The Company and each of its subsidiaries is in compliance in all material respects with all
presently applicable provisions of ERISA; no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company or any of its
subsidiaries would have any liability; neither the Company nor any of its subsidiaries has incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the Company or any of its subsidiaries would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss
of such qualification.
(hh) Compliance with Environmental Laws. The Company and each of its subsidiaries (i) is in compliance
with any and all applicable foreign, federal, state and local laws, orders, rules, regulations, directives, decrees and judgments relating to the use, treatment, storage and disposal of hazardous or
toxic substances or waste and protection of human health and safety or the environment which are applicable to their businesses ("Environmental Laws");
(ii) has received and is in compliance with all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business; and (iii) is in
compliance with all terms and conditions of any such permit, license or approval, except, with respect to clauses (i), (ii), and (iii) where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, individually or in the aggregate,
result in a Material Adverse Effect. There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to
third parties) which would, individually or in the aggregate, result in a Material Adverse Effect.
(ii) Insurance. The Company and each of its subsidiaries maintains or is covered by insurance provided by
recognized, financially sound and reputable institutions with insurance policies in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties
and as is customary for companies engaged in similar businesses in similar industries. All such insurance is fully in force on the date hereof and will be fully in force as of the Closing. The Company
has no reason to believe that it and its subsidiaries will not be able to renew their existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. Neither the Company nor any of its subsidiaries has been denied any material insurance policy or
coverage for which it has applied. Neither the
11
Company
nor any of its subsidiaries insures risk of loss through any captive insurance, risk retention group, reciprocal group or by means of any fund or pool of assets specifically set aside for
contingent liabilities other than as described in the Disclosure Package.
(jj) Accounting Controls. The Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance
with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(kk) Disclosure Controls. The Company has established, maintains and evaluates "disclosure controls and
procedures" (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), which (i) are designed to ensure that material information relating
to the Company and its subsidiaries is made known to the Company's principal executive officer and its principal financial officer by others within those entities, particularly during the periods in
which the periodic reports required under the Exchange Act are being prepared, (ii) have been evaluated for effectiveness as of the end of the last fiscal period covered by the Registration
Statement; and (iii) such disclosure controls and procedures are effective to perform the functions for which they were established. There are no significant deficiencies or material weaknesses
in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize, or report financial data to management and the Board of Directors of
the Company. The Company is not aware of any fraud, whether or not material, that involves management or other employees who have a role in the Company's internal controls; and since the date of the
most recent evaluation of such disclosure controls and procedures, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls,
including any corrective actions with regard to significant deficiencies and material weaknesses.
(ll) Minute Books. The minute books of the Company and each of its subsidiaries have been made available (other
than certain personnel and other information) upon request to the Underwriter and counsel for the Underwriter, and such books (i) contain a materially complete summary of all meetings and
actions of the board of directors (including each board committee) and stockholders of the
Company (or analogous governing bodies and interest holders, as applicable), and each of its subsidiaries since the time of its incorporation or organization through the date of the latest meeting and
action, to the extent the minutes of such meetings have been reduced to writing as of the date of this Agreement, and (ii) accurately in all material respects reflect all transactions referred
to in such minutes.
(mm) Contracts; Off-Balance Sheet Interests. There is no document, contract, permit or instrument,
or off-balance sheet transaction (including without limitation, any "variable interests" in "variable interest entities," as such terms are defined in Financial Accounting Standards Board
Interpretation No. 46) of a character required by the Securities Act or the Rules and Regulations to be described in the Registration Statement or the Disclosure Package or to be filed as an
exhibit to the Registration Statement or document incorporated by reference therein, which is not described or filed as required. Each description of a document, contract, permit or instrument in the
Registration Statement or the Disclosure Package accurately reflects in all material respects the terms of the underlying document, contract, permit or instrument. The documents, contracts, permits
and instruments described in the immediately preceding sentence to which the Company is a party have been duly authorized, executed and delivered by the Company, constitute valid and binding
agreements of the Company, are enforceable against and by the Company in accordance
12
with
the terms thereof and are in full force and effect on the date hereof. Neither the Company nor any of its subsidiaries, if a subsidiary is a party, nor to the Company's knowledge, any other party
is in default in the observance or performance of any term or obligation to be performed by it under any such agreement, and no event has occurred which with notice or lapse of time or both would
constitute such a default, in any case which default or event, individually or in the aggregate, would have a Material Adverse Effect. No default exists, and no event has occurred which with notice or
lapse of time or both would constitute a default, in the due performance and observance of any term, covenant or condition, by the Company or a subsidiary, if a subsidiary is a party thereto, of any
agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or its properties or business or a subsidiary or the subsidiary's properties or business may
be bound or affected which default or event, individually or in the aggregate, would have a Material Adverse Effect.
(nn) No Undisclosed Relationships. No relationship, direct or indirect, exists between or among the Company, on
the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of their affiliates, on the other hand, which is required to be described in the Registration
Statement, the Disclosure Package or the Prospectus or a document incorporated by reference therein and which has not been so described.
(oo) Brokers Fees. Except as disclosed in the Disclosure Package, there are no contracts, agreements or
understandings between the Company and any person (other than this Agreement) that would give rise to a claim against the Company or the Underwriter for a brokerage commission, finder's fee or other
like payment in connection with the offering and sale of the Securities.
(pp) Forward-Looking Statements. The Company has no actual knowledge that any forward-looking statement (within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in either the Disclosure Package or the Prospectus at the time it was made or upon any
reaffirmation thereof by the Company, was false or misleading in any material respect.
(qq) Sarbanes-Oxley Act. The Company, and to its knowledge, each of the Company's directors or officers, in
their capacities as such, are in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act and any related rules and regulations promulgated by the
Commission. Each of the principal executive officer and the principal financial officer of the Company (and each former principal executive officer of the Company and each former principal financial
officer of the Company as applicable) has made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to all reports, schedules, forms, statements and other
documents required to be filed by him or her with the Commission. For purposes of the preceding sentence, "principal executive officer" and "principal financial officer" shall have the meanings given
to such terms in the Sarbanes-Oxley Act.
(rr) Foreign Corrupt Practices. Neither the Company nor, to the Company's knowledge, any other person associated
with or acting on behalf of the Company, including without limitation any director, officer, agent or employee of the Company or any of its subsidiaries has, directly or indirectly, while acting on
behalf of the Company or any of its subsidiaries (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity or
failed to disclose fully any contribution in violation of law, (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof, (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.
13
(ss) Affiliate Transactions. There are no transactions, arrangements or other relationships between and/or among
the Company, any of its affiliates (as such term is defined in Rule 405) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose
entity that could reasonably be expected to materially affect the Company's liquidity or the availability of or requirements for its capital resources required to be described in the Disclosure
Package and the Prospectus or a document incorporated by reference therein which have not been described as required. The Company does not, directly or indirectly, including through any subsidiary,
have any outstanding personal loans or other credit extended to or for any of its directors or executive officers.
(tt) Statistical or Market-Related Data. Any statistical, industry-related or market-related data included or
incorporated by reference in the Registration Statement, the Prospectus or the Disclosure Package, are
based on or derived from sources that the Company reasonably and in good faith believes to be reliable and accurate, and such data agree with the sources from which they are derived.
(uu) Money Laundering Laws. The operations of the Company and its subsidiaries are and have been conducted at
all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the USA
PATRIOT Act, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by
any governmental agency (collectively, the "Money Laundering Laws") and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending, or to the knowledge of the Company, threatened against the Company or any of its
subsidiaries.
(vv) OFAC. Neither the Company 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 affiliate, joint venture partner or other person or entity, which, to the Company's knowledge, will use such proceeds for the purpose of financing the activities of any person
currently subject to any U.S. sanctions administered by OFAC.
(ww) Margin Securities. The Company does not own 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 the
Securities 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 Securities to be considered a "purpose credit" within the meanings of Regulation T, U or X of the
Federal Reserve Board.
(xx) Rated Securities. At the Time of Sale there were, and as of the Closing there will be, no securities of or
guaranteed by the Company that are rated by a "nationally recognized statistical rating organization," as that term is defined in Rule 436(g)(2) promulgated under the Securities Act.
(yy) FINRA Affiliations. There are no affiliations or associations between (i) any member of the FINRA
and (ii) the Company or any of the Company's officers, directors or 5% or greater security holders or any beneficial owner of the Company's unregistered equity securities that were acquired at
any time on or after the one hundred eightieth (180th) day immediately preceding the
14
date
the Registration Statement was initially filed with the Commission, except as set forth in the Registration Statement, the Disclosure Package and the Prospectus.
(zz) Exchange Act Requirements. The Company has filed in a timely manner all reports required to be filed
pursuant to Sections 13(a), 13(e), 14 and 15(d) of the Exchange Act during the preceding 12 months (except to the extent that Section 15(d) requires reports to be filed pursuant
to Sections 13(d) and 13(g) of the Exchange Act, which shall be governed by the next clause of this sentence); and the Company has filed in a timely manner all reports required to be filed
pursuant to Sections 13(d) and 13(g) of the Exchange Act, except where the failure to timely file could not reasonably be expected individually or in the aggregate to have a Material Adverse
Effect.
(aaa) Trading Market. No approval of the stockholders of the Company under the rules and regulations of any
trading market is required for the Company to issue and deliver the Securities.
(bbb) Reserve Reports. The information underlying the estimates of the reserves of the Company and its
subsidiaries, which was supplied by the Company to W.D. Von Gonten & Co. and Degolyer and MacNaughton (collectively, the "Reserve
Engineers"), independent petroleum engineers, for purposes of preparing the reserve reports incorporated by reference into the Registration Statement (the
"Reserve Reports"), including, without limitation, production, volumes, sales prices for production, contractual pricing provisions under oil or gas
sales or marketing contracts under hedging arrangements, costs of operations and development, and working interest and net revenue interest information relating to the Company's ownership interests in
properties, was true and correct in all material respects on the dates of such Reserve Reports; the estimates of future capital expenditures and other future exploration and development costs supplied
to the Reserve Engineers were prepared in good faith and with a reasonable basis; the information provided to the Reserve Engineers by the Company for purposes of preparing the Reserve Reports was
prepared in accordance with customary industry practices; the Reserve Engineers were, as of the dates of the Reserve Reports, and are, as of the date hereof, independent petroleum engineers with
respect to the Company; other than any decrease in reserves resulting from normal production of the reserves and intervening spot market product price fluctuations or as disclosed in the Preliminary
Prospectus Supplement and incorporated by reference into the Registration Statement, to the knowledge of the Company, there are not any facts or circumstances that would adversely affect the reserves
in the aggregate, or the aggregate present value of future net cash flows therefrom, as disclosed in the Statutory Prospectus and incorporated by reference into the Registration Statement and
reflected in the Reserve Reports such as to cause a material adverse change; estimates of such reserves and the present value of the future net cash flows therefrom as disclosed in the Statutory
Prospectus and incorporated by reference into the Registration Statement and reflected in the Reserve Reports comply in all material respects to the applicable requirements of
Regulation S-X and Regulation S-K under the Securities Act. The estimates of such proved reserves and standardized measure as described in the Registration
Statement and Prospectus and reflected in the reports referenced therein have been prepared in a manner that complies with the applicable requirements of the rules under the Securities Act with
respect to such estimates.
(ccc) To
the best of the Company's knowledge, information and belief, none of the current directors or officers of the Company or any of its subsidiaries (or such
stockholders' respective principals) is or has ever been subject to prior regulatory, criminal or bankruptcy proceedings in the U.S. or elsewhere.
(ddd) The
Company has not provided and has not authorized any other person to act on its behalf to provide any investor or its respective agents or counsel with any
information about the
15
Company
that constitutes or might constitute material, non-public information which is not otherwise disclosed in the Prospectus.
Any
certificate signed by any authorized officer of the Company and delivered to the Underwriter or to counsel for the Underwriter in connection with the Offering of the Securities shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters covered thereby.
3. Purchase and Sale of Securities.
(a) Subject
to the terms and conditions herein set forth, the Company agrees to issue and sell the Securities to the public through the Underwriter, and the Underwriter
agrees to offer and sell the Securities for the Company on a best efforts basis, at a purchase price equal to the Per Share Price; provided that notwithstanding anything in this Agreement to the
contrary, the Company will be under no obligation to sell any Securities hereunder unless, upon the Closing, the Securities would be eligible for listing on the NYSE Amex (i.e., upon Closing at
least 100,000 of the Securities must be outstanding and such Securities must be held in the aggregate by at least 100 round lot stockholders holding an aggregate of at least $2,000,000 in shares). The
Underwriter shall endeavor to sell the Securities on behalf of the Company to both retail and institutional investors (each an "Investor," collectively,
the "Investors") upon the terms and conditions set forth in the Disclosure Package and the Prospectus.
(b) The
Underwriter may retain other brokers or dealers (each a "Selected Dealer") which are members in good standing of
FINRA and duly registered as broker-dealers under the Exchange Act and under the laws of any states in which the Offering is conducted (except where such registration is not required by law) to assist
them and to act as subagents on their behalf in connection with the Offering, and may enter into agreements with such Selected Dealers for the offer and sale of the Securities adopting such provisions
of this Agreement for the benefit of the Selected Dealers as the Underwriter deems appropriate; provided, however, that the Company will only be obligated to pay the Underwriter, in accordance with
the terms of this Agreement, for services rendered hereunder and shall be under no obligation to make any payment of any kind to any such Selected Dealer.
(c) It
is understood and agreed that the Underwriter shall not and is under no obligation to purchase any Securities for its own account and that this Agreement does not
create any partnership, joint venture, or other similar relationship between the Underwriter and the Company.
4. Delivery of the Securities.
(a) The
Securities to be purchased by each Investor hereunder, in definitive form, and registered in such names as the Underwriter (on behalf of the Investors) may request
shall be delivered by or on behalf of the Company, to the Investors through the facilities of The Depository Trust Company ("DTC") or a custodian
designated by DTC for the account of each Investor, against payment by or on behalf of each Investor of the purchase price therefor by wire transfer of Federal (same-day) funds to the
account specified by the Company to the Underwriter at least forty-eight hours in advance. The Company will cause the certificates, if any are to be issued, representing the Securities to be made
available for checking and packaging at least twenty-four hours prior to the Closing (as defined below) with respect thereto at the office of DTC or its designated custodian. The delivery
and payment shall be 10:00 a.m., New York City time, on such date as may be agreed to as the Closing or such other time as the Underwriter and the Company may agree upon in writing. One or more
closings of the transactions contemplated hereby (each, a "Closing") may be undertaken during the Offering period.
16
(b) The
documents to be delivered at the Closing by or on behalf of the parties hereto pursuant to Section 7 hereof,
will be delivered at the offices DLA Piper LLP (US), counsel to the Underwriter, at 1251 Avenue of the Americas, New York, New York 10020, or at such other place as the Company and Underwriter
may agree (the "Closing Location"), and the Securities will be delivered at the office of DTC or its designated custodian, all at the Closing. A meeting
will be held at the Closing Location at 3:00 p.m., New York City time, on the New York Business Day next preceding the Closing, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review by the parties hereto. All actions taken at the Closing shall be deemed to have occurred simultaneously. For the purposes of
this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close.
5. Certain Agreements of the Company. The Company agrees with the Underwriter that:
(a) Filing of Prospectuses. The Company has filed or will file each Statutory Prospectus and the Prospectus
pursuant to and in accordance with Rule 424(b)(2) (or, if applicable and consented to by the Underwriter, subparagraph (5)) not later than the second business day following the earlier
of the date it is first used or the execution and delivery of this Agreement. The Company has complied and will comply with Rule 433.
(b) Filing of Amendments; Response to Commission Requests. The Company will promptly advise the Underwriter of
any proposal to amend or supplement the Registration Statement or any Statutory Prospectus at any time and will offer the Underwriter a reasonable opportunity to comment on any such amendment or
supplement; and the Company will also advise the Underwriter promptly of (i) the filing of any such amendment or supplement, (ii) any request by the Commission or its staff for any
amendment to the Registration Statement, for any supplement to any Statutory Prospectus or for any additional information, (iii) the institution by the Commission of any stop order proceedings
in respect of the Registration Statement or the threatening of any proceeding for that purpose, and (iv) the receipt by the Company of any notification with respect to the suspension of the
qualification of the Securities in any jurisdiction or the institution or threatening of any proceedings for such purpose. The Company
will use its commercially reasonable efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if issued, to obtain as soon as possible the withdrawal
thereof.
(c) Continued Compliance with Securities Laws. If, at any time when a prospectus relating to the Securities is
(or but for the exemption in Rule 172 would be) required to be delivered under the Securities Act by the Underwriter or dealers, any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact or omit to state any material fact 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, or if it is necessary at any time to amend the Registration Statement or supplement the Prospectus to comply with the Securities Act,
the Company will promptly notify the Underwriter of such event and will promptly prepare and file with the Commission and furnish, at its own expense, to the Underwriter and the dealers and any other
dealers upon request of the Underwriter, an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance. Neither the Underwriter's consent
to, nor the Underwriter's delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 7
hereof.
(d) Rule 158. As soon as practicable, but not later than 16 months, after the date of this
Agreement, the Company will make generally available to its security holders an earnings statement (which need not be audited) covering a period of at least 12 months beginning after the
17
date
of this Agreement and satisfying the provisions of Section 11(a) of the Securities Act and Rule 158.
(e) Furnishing of Prospectuses. The Company will furnish to the Underwriter copies of the Registration
Statement, including all exhibits, any Statutory Prospectus, the Prospectus and all amendments and supplements to such documents, in each case as soon as available and in such quantities as the
Underwriter reasonably requests. The Company will pay the expenses of printing and distributing to the Underwriter all such documents.
(f) Blue Sky Qualifications. The Company will arrange for the qualification of the Securities for sale under the
laws of such jurisdictions as the Underwriter designates and will continue such qualifications in effect so long as required for the distribution; provided that such obligation to qualify the
Securities for sale shall not include the obligation to register the Securities in any such jurisdiction in the event that counsel for the Company reasonably determines that such registration is not
required pursuant to Section 18 of the Securities Act; and provided further that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so
qualified, to register or qualify as a dealer in securities or to take any action that would subject it to service of process in any jurisdiction, other than those arising out of the offering or sale
of the Securities, in any jurisdiction where it is not now so subject.
(g) Reporting Requirements. For so long as the Securities remain outstanding, the Company will furnish to the
Underwriter as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to the Underwriter (i) as soon as
available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Exchange Act or mailed to stockholders, and (ii) from time to time, such
other information concerning the Company as the Underwriter may reasonably request. However, so long as the Company is subject to the reporting requirements of either Section 13 or
Section 15(d) of the Exchange Act and is timely filing reports with the Commission on EDGAR, it is not required to furnish such reports or statements to the Underwriter.
(h) Payment of Expenses. The Company will pay all expenses incident to the performance of its obligations under
this Agreement, including but not limited to any filing fees and other expenses incurred in connection with qualification of the Securities for sale under the laws of such jurisdictions as the
Underwriter designates and the preparation and printing of memoranda relating thereto, any fees charged by investment rating agencies for the rating of the Securities, costs and expenses relating to
investor presentations or any "road show" in connection with the offering and sale of the Securities including, without limitation, any travel expenses of the Company's officers and employees and any
other expenses of the Company including the chartering of airplanes, expenses incurred in distributing preliminary prospectuses and the Prospectus (including any amendments and supplements thereto) to
the Underwriter and for expenses incurred for preparing, printing and distributing any Issuer Free Writing Prospectuses to investors or prospective investors, all fees and expenses incurred in
connection with any filing for the review of the Offering by FINRA and all fees and disbursements of counsel for the Underwriter in connection with the Offering up to $125,000 in the aggregate.
(i) Use of Proceeds. The Company will use the net proceeds received in connection with this Offering in the
manner described in the "Use of Proceeds" section of the Disclosure Package and the Prospectus and, except as disclosed in the Disclosure Package and the Prospectus, the Company does not intend to use
any of the proceeds from the sale of the Securities hereunder to repay any outstanding debt owed to any affiliate of the Underwriter.
(j) Absence of Manipulation. The Company will not take, directly or indirectly, any action designed to or that
would constitute or that might reasonably be expected to cause or result in,
18
stabilization
or manipulation of the price of any securities of the Company to facilitate the sale or resale of the Securities.
(k) Restriction on Sale of Securities. The Company will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Commission a registration statement under the Securities Act relating to Series A Preferred Stock or any other substantially similar series
of preferred stock of the Company, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of the Underwriter for a period
beginning on the date hereof and ending on the Closing.
(l) NYSE Amex Listing. The Company will list, subject to notice of issuance, the Securities on the NYSE Amex.
6. Free Writing Prospectuses.
(a) Issuer Free Writing Prospectuses. The Company represents and agrees that, unless it obtains the prior
consent of the Underwriter, and the Underwriter represents and agrees that, unless it obtains the prior consent of the Company, they have not made and will not make any offer relating to the
Securities that would constitute an Issuer Free Writing Prospectus, or that would otherwise constitute a "free writing prospectus," as defined in Rule 405, required to be filed with the
Commission. Any such free writing prospectus consented to by the Company and the Underwriter is hereinafter referred to as a "Permitted Free Writing
Prospectus." The Company represents that it has treated and agrees that it will treat each Permitted Free Writing Prospectus as an "issuer free writing prospectus," as defined
in Rule 433, and has complied and will comply with the requirements of Rules 164 and 433 applicable to any Permitted Free Writing Prospectus, including timely Commission filing where
required, legending and record keeping.
(b) Term Sheets. The Company will prepare a final term sheet relating to the Securities as agreed to by the
Company and the Underwriter, containing only information that describes the final terms of the Securities and otherwise in a form consented to by the Underwriter, and will file such final term sheet
within the period required by Rule 433(d)(5)(ii) following the date such final terms have been established for all classes of the offering of the Securities. Any such final term sheet is an
Issuer Free Writing Prospectus and a Permitted Free Writing Prospectus for purposes of this Agreement. The Company also consents to the use by the Underwriter of a free writing prospectus that
contains only (i) (x) information describing the preliminary terms of the Securities or their offering, (y) information permitted by Rule 134, or (z) information that
describes the final terms of the Securities or their offering and that is included in the final term sheet of the Company contemplated in the first sentence of this subsection or (ii) other
information that is not "issuer information," as defined in Rule 433, it being understood that any such free writing prospectus referred to in clause (i) or (ii) above shall not
be an Issuer Free Writing Prospectus for purposes of this Agreement.
7. Conditions of the Obligations of the Underwriter. The obligations of the Underwriter hereunder will be
subject to the accuracy of the representations and warranties of the Company herein (as though made on the Closing), to the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent:
(a) Accountants' Comfort Letters.
(i) On
the date hereof, the Underwriter shall have received a letter dated the date hereof (the "Comfort Letter"), addressed
to the Underwriter and in form and substance reasonably satisfactory to the Underwriter and its counsel, from Hein (i) confirming that it is an independent registered public accounting firm
with respect to the Company within the meaning of the Securities Act and the Rules and Regulations, and (ii) stating, as of the date
19
hereof
(or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Disclosure Package, as of a date not more
than three days prior to the date hereof), the conclusions and findings of Hein with respect to the financial information and other matters ordinarily covered by accountants' "comfort letters" to
underwriters, delivered according to Statement of Auditing Standards No. 72 and Statement of Auditing Standard No. 100 (or successor bulletins), in connection with registered public
offerings.
(ii) At
the Closing, the Underwriter shall have received from Hein a letter (the "Bring-Down Letter"), dated as
of the Closing, addressed to the Underwriter and in form and substance reasonably satisfactory to the Underwriter and their counsel, (i) confirming that it is an independent registered public
accounting firm with respect to the Company within the meaning of the Securities Act and the Rules and Regulations, (ii) stating, as of the date of the Bring-Down Letter (or, with
respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Disclosure Package and the Prospectus, as of a date not more
than three days prior to the date of the Bring-Down Letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by the Comfort
Letter, and (iii) confirming in all material respects the conclusions and findings set forth in the Comfort Letter.
(b) Filing of Prospectus. The Prospectus shall have been filed with the Commission in accordance with the Rules
and Regulations and Section 5(a) hereof.
(c) No Stop Orders. Prior to the Closing: (i) no stop order suspending the effectiveness of the
Registration Statement or any part thereof, preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus or any part thereof shall have been issued under the Securities Act
and no proceedings for that purpose or pursuant to Section 8A under the Securities Act shall have been initiated or threatened by the Commission, (ii) no order suspending the
qualification or registration of the Securities under the securities or blue sky laws of any jurisdiction shall be in effect and (iii) all requests for additional information on the part of the
Commission (to be included or incorporated by reference in the Registration Statement, the Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus or otherwise) shall have been
complied with to the reasonable satisfaction of the Underwriter. On or prior to the Closing, the Registration Statement or any amendment thereof or supplement thereto shall not contain an untrue
statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and neither the Disclosure Package, nor any Issuer
Free Writing Prospectus nor the Prospectus nor any amendment thereof or supplement thereto shall contain any 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 light of the circumstances in which they were made, not misleading.
(d) Action Preventing Issuance. 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; 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.
(e) No Material Adverse Change. Subsequent to the date of the latest audited financial statements included or
incorporated by reference in the Disclosure Package, (i) neither the Company nor any of its subsidiaries has sustained any material loss or interference with its
20
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 Disclosure Package, (ii) there has not been any change in the capital stock (other than a change in the number of outstanding shares of Common Stock due to the issuance of shares upon the
exercise of outstanding options or warrants or the conversion of convertible indebtedness), or material change in the short-term debt or long-term debt of the Company (other
than upon conversion of convertible indebtedness) or any material adverse change, in or affecting the business, assets, general affairs, management, financial position, stockholders' equity or results
of operations of the Company, otherwise than as set forth in the Disclosure Package, the effect of which, in any such case described in clause (i) or (ii) of this subsection (e),
is, in the reasonable judgment of the Underwriter, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the
manner contemplated in the Disclosure Package.
(f) Representations and Warranties. Each of the representations and warranties of the Company contained herein
shall be true and correct when made and on and as of the Closing, as if made on such date (except that those representations and warranties that address matters only as of a particular date shall
remain true and correct as of such date), and all covenants and agreements herein contained to be performed on the part of the Company and all conditions herein contained to be fulfilled or complied
with by the Company at or prior to the Closing shall have been duly performed, fulfilled or complied with in all material respects.
(g) Engineers' Comfort Letters. The Reserve Engineers shall have furnished to the Underwriter a letter or
letters, dated as of the Closing, in form and substance reasonably satisfactory to the Underwriter.
(h) Opinion of Counsel for Company. The Underwriter shall have received from Adams and Reese LLP, counsel
to the Company, such counsel's written opinion, addressed to the Underwriter and dated as of the Closing, in form and substance reasonably satisfactory to the Underwriter and its counsel. Such
counsel to the Company shall also have furnished to the Underwriter a written statement ("Negative Assurances"), addressed to the Underwriter and dated
the Closing, in form and substance reasonably satisfactory to the Underwriter and its counsel.
(i) Opinion of Counsel for Underwriter. The Underwriter shall have received from DLA Piper LLP (US),
counsel for the Underwriter, such opinion or opinions, dated as of the Closing, with respect to such matters as the Underwriter may reasonably require, and the Company shall have furnished to such
counsel such documents as it requests to enable it to pass upon such matters.
(j) Officer's Certificate. The Underwriter shall have received on the Closing a certificate, addressed to the
Underwriter and dated as of the Closing, of the chief executive or chief operating officer and the chief financial officer or chief accounting officer of the Company to the effect that:
(i) each
of the representations, warranties and agreements of the Company contained in this Agreement were true and correct when originally made and are true and correct as
of the Time of Sale and the Closing as if made on each such date (except that those representations and warranties that address matters only as of a particular date remain true and correct as of each
such date); and the Company has, in all material respects, complied with all agreements and satisfied all the conditions on its part required under this Agreement to be performed or satisfied at or
prior to the Closing;
(ii) there
has not been, subsequent to the date of the most recent audited financial statements included or incorporated by reference in the Disclosure Package, any Material
Adverse Effect except as set forth in the Prospectus;
21
(iii) no
stop order suspending the effectiveness of the Registration Statement or any part thereof or any amendment thereof or the qualification of the Securities for
offering or sale, nor suspending or preventing the use of the Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus shall have been issued, and no proceedings for that purpose or
pursuant to Section 8A under the Securities Act shall be pending or to their knowledge, threatened by the Commission or any state or regulatory body;
(iv) the
Registration Statement and each amendment thereto, at the Time of Sale and as of the date of this Agreement and as of the Closing 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 Disclosure Package, as of the
Time of Sale and as of the Closing, any Issuer Free Writing Prospectus as of its date and as of the Closing, the Prospectus and each amendment or supplement thereto, as of the respective date thereof
and as of the Closing, 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 in order to make the statements
therein, in the light of the circumstances in which they were made, not misleading; and
(v) no
event has occurred as a result of which it is necessary to amend or supplement the Registration Statement, the Prospectus or the Disclosure Package in order to make
the statements therein not untrue or misleading in any material respect, and in the case of the Prospectus and Disclosure Package, in the light of the circumstances in which they were made.
(k) Certificate of Designation. The Certificate of Designation shall have been filed with the Secretary of State
of the State of Nevada.
(l) NYSE Amex Listing. The Securities shall have been approved for listing on the NYSE Amex, subject only to
official notice of issuance.
(m) Additional Documents. The Company shall have furnished to the Underwriter such further information,
certificates or documents as the Underwriter 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 Underwriter.
8. Indemnification and Contribution.
(a) Indemnification of Underwriter and Selected Dealers. The Company will indemnify and hold harmless the
Underwriter, Selected Dealers and their partners, members, directors, officers, employees, agents, affiliates and each person, if any, who controls the Underwriter or Selected Dealers within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an "Indemnified Party"), against any and all losses,
claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject, under the Securities Act, the Exchange Act, other Federal or state statutory law or regulation or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact
contained in any part of the Registration Statement at any time, any Statutory Prospectus as of any time, the Prospectus or any Issuer Free Writing Prospectus, or arise out of or are based upon the
omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and in the case of the Statutory Prospectus, the Prospectus or
any Issuer Free Writing Prospectus, in light of the circumstances in which they were made, and will reimburse each Indemnified Party for any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending against any loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Indemnified
Party is a party
22
thereto),
whether threatened or commenced, and in connection with the enforcement of this provision with respect to any of the above as such expenses are incurred; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by the Underwriter specifically for use therein, it being understood
and agreed that the only such information furnished by the Underwriter consists of the information described as such in subsection (b) below.
(b) Indemnification of Company. The Underwriter will indemnify and hold harmless the Company and its directors
and officers who sign a 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
(each, an "Underwriter Indemnified Party"), against any losses, claims, damages or liabilities to which the Underwriter Indemnified Party may become
subject, under the Securities Act, the Exchange Act,
other Federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any part of the Registration Statement at any time, any Statutory Prospectus as of any time, the Prospectus, or any Issuer Free
Writing Prospectus, or arise out of or are based upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading,
and in the case of the Statutory Prospectus, the Prospectus or any Issuer Free Writing Prospectus, in light of the circumstances in which they were made, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on
behalf of the Underwriter or their representatives specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Underwriter Indemnified Party in connection
with investigating or defending against any such loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not the Underwriter Indemnified Party is a party
thereto), whether threatened or commenced, based upon any such untrue statement or omission, or any such alleged untrue statement or omission as such expenses are incurred, it being understood and
agreed that the only such information furnished by or on behalf of the Underwriter or their representatives consists of the information (the "Underwriter's
Information") identified in the Prospectus in Paragraphs 9 and 10 under the caption "Underwriting" furnished on behalf of the Underwriter.
(c) Actions against Parties; Notification. Promptly after receipt by an Indemnified Party or Underwriter
Indemnified Party under this Section 8(c) of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof
is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying
party shall not relieve it from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with
counsel selected by the indemnifying party and reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 8(c) for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense thereof other than
23
reasonable
costs of investigation. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to
employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include
both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which
are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable
time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party;
provided, however, the indemnifying party shall not be responsible for paying the fees, costs and expenses for more than one separate counsel for all indemnified parties in any one jurisdiction. No
indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action 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 an
indemnified party.
(d) Contribution. If the indemnification provided for in this Section 8 is unavailable or insufficient to hold harmless
an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriter, on the other, from the offering of the Securities or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Underwriter on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as
any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriter on the other shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses but after deducting underwriting discounts and commissions) received by the Company bear to the total underwriting discounts and commissions
received by the Underwriter. The relative fault 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 or the Underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), the Underwriter shall not be required to contribute any amount in excess of the amount by which
the total price at which the Securities underwritten by the Underwriter and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from
24
any
person who was not guilty of such fraudulent misrepresentation. The Company and the Underwriter agree that it would not be just and equitable if contribution pursuant to
this Section 8(d) was determined by pro rata allocation or by any other method of allocation which does not take account of the equitable
considerations referred to in this Section 8(d).
9. Termination.
(a) The
Underwriter shall have the right to terminate this Agreement by giving notice to the Company as hereinafter specified at any time in writing at or prior to the
Closing, without liability on the part of the Underwriter to the Company, if (i) since the time of execution of this Agreement or since the date as of which information is given in the
Prospectus (A) any Material Adverse Effect, or any development that has occurred that is reasonably likely to have a Material Adverse Effect has occurred or in the sole judgment of the
Underwriter makes it impractical or inadvisable to market the Securities or to enforce contracts for the sale of the Securities, (B) trading in securities generally shall have been suspended on
or by the New York Stock Exchange, the NYSE Amex, the NASDAQ Global Market or in the over the counter market (each, a "Trading Market"),
(C) trading in any of the securities of the Company shall have been suspended on any Trading Market or by the Commission, (D) a general moratorium on commercial banking activities shall
have been declared by federal or New York state authorities or a material disruption shall have occurred in commercial banking or securities settlement or clearance services in the United States,
(E) there shall have occurred any outbreak or material escalation of hostilities or acts of terrorism involving the United States or there shall have been a declaration by the United States of
a national emergency or war, (F) there shall have occurred any other calamity or crisis or any material change in general economic, political or financial conditions in the United States, if
the effect of any such event specified in clause (E) or (F), in the sole judgment of the Underwriter, is material and adverse and makes it impractical or inadvisable to proceed with the
completion of the sale of and payment for such Securities at the applicable Closing on the terms and in the manner contemplated by this Agreement, the Disclosure Package and the Prospectus,
(ii) the Company shall have failed, refused or been unable to comply with the terms of or perform any agreement or obligation under this Agreement in any material respect, other than by reason
of a default by the Underwriter, or (iii) any condition to the Underwriter's obligations hereunder is not fulfilled in any material respect. Any such termination shall be without liability of
any party to any other party except that the provisions of Section 5(h) (Payment of Expenses), Section 8 (Indemnification and Contribution),
Section 10 (Survival of Certain
Representations and Obligations), Section 15 (Applicable Law) and Section 16 hereof shall
remain in full force and effect notwithstanding such termination. If the Underwriter elects to terminate this Agreement as provided in this Section 9(a), the Underwriter shall provide the required
notice as specified in Section 11
(Notices). For purposes of clarification, if the closing of the Offering is not completed by July 1, 2011, this Agreement will automatically expire and terminate without any further action
required by the parties hereto.
(b) If
this Agreement is terminated in accordance with Section 9(a) or the purchase of the Securities pursuant to the
terms of this Agreement is not consummated for any reason, Company will reimburse the Underwriter for all reasonable documented out of pocket expenses (including reasonable fees and disbursements of
counsel) incurred by them in connection with the offering of the Securities, up to a maximum of $125,000, and the Company will have no further obligation or liability hereunder except as set forth in Sections 5(h)
, 8, and 9 hereof and the
Underwriter will have no further obligation or liability hereunder except as set forth in Section 8 hereof.
10. Survival of Certain Representations and Obligations. The respective indemnities, agreements,
representations, warranties and other statements of the Company or its officers and of the Underwriter set forth in or made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation, or statement as to the results thereof, made by or on behalf of the Underwriter, the
25
Company
or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Securities.
11. Notices. All notices or other communications required or permitted to be given by any party to any other
party pursuant to the terms of this Agreement shall be in writing and if sent to the Underwriter, shall be mailed, delivered or sent by facsimile transmission and confirmed to:
McNicoll,
Lewis & Vlak, LLC
1251 Avenue of the Americas, 41st Floor
New York, New York 10020
Attention: Patrice McNicoll, Chief Executive Officer
Facsimile No.: (212) 317-1515
with
a copy to (which shall not constitute notice):
DLA
Piper LLP (US)
1251 Avenue of the Americas
New York, NY 10020
Attention: Daniel I. Goldberg
Facsimile No.: (212) 884-8466
and
if to the Company, shall be mailed, delivered or sent by facsimile transmission and confirmed to:
Evolution
Petroleum Corporation
2500 CityWest Blvd., Suite 1300
Houston, Texas 77042
Attention: Sterling McDonald, Chief Financial Officer
Facsimile No.: (713) 935-0199
with
a copy (which shall not constitute notice) to:
Adams
and Reese LLP
One Houston Center
1221 McKinney, Suite 4400
Houston, Texas 77010
Attention: Michael T. Larkin
Facsimile No.: (713) 308-0103
Any
such statements, requests, notices or agreements shall be effective only upon receipt. Any party to this Agreement may change such address for notices by sending to the parties to this Agreement
written notice of a new address for such purpose.
12. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and controlling persons referred to in Section 8, and no other person will have any right or
obligation hereunder.
13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the same Agreement.
14. Absence of Fiduciary Relationship. The Company acknowledges and agrees that:
(a) No Other Relationship. The Underwriter has been retained solely to act as an underwriter in connection with
the sale of Securities and that no fiduciary, advisory or agency relationship between the Company and the Underwriter has been created in respect of any of the transactions contemplated by this
Agreement or the Prospectus, irrespective of whether the Underwriter has advised or are advising the Company on other matters;
26
(b) Arms' Length Negotiations. The price of the Securities set forth in this Agreement was established by the
Company following discussions and arms-length negotiations with the Underwriter, 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) Absence of Obligation to Disclose. The Company has been advised that the Underwriter and their affiliates
are engaged in a broad range of transactions which may involve interests that differ from those of the Company and that the Underwriter has no obligation to disclose such interests and transactions to
the Company by virtue of any fiduciary, advisory or agency relationship; and
(d) Waiver. The Company waives, to the fullest extent permitted by law, any claims it may have against the
Underwriter for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that the Underwriter 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.
15. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State
of New York.
16. The
Company and the Underwriter hereby submit to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of
New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Company and the Underwriter irrevocably and unconditionally waive any
objection to the laying of venue of any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in Federal and state courts in the Borough of Manhattan
in The City of New York and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit or proceeding in any such court has been brought in an
inconvenient forum.
[Remainder of page intentionally left blank.]
27
If the foregoing is in accordance with the Underwriter's understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a
binding agreement among the Company and the Underwriter in accordance with its terms.
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Very truly yours, |
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EVOLUTION PETROLEUM CORPORATION |
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By: |
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/s/ ROBERT S. HERLIN
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Name: |
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Robert S. Herlin |
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Title: |
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President and Chief Executive Officer |
The
foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written.
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MCNICOLL, LEWIS & VLAK LLC |
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By: |
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/s/ PATRICE MCNICOLL
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Name: |
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Patrice McNicoll |
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Title: |
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Chief Executive Officer |
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SCHEDULE I
- 1.
- General Use Free Writing Prospectuses (included in the Disclosure
Package):
Free
Writing Prospectus filed by the Company on June 27, 2011
Free
Writing Prospectus filed by the Company on June 28, 2011
- 2.
- Other Information Included in the Disclosure Package:
None
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EVOLUTION PETROLEUM CORPORATION Series A Preferred Stock UNDERWRITING AGREEMENT
SCHEDULE I
