Exhibit 10.4
TETON
ENERGY CORPORATION
964,060 Shares of Common Stock
($0.001 Par Value)
337,421 Warrants
PLACEMENT AGENCY AGREEMENT
July 19, 2007
Commonwealth Associates, LP
830 Third Avenue, 8 th floor
New York, NY 10022
Ferris,
Baker Watts, Incorporated
100 Light Street, 8 th floor
Baltimore, MD 21202
The
undersigned, Teton Energy Corporation, a Delaware corporation (the
“ Company ”), hereby addresses Commonwealth
Associates, LP (“ COMW ”), Ferris, Baker Watts,
Incorporated (“ FBW ”) (each, the “
Placement Agent ” and collectively, the “
Placement Agents ”) and confirms its agreement with
the Placement Agents as follows:
1. Description of
Securities . The Company proposes, subject to the terms and
conditions stated herein, to issue and sell an aggregate of
(i) 964,060 shares (the “ Offered Common Shares
”) of the Company’s common stock, $0.001 par value per
share (the “ Common Stock ”) and
(ii) 337,421 warrants to purchase Common Stock (the “
Offered Warrants ” in the form attached hereto as
Exhibit A ), to certain investors (each, an “
Investor ” and, collectively, the “
Investors ”), in a direct offering under its
Registration Statement on Form S-3 (Registration
No. 333-132451). The shares of Common Stock issuable upon
exercise of the Offered Warrants are hereinafter referred to as the
“ Offered Warrant Shares .” The Offered Common
Shares and the Offered Warrants are hereinafter referred to as the
“ Securities .” Subject to the provisions of
Section 2, below, the Company desires to engage the Placement
Agents as its placement agents in connection with such issuance and
sale. The Securities are more fully described in the Prospectus
hereinafter defined.
2. Agreement to Act as
Placement Agents; Delivery and Payment . On the basis of the
representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Placement
Agents agree to act as the Company’s exclusive placement
agents to assist the Company, on a best efforts basis, in
connection with the proposed
issuance and sale by the Company of the Securities to the
Investors. The Company expressly acknowledges and agrees that this
Agreement does not in any way constitute a commitment by the
Placement Agents or either of them to purchase any of the
Securities and does not ensure successful placement of the
Securities or any portion thereof. The Company shall pay to the
Placement Agents concurrently with the Closing (as defined below)
an aggregate of (i) an amount in cash equal to 7.0% of the
gross purchase price of the Securities, which gross purchase price
does not include any consideration that may be paid to the Company
in the future upon exercise of the Offered Warrants, and
(ii) such number of Common Stock purchase warrants (the
“ Placement Warrants ”) equal to 8% of the
number of Offered Common Shares purchased from the Company
(collectively with the cash amount set forth in (i) above, the
“ Placement Fee ”). The terms of the Placement
Warrants shall be identical to the terms of the Offered Warrants.
The shares of Common Stock issuable upon exercise of the Placement
Warrants are hereinafter referred to as the “
Placement Warrant Shares .” The Placement Fee
shall be split equally between COMW and FBW.
Upon
satisfaction of the conditions set forth in Section 5 hereof,
the closing of the sale and issuance of the Securities (the “
Closing ”) shall occur at the offices of Gersten
Savage LLP, 600 Lexington Avenue, 9 th Floor, New
York, New York, or at such other place as may be agreed upon
between the Placement Agents and the Company (the “ Place
of Closing ”), at 10:00 a.m., New York City time, on
July 25, 2007, or at such other time and date as the Placement
Agent and the Company may agree, such time and date of payment and
delivery being herein called the “ Closing Date
.”
The
Offered Common Shares will be settled through the facilities of The
Depository Trust Company’s DWAC system and the Offered
Warrants and Placement Warrants will be issued in registered
physical certificated form.
The
Company acknowledges and agrees that each Placement Agent shall act
as an independent contractor, and not as a fiduciary, and any
duties of the Placement Agent with respect to investment banking
services to the Company, including the offering of the Securities
contemplated hereby (including in connection with determining the
terms of the offering), shall be contractual in nature, as
expressly set forth herein, and shall be owed solely to the
Company. Each party disclaims any intention to impose any fiduciary
or similar duty on the other. Additionally, the Placement Agents
have not advised, nor are advising, the Company or any other person
as to any legal, tax, investment, accounting or regulatory matters
in any jurisdiction with respect to the transactions contemplated
hereby. The Company shall consult with its own advisors concerning
such matters and shall be responsible for making its own
independent investigation and appraisal of the transactions
contemplated hereby, and the Placement Agents shall have no
responsibility or liability to the Company with respect thereto.
Any review by the Placement Agents of the Company, the transactions
contemplated hereby or other matters relating to such transactions
has been and will be performed solely for the benefit of the
Placement Agents and has not been and shall not be on behalf of the
Company or any other person. It is understood that the Placement
Agents have not and will not be rendering an opinion to the Company
as to the fairness of the terms of the offering. Notwithstanding
anything in this Agreement to the contrary, the Company
acknowledges that the Placement Agents may have financial interests
in the success of the offering contemplated hereby that are not
limited to the Placement Fee. The Company hereby waives and
releases, to the fullest extent permitted by law,
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any claims that the Company may have against the Placement Agents
with respect to any breach or alleged breach of fiduciary
duty.
It is
understood that the Company proposes to offer the Securities to the
Investors upon the terms and conditions set forth in the
Registration Statement (hereinafter defined).
3. Representations,
Warranties and Agreements of the Company .
(a) The
Company represents and warrants to and agrees with the Placement
Agents and each of them as of the date hereof and as of the Closing
Date and any other date specified below, that:
(i) At the time of filing the Registration Statement on Form
S-3 (File No. 333-132451), the Company met the requirements
for use of Form S-3 under the 1933 Act for a primary offering. A
Registration Statement on Form S-3 (Registration
No. 333-132451) with respect to the Securities, including a
base prospectus (the “ Base Prospectus ”), and
such amendments to such registration statement as may have been
required to the date of this Agreement, has been carefully prepared
by the Company pursuant to and in conformity with the requirements
of the Securities Act of 1933, as amended (the “ 1933
Act ”), and the rules and regulations thereunder (the
“ 1933 Act Rules and Regulations ”) of the
Securities and Exchange Commission (the “ SEC ”)
and has been filed with the SEC under the 1933 Act. Such
registration statement has been declared effective by the SEC.
Copies of such registration statement, including any amendments
thereto, each related preliminary prospectus (meeting the
requirements of Rule 430, 430A or 430B of the 1933 Act Rules
and Regulations) contained therein, and the exhibits, financial
statements and schedules thereto have heretofore been delivered by
the Company to the Placement Agent (it being understood among the
parties hereto that any reference to “delivery,”
“furnishing” or similar words or phrases by the Company
to the Placement Agent of any information that is on file with the
SEC will be deemed to be so delivered in the absence of an express
request from the Placement Agent). A final prospectus supplement
containing information permitted to be omitted at the time of
effectiveness by Rule 430A or 430B of the 1933 Act Rules and
Regulations will be filed promptly by the Company with the SEC in
accordance with Rule 424(b) of the 1933 Act Rules and Regulations.
The term “ Registration Statement ” as used
herein means the registration statement as amended at the time was
declared effective by the SEC under the 1933 Act (the “
Effective Date ”), including financial statements, all
exhibits and all documents incorporated by reference therein and,
if applicable, the information deemed to be included by
Rule 430A or 430B of the 1933 Act Rules and Regulations. If an
abbreviated registration statement is prepared and filed with the
SEC in accordance with Rule 462(b) under the 1933 Act (an “
Abbreviated Registration Statement ”), the term
“ Registration Statement ” as used in this
Agreement includes the Abbreviated Registration Statement. The term
“ Prospectus ” as used herein means, together
with the Base Prospectus, the one or more final prospectus
supplements as filed with the SEC in connection with the offering
of the Securities pursuant to Rule 424(b) of the 1933 Act Rules and
Regulations, including the documents incorporated by reference
therein. The term “ Preliminary Prospectus ” as
used herein shall mean one or more preliminary prospectuses in
connection with the offering of the Securities as contemplated by
Rule
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430, 430A or 430B of the 1933 Act Rules and Regulations included at
any time in the Registration Statement, including the Base
Prospectus and any preliminary prospectus supplement in connection
with the offering of the Securities, and including in each case the
documents incorporated by reference therein. The term “
Free Writing Prospectus ” as used herein shall have
the meaning set forth in Rule 405 of the 1933 Act. The term
“ Issuer Free Writing Prospectus ” as used
herein shall have the meaning set forth in Rule 433 of the
1933 Act Rules and Regulations. The term “ Disclosure
Package ” as used herein shall mean the Preliminary
Prospectus as most recently amended or supplemented prior to the
Initial Time of Sale (as defined below) together with the Issuer
Free Writing Prospectuses identified in Schedule I
hereto, if any, and any other Free Writing Prospectus that the
parties hereto shall hereafter expressly agree to treat as part of
the Disclosure Package. The Preliminary Prospectus, and, if any,
any Issuer Free Writing Prospectus required to be filed pursuant to
Rule 433(d) of the 1933 Act Rules and Regulations and the
Prospectus delivered to the Placement Agent for use in connection
with the offering of the Securities have been and will be identical
to the respective versions thereof transmitted to the SEC for
filing via the Electronic Data Gathering Analysis and Retrieval
System (“ EDGAR ”), except to the extent
permitted by Regulation S-T. For purposes of this Agreement,
the words “amend,” “amendment,”
“amended,” “supplement” or
“supplemented” with respect to the Registration
Statement, the Prospectus, any Free Writing Prospectus or the
Disclosure Package shall mean amendments or supplements to the
Registration Statement, the Prospectus, any Free Writing Prospectus
or the Disclosure Package, as the case may be, as well as documents
filed after the date of this Agreement and prior to the completion
of the distribution of the Securities and incorporated by reference
therein as described above.
(ii) Neither the SEC nor any state or other jurisdiction or
other regulatory body has issued, and neither is, to the knowledge
of the Company, threatening to issue, any stop order under the 1933
Act or other order suspending the effectiveness of the Registration
Statement (as amended or supplemented) or preventing or suspending
the use of any Preliminary Prospectus, Issuer Free Writing
Prospectus, the Disclosure Package or the Prospectus or suspending
the qualification or registration of the Securities for offering or
sale in any jurisdiction nor instituted or, to the knowledge of the
Company, threatened to institute proceedings for any such purpose.
The Preliminary Prospectus at its date of issue and as of 5:00 p.m.
New York City time on the date hereof (the “ Initial Time
of Sale ”), the Registration Statement at each effective
date and the Initial Time of Sale, and the Prospectus and any
amendments or supplements thereto or to the Registration Statement
when they are filed with the SEC or become effective, as the case
may be, contain or will contain, as the case may be, all statements
that are required to be stated therein by, and in all material
respects conform or will conform, as the case may be, to the
requirements of, the 1933 Act and the 1933 Act Rules and
Regulations. Neither the Registration Statement nor any amendment
thereto, as of the applicable effective date, contains or will
contain, as the case may be, any untrue statement of a material
fact or omits or will omit to state any material fact required to
be stated therein or necessary to make the statements therein, not
misleading. Neither the Preliminary Prospectus, the Prospectus nor
any supplement thereto contains or will contain, as the case may
be, any untrue statement of a material fact or omits or will omit
to state any material fact required to be stated therein or
necessary to make the statements therein, in
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the light of the circumstances under which they were made, not
misleading. Neither the Disclosure Package nor any supplement
thereto, at the Initial Time of Sale, contains or will contain, as
the case may be, any untrue statement of a material fact or omits
or will omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, the Company makes no representation
or warranty as to information contained in or omitted from the
Registration Statement, the Disclosure Package or the Prospectus,
or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company
relating to the Placement Agents by or on behalf of the Placement
Agents expressly for use in the preparation thereof (as provided in
Section 12 hereof). There is no contract, agreement,
understanding or arrangement, whether written or oral, or document
required to be described in the Registration Statement, Disclosure
Package or Prospectus or to be filed as an exhibit to the
Registration Statement that is not described or filed as required.
The documents incorporated by reference in the Disclosure Package
or the Prospectus at the time they were filed with the SEC,
complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the “ 1934
Act ”), and the rules and regulations adopted by the SEC
thereunder (the “ 1934 Act Rules and Regulations
”). Any future documents incorporated by reference so filed,
when they are filed, will comply in all material respects with the
requirements of the 1934 Act and the 1934 Act Rules and
Regulations; no such incorporated document contained or will
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 not misleading; and, when read together and
with the other information in each of the Disclosure Package and
the Prospectus, at the time the Registration Statement became
effective, at the Initial Time of Sale and at the Closing Date,
each such incorporated document did not or will not, as the case
may be, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(iii) The Company is eligible to use Issuer Free Writing
Prospectuses in connection with the offering of the Securities
pursuant to Rules 164 and 433 of the 1933 Act. Any Issuer Free
Writing Prospectus that the Company is required to file pursuant to
Rule 433(d) of the 1933 Act Rules and Regulations has been, or will
be, timely filed with the SEC in accordance with the requirements
of the 1933 Act Rules and Regulations. Each Issuer Free Writing
Prospectus that the Company has filed, or is required to file,
pursuant to Rule 433(d) of the 1933 Act or that was prepared by or
on behalf of or used by the Company complies or will comply in all
material respects with the requirements of the 1933 Act Rules and
Regulations, including but not limited to legending and
recordkeeping requirements. Except for the Issuer Free Writing
Prospectuses, if any, identified in Schedule I hereto,
the Company has not prepared, used or referred to, and will not,
without your prior consent, prepare, use or refer to any Free
Writing Prospectus. Each Issuer Free Writing Prospectus, as of its
issue date and at all times through the completion of the offering
and sale of the Securities, did not, does not and will not include
any information that conflicted, conflicts or will conflict with
the information contained in the Registration Statement. The
Company filed the Registration Statement with the SEC before using
any Free Writing Prospectus. The Company has satisfied and
5
will satisfy the conditions of Rule 433 of the 1933 Act Rules
and Regulations such that any electronic road show need not be
filed with the SEC.
(iv) This Agreement has been duly authorized, executed and
delivered by the Company and constitute a valid and legally binding
obligation of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors’ rights generally and by general principles of
equity.
(v) The Company and its Subsidiaries have been duly
organized and are validly existing as corporations in good standing
under the laws of the states or other jurisdictions in which they
are incorporated, with full power and authority (corporate and
other) to own, lease and operate their properties and conduct their
businesses as described in each of the Disclosure Package and the
Prospectus and, with respect to the Company, to execute and
deliver, and perform the Company’s obligations under, this
Agreement; the Company and its Subsidiaries are duly qualified to
do business as foreign corporations in good standing in each state
or other jurisdiction in which their ownership or leasing of
property or conduct of business legally requires such
qualification, except where the failure to be so qualified,
individually or in the aggregate, would not have a Material Adverse
Effect. The term “ Material Adverse Effect ” as
used herein means any material adverse effect on the condition
(financial or other), net worth, business, affairs, management,
prospects, results of operations or cash flow of the Company and
its Subsidiaries, taken as a whole. The Company has no significant
subsidiaries (as such term is defined in Rule 1-02(w) of
Regulation S-X promulgated by the Commission) other than those
Subsidiaries listed on Schedule II hereto (the “
Subsidiaries ”).
(vi) Neither the Company nor any of its Subsidiaries has
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Disclosure Package any
material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree otherwise than as set forth in each of the
Disclosure Package and the Prospectus and, since the respective
dates as of which information is given in the Disclosure Package,
there has not been any change in the capital stock or long-term
debt of the Company or any of its Subsidiaries or any Material
Adverse Change, or any development involving a prospective Material
Adverse Change, otherwise than as set forth in each of the
Disclosure Package and the Prospectus. The term “ Material
Adverse Change ” as used herein means any change that has
a Material Adverse Effect.
(vii) The issuance and sale of the Securities and the
execution, delivery and performance by the Company of this
Agreement, and the consummation of the transactions herein
contemplated, will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any properties or assets of the Company
or any of its Subsidiaries under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the
Company or any of its
6
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or to which any of the properties or assets
of the Company or any of its Subsidiaries is subject, except to
such extent as, individually or in the aggregate, does not have a
Material Adverse Effect, nor will such action result in any
violation of the provisions of the Company’s certificate of
incorporation or bylaws or any statute, rule, regulation or other
law, or any order or judgment, of any court or governmental agency
or body having jurisdiction over the Company or any of its
Subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement, the issuance
and sale of the Securities or the consummation of the transactions
contemplated hereby, except such as have been, or will be prior to
the Closing Date, obtained under the 1933 Act or as may be required
by the National Association of Securities Dealers, Inc. (the
“ NASD ”) and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or blue sky laws in connection with the
purchase and distribution of the Securities to the Investors.
(viii) The Company has duly and validly authorized capital
stock as set forth in each of the Disclosure Package and
Prospectus; all outstanding shares of Common Stock of the Company
and the Offered Common Shares conform, or when issued will conform,
to the description thereof in the Prospectus and have been, or,
when issued and paid for in the manner described herein will be,
duly authorized, validly issued, fully paid and non-assessable; and
the issuance of the Securities as contemplated by the Prospectus is
not subject to preemptive or other similar rights, or any
restriction upon the voting or transfer thereof pursuant to
applicable law or the Company’s certificate of incorporation,
by-laws or governing documents or any agreement to which the
Company or any of its Subsidiaries is a party or by which any of
them may be bound. All corporate action required to be taken by the
Company for the authorization, issuance and sale of the Securities
has been duly and validly taken. The Offered Warrants and the
Placement Warrants conform, or when issued will conform, to the
description thereof in the Prospectus and have been duly and
validly authorized by the Company and upon delivery to the
Investors, and/or Placement Agents, as applicable, at the Closing
Date will be valid and binding obligations of the Company,
enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights and
remedies of creditors generally or subject to general principles of
equity. The Offered Warrant Shares initially issuable upon exercise
of the Offered Warrants conform, or when issued will conform, to
the description thereof in the Prospectus and have been duly
authorized and reserved for issuance and when issued upon payment
of the exercise price therefor will be validly issued, fully paid
and nonassessable. The Placement Warrant Shares initially issuable
upon exercise of the Placement Warrants conform, or when issued
will conform, to the description thereof in the Prospectus and have
been duly authorized and reserved for issuance and when issued to
the Placement Agents, will be validly issued, fully paid and
nonassessable. Except as disclosed in each of the Disclosure
Package, Prospectus, and the Company’s regulatory filings
pursuant to the 1934 Act, there are no outstanding subscriptions,
rights, warrants, options, calls, convertible securities,
commitments of sale or rights related to or entitling any person to
purchase or otherwise to acquire any shares
7
of, or any security convertible into or exchangeable or exercisable
for, the capital stock of, or other ownership interest in, the
Company. The outstanding membership interests of the
Company’s Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable and are owned by the
Company free and clear of any mortgage, pledge, lien, encumbrance,
charge or adverse claim and are not the subject of any agreement or
understanding with any person and were not issued in violation of
any preemptive or similar rights; and there are no outstanding
subscriptions, rights, warrants, options, calls, convertible
securities, commitments of sale or instruments related to or
entitling any person to purchase or otherwise acquire any shares
of, or any security convertible into or exchangeable or exercisable
for, the capital stock of, or other ownership interest in any of
the Subsidiaries.
(ix) The statements set forth in each of the Disclosure
Package and the Prospectus describing the Securities and this
Agreement, insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete
and fair.
(x) Each of the Company and its Subsidiaries is in
possession of and is operating in compliance with all franchises,
grants, authorizations, licenses, certificates, permits, easements,
consents, orders and approvals (“ Permits ”)
from all state, federal, foreign and other regulatory authorities,
and has satisfied the requirements imposed by regulatory bodies,
administrative agencies or other governmental bodies, agencies or
officials, that are required for the Company and its Subsidiaries
lawfully to own, lease and operate their properties and conduct
their businesses as described in each of the Disclosure Package and
the Prospectus, and each of the Company and its Subsidiaries is
conducting its business in compliance with all of the laws, rules
and regulations of each jurisdiction in which it conducts its
business, in each case with such exceptions, individually or in the
aggregate, as would not have a Material Adverse Effect; each of the
Company and its Subsidiaries has filed all notices, reports,
documents or other information (“ Notices ”)
required to be filed under applicable laws, rules and regulations,
in each case, with such exceptions, individually or in the
aggregate, as would not have a Material Adverse Effect; and, except
as otherwise specifically described in each of the Disclosure
Package and the Prospectus, neither the Company nor any of its
Subsidiaries has received any notification from any court or
governmental body, authority or agency, relating to the revocation
or modification of any such Permit or to the effect that any
additional authorization, approval, order, consent, license,
certificate, permit, registration or qualification (“
Approvals ”) from such regulatory authority is needed
to be obtained by any of them, in any case where it is reasonably
expected that obtaining such Approvals or the failure to obtain
such Approvals, individually or in the aggregate, would have a
Material Adverse Effect.
(xi) The Company and its Subsidiaries have filed all
necessary federal, state and foreign income and franchise tax
returns required to be filed prior to the date hereof and paid all
taxes shown as due thereon; all such tax returns are complete and
correct in all material respects; all tax liabilities are
adequately provided for on the books of the Company and its
Subsidiaries except to such extent as would not have a Material
Adverse Effect; the Company and its Subsidiaries have made all
necessary payroll tax
8
payments; and the Company and its Subsidiaries have no knowledge of
any tax proceeding or action pending or threatened against the
Company or its Subsidiaries that, individually or in the aggregate,
might have a Material Adverse Effect.
(xii) Except as described in each of the Disclosure Package
and the Prospectus, the Company and its Subsidiaries own or
possess, or can acquire on reasonable terms, adequate patents,
patent licenses, trademarks, service marks and trade names
necessary to conduct the business now operated by them, and neither
the Company nor any of its Subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with
respect to any patents, patent licenses, trademarks, service marks
or trade names that, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect.
(xiii) The Company and its Subsidiaries have good and
marketable title to all items of real property (except oil and gas
real property) and good and marketable title to all personal
property owned by them, in each case free and clear of all liens,
encumbrances, restrictions and defects except such as are described
in each of the Disclosure Package and the Prospectus or do not
materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property; and any
such property held under lease or sublease by the Company or any of
its Subsidiaries is held under valid, subsisting and enforceable
leases or subleases with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such
property by the Company and its Subsidiaries; and neither the
Company nor any of its Subsidiaries has any notice or knowledge of
any material claim of any sort that has been, or may be, asserted
by anyone adverse to the Company’s or any of its Subsidiaries
rights as lessee or sublessee under any lease or sublease described
above, or affecting or questioning the Company’s or any of
its Subsidiaries’ rights to the continued possession of the
leased or subleased premises under any such lease or sublease in
conflict with the terms thereof.
As
to items of oil and gas real property (including, for example, fee
mineral interests, oil and gas leasehold interests and other
operating interests, as well as overriding royalties and other
nonoperating interests), the Company and its Subsidiaries have
(i) good and defensible title to their interest in all such
producing property and (ii) such title to their interest in all
such nonproducing property as would be consistent with customary
industry practices for newly acquired exploratory properties that
are held in inventory and are not scheduled for drilling in the
foreseeable future, in both cases subject to liens, encumbrances,
restrictions and defects (x) that are described in the
Prospectus or (y) that do not materially affect the value of
such property and do not interfere with the use made and proposed
to be made of such property.
(xiv) Except as described in each of the Disclosure Package
and the Prospectus, there is no pending action, suit or other
proceeding involving the Company or any of its Subsidiaries or any
of their material assets for any failure of the Company or any of
its Subsidiaries, or any predecessor thereof, to comply with any
requirements of federal, state or local regulation relating to air,
water, solid waste management, hazardous or toxic substances, or
the protection of health, safety or the environment. Except
as
9
described in each of the Disclosure Package and the Prospectus,
none of the property owned or leased by the Company or any of its
Subsidiaries is, to the best knowledge of the Company, contaminated
with waste or hazardous or toxic substances, and neither the
Company nor any of its Subsidiaries may be deemed an “owner
or operator” of a “facility” or
“vessel” that owns, possesses, transports, generates or
disposes of a “hazardous substance” as those terms are
defined in §9601 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. §9601 et
seq .
(xv) No labor disturbance exists with the employees of the
Company or any of its Subsidiaries or is imminent that,
individually or in the aggregate, would have a Material Adverse
Effect. None of the employees of the Company or any of its
Subsidiaries is represented by a union and, to the best knowledge
of the Company and its Subsidiaries, no union organizing activities
are taking place. Neither the Company nor any of its Subsidiaries
has violated any federal, state or local law or foreign law
relating to discrimination in hiring, promotion or pay of
employees, nor any applicable wage or hour laws, or the rules and
regulations thereunder, or analogous foreign laws and regulations,
that would, individually or in the aggregate, result in a Material
Adverse Effect.
(xvi) The Company and its Subsidiaries are in compliance in
all material respects with all presently applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder
(“ ERISA ”); no “reportable event”
(as defined in ERISA) has occurred with respect to any
“pension plan” (as defined in ERISA) for which the
Company and its Subsidiaries would have any liability; the Company
and its Subsidiaries have not incurred and do not expect to incur
liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any “pension plan”
or (ii) Sections 412 or 4971 of the Internal Revenue Code
of 1986, as amended, including the regulations and published
interpretations thereunder (the “ Code ”); and
each “pension plan” for which the Company or any of its
Subsidiaries would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all
material respects, and nothing has occurred, whether by action or
by failure to act, that would cause the loss of such
qualification.
(xvii) The Company and its Subsidiaries maintain insurance
of the types and in the amounts generally deemed adequate for its
business, including, but not limited to, directors’ and
officers’ insurance, insurance covering real and personal
property owned or leased by the Company and its Subsidiaries
against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in
full force and effect. Neither the Company nor any of its
Subsidiaries has been refused any insurance coverage sought or
applied for, and the Company has no reason to believe that it and
its Subsidiaries will not be able to renew their existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse
Effect.
10
(xviii) Neither the Company nor any of its Subsidiaries is,
or with the giving of notice or lapse of time or both would be, in
default or violation with respect to its certificate of
incorporation or by-laws. Neither the Company nor any of its
Subsidiaries is, or with the giving of notice or lapse of time or
both would be, in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in
any material indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound or to which any of the properties or
assets owned by the Company or any of its Subsidiaries is subject,
or in violation of any statutes, laws, ordinances or governmental
rules or regulations or any orders or decrees to which it is
subject, including, without limitation, Section 13 of the 1934
Act, which default or violation, individually or in the aggregate,
would have a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries has, at any time during the past five years,
(A) made any unlawful contributions to any candidate for any
political office, or failed fully to disclose any contribution in
violation of law, or (B) made any payment to any state,
federal or foreign government official, or other person charged
with similar public or quasi-public duty (other than payment
required or permitted by applicable law).
(xix) Other than as set forth in each of the Disclosure
Package and the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its Subsidiaries
is a party or of which any property of the Company or any of its
Subsidiaries is the subject that, if determined adversely to the
Company or any of its Subsidiaries, would individually or in the
aggregate have a Material Adverse Effect or that would materially
and adversely affect the consummation of the transactions
contemplated hereby or that is required to be disclosed in each of
the Disclosure Package or the Prospectus; to the best of the
Company’s knowledge, no such proceedings are threatened or
contemplated.
(xx) The Company is not and, after giving effect to the
offering and sale of the Securities, will not be a “holding
company,” or a “subsidiary company” of a
“holding company,” or an “affiliate” of a
“holding company” or of a “subsidiary
company,” as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended, or the Public Utility
Holding Company Act of 2005.
(xxi) The Company is not and, after giving effect to the
offering and sale of the Securities, will not be an
“investment company” or an entity
“controlled” by an “investment company,” as
such terms are defined in the Investment Company Act of 1940, as
amended (the “ 1940 Act ”).
(xxii) At the earliest time after the filing of the
Registration Statement at which the Company or another offering
participant made a bona fide offer (within the meaning of
Rule 164(a)(2) of the 1933 Act Rules and Regulations) and as of the
date hereof, the Company was not and is not an “ineligible
issuer” as such term is defined in Rule 405 of the 1933
Act Rules and Regulations, without taking account of any
determination by the SEC that it is not necessary that the Company
be considered an “ineligible issuer.”
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(xxiii) Ehrhardt Keefe Steiner and Hottman PC, the
accounting firm that has issued an opinion on the financial
statements filed with or incorporated by reference in and as a part
of the Registration Statement, is an independent registered public
accounting firm within the meaning of the 1933 Act and the 1933 Act
Rules and Regulations and the rules and regulations of the Public
Company Accounting Oversight Board (“ PCAOB ”)
of the United States. The Company and each of its Subsidiaries
maintains a system of internal accounting controls sufficient to
provide reasonable assurance that: (1) transactions are
executed in accordance with management’s general or specific
authorization; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets; (3) access to assets is permitted only
in accordance with management’s general or specific
authorization; and (4) the recorded accounts for assets are
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect thereto. The consolidated
financial statements and schedules of the Company, including the
notes thereto, filed with (or incorporated by reference) and as a
part of the Registration Statement, Disclosure Package or
Prospectus, present fairly the financial condition of the Company
and its Subsidiaries as of the respective dates thereof and the
consolidated results of operations and changes in financial
position and consolidated statements of cash flow for the
respective periods covered thereby, all in conformity with
generally accepted accounting principles applied on a consistent
basis throughout the periods involved except as otherwise disclosed
therein. All adjustments necessary for a fair presentation of
results for such periods have been made. The selected financial
data included or incorporated by reference in the Registration
Statement, Disclosure Package and Prospectus present fairly the
information shown therein and have been compiled on a basis
consistent with that of the audited financial statements. Any
operating or other statistical data included or incorporated by
reference in the Registration Statement, Disclosure Package and
Prospectus comply in all material respects with the 1933 Act and
the 1933 Act Rules and Regulations and present fairly the
information shown therein and are based on or derived from sources
that the Company reasonably and in good faith believes are reliable
and accurate, and such data agree with the sources from which they
are derived. All non-GAAP financial information included (or
incorporated by reference) in the Registration Statement,
Disclosure Package or Prospectus complies in all material respects
with the requirements of Regulation G and Item 10 of
Regulation S-K under the 1933 Act.
(xxiv) Except as disclosed in each of the Disclosure Package
and the Prospectus, no holder of any security of the Company has
any right to require registration of shares of Common Stock or any
other security of the Company because of the filing of the
Registration Statement or the consummation of the transactions
contemplated hereby and, except as disclosed in each of the
Disclosure Package and the Prospectus, no person has the right to
require registration under the 1933 Act of any shares of Common
Stock or any other securities of the Company. No person has the
right, contractual or otherwise, to cause the Company to permit
such person to underwrite the sale of any of the Securities. Except
for this Agreement, there are no contracts, agreements or
understandings between the Company or any of its Subsidiaries and
any person that would give rise to a valid claim against the
Company, its Subsidiaries or any Placement Agent for a
brokerage
12
commission, finder’s fee or like payment in connection with
the issuance, purchase and sale of the Securities.
(xxv) The Company has not distributed and, prior to the
later to occur of (A) the Closing Date and (B) completion
of the distribution of the Securities, will not distribute any
offering material in connection with the offering and sale of the
Securities other than the Registration Statement, the Preliminary
Prospectus, any Issuer Free Writing Prospectus identified in
Schedule I hereto, the Disclosure Package and the
Prospectus.
(xxvi) The Company has not taken and will not take, directly
or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the
price of the Company’s Common Stock, and the Company is not
aware of any such action taken or to be taken by affiliates of the
Company.
(xxvii) There is not currently and has not in the past been
a failure on the part of the Company or any of its respective
directors or officers, in their capacities as such, to comply with
any applicable provisions of the Sarbanes-Oxley Act of 2002
(“ Sarbanes-Oxley ”) and the rules and
regulations promulgated in connection therewith, including
Sections 302, 402 and 906, and the statements contained in any
certification pursuant to such Act and related rules and
regulations are complete and correct.
(xxviii) The Company has established and maintains
disclosure controls and procedures and internal control over
financial reporting as are currently required (as such terms are
defined in Rule 13a-15 and 15d-15 under the 1934 Act); the
Company’s disclosure controls and procedures (i) are
designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act
is accumulated and communicated to management, including the
principal executive and principal financial officer of the Company,
or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure, and that such
information is recorded, processed, summarized and reported, within
the time periods specified in the 1934 Act Rules and Regulations;
(ii) have been evaluated for effectiveness; and (iii) are
effective in all material respects to perform the functions for
which they were established.
(xxix) Except as discussed with the Company’s auditors
and audit committee and as disclosed in each of the Disclosure
Package and the Prospectus, (i) there are no significant
deficiencies or material weaknesses in the design or operation of
internal control over financial reporting that are reasonably
likely to adversely affect the Company’s ability to record,
process, summarize, and report financial data and (ii) there
is, and there has been, no fraud, whether or not material, that
involves management or other employees who have a role in the
Company’s internal control over financial reporting.
(xxx) Since the date of the end of the last fiscal year for
which audited financial statements are included or incorporated by
reference in each of the Disclosure
13
Package and the Prospectus, there have been no significant changes
in internal control over financial reporting or in other factors
that could significantly affect internal control over financial
reporting, including any corrective actions with regard to
significant deficiencies and material weaknesses.
(xxxi) The Company has received no written comments from the
SEC staff regarding its periodic or current reports under the 1934
Act that remain unresolved and have not been disclosed in the
Registration Statement, Disclosure Package and Prospectus.
(xxxii) No relationship, direct or indirect, exists between
or among the Company and any director, officer or stockholder of
the Company, or any member of his or her immediate family, or any
customers or suppliers that is required to be described in the
Registration Statement, the Disclosure Package or the Prospectus
and that is not so described and described as required in material
compliance with such requirement. There are no outstanding loans,
advances (except normal advances for business expenses in the
ordinary course of business) or guarantees of indebtedness by the
Company to or for the benefit of any of the officers or directors
of the Company or any member of their respective immediate
families, except as disclosed in the Registration Statement, the
Disclosure Package and the Prospectus. The Company has not, in
violation of the Sarbanes-Oxley Act, directly or indirectly,
extended or maintained credit, arranged for the extension of
credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer of the
Company.
(xxxiii) To the best knowledge of the Company, no change in
any laws or regulations is pending that could reasonably be
expected to be adopted and if adopted, is reasonably expected to
have, individually or in the aggregate with all such changes, a
Material Adverse Effect, except as set forth in or contemplated in
each of the Disclosure Package and the Prospectus.
(xxxiv) The minute books of each of the Company and its
Subsidiaries have been
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