Exhibit 1.1
GMX RESOURCES INC.
(Oklahoma corporation)
5,000,000 Shares of Common
Stock
PURCHASE AGREEMENT
Dated: May 13, 2009
GMX RESOURCES INC.
(Oklahoma corporation)
5,000,0000 Shares of Common Stock
(Par Value $0.001 Per Share)
PURCHASE AGREEMENT
May 13, 2009
MERRILL LYNCH &
CO.
Merrill Lynch, Pierce, Fenner &
Smith
Incorporated
as Representative of the several
Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith
Incorporated
One Bryant Park
New York, New York 10036
Ladies and Gentlemen:
GMX Resources Inc.
, an Oklahoma corporation (the
“Company”), confirms its agreement with Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated (“Merrill Lynch”) and each of the
other Underwriters named in Schedule A hereto
(collectively, the “Underwriters,” which term shall
also include any underwriter substituted as hereinafter provided in
Section 10 hereof), for whom Merrill Lynch is acting as
representative (in such capacity, the
“Representative”), with respect to the issue and sale
by the Company and the purchase by the Underwriters, acting
severally and not jointly, of the respective numbers of shares of
Common Stock, par value $0.001 per share, of the Company
(“Common Stock”) set forth in said Schedule
A , and with respect to the grant by the Company to the
Underwriters, acting severally and not jointly, of the option
described in Section 2(b) hereof to purchase all or any part
of 750,000 additional shares of Common Stock to cover
overallotments, if any. The aforesaid 5,000,000 shares of Common
Stock (the “Initial Securities”) to be purchased by the
Underwriters and all or any part of the 750,000 shares of Common
Stock subject to the option described in Section 2(b) hereof
(the “Option Securities”) are hereinafter called,
collectively, the “Securities.”
The Company understands that the
Underwriters propose to make a public offering of the Securities as
soon as the Representative deems advisable after this Agreement has
been executed and delivered.
The Company and the Underwriters
agree that up to 150,000 shares of the Securities to be purchased
by the Underwriters (the “Reserved Securities”) shall
be reserved for sale by the Underwriters to certain eligible
officers, employees and persons having business relationships with
the Company (the “Invitees”), as part of the
distribution of the Securities by the Underwriters, subject to the
terms of this Agreement, the applicable rules, regulations and
interpretations of the National Association of Securities Dealers,
Inc. and all other applicable laws, rules and regulations. To the
extent that such Reserved Securities are not orally confirmed for
purchase by Invitees by the end of the first business day after the
date of this Agreement, such Reserved Securities may be offered to
the public as part of the public offering contemplated
hereby.
The Company has filed with the
Securities and Exchange Commission (the “Commission”)
an automatic shelf registration statement on Form S-3 (No.
333-150368), including the related preliminary prospectus or
prospectuses, which registration statement became effective upon
filing under Rule 462(e) of the rules and regulations of the
Commission (the “1933 Act Regulations”)
under
the Securities Act of 1933, as amended (the
“1933 Act”). Such registration statement covers the
registration of the Securities under the 1933 Act. Promptly after
execution and delivery of this Agreement, the Company will prepare
and file a prospectus in accordance with the provisions of Rule
430B (“Rule 430B”) of the 1933 Act Regulations and
paragraph (b) of Rule 424 (“Rule 424(b)”) of the
1933 Act Regulations. Any information included in such prospectus
that was omitted from such registration statement at the time it
became effective but that is deemed to be part of and included in
such registration statement pursuant to Rule 430B is referred to as
“Rule 430B Information.” Each prospectus used in
connection with the offering of the Securities that omitted Rule
430B Information, is herein called a “preliminary
prospectus.” Such registration statement, at any given time,
including the amendments thereto to such time, the exhibits and any
schedules thereto at such time, the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the
1933 Act at such time and the documents otherwise deemed to be a
part thereof or included therein by 1933 Act Regulations, is herein
called the “Registration Statement.” The Registration
Statement at the time it originally became effective is herein
called the “Original Registration Statement.” The final
prospectus in the form first furnished to the Underwriters for use
in connection with the offering of the Securities, including the
documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the 1933 Act at the time of the
execution of this Agreement and any preliminary prospectuses that
form a part thereof, is herein called the “Prospectus.”
For purposes of this Agreement, all references to the Registration
Statement, any preliminary prospectus, the Prospectus 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
financial statements and schedules and other information which is
“contained,” “included” or
“stated” in the Registration Statement, any preliminary
prospectus or the Prospectus (or other references of like import)
shall be deemed to mean and include all such financial statements
and schedules and other information which is incorporated by
reference in or otherwise deemed by 1933 Act Regulations to be a
part of or included in the Registration Statement, any preliminary
prospectus or the Prospectus, as the case may be; and all
references in this Agreement to amendments or supplements to the
Registration Statement, any preliminary prospectus or the
Prospectus shall be deemed to mean and include the filing of any
document under the Securities Exchange Act of 1934 (the “1934
Act”) which is incorporated by reference in or otherwise
deemed by 1933 Act Regulations to be a part of or included in the
Registration Statement, such preliminary prospectus or the
Prospectus, as the case may be.
SECTION 1. Representations and
Warranties .
(a) Representations and
Warranties by the Company . The Company represents and warrants
to each Underwriter as of the date hereof, the Applicable Time
referred to in Section 1(a)(i) hereof and as of the Closing
Time referred to in Section 2(c) hereof, and as of each Date
of Delivery (if any) referred to in Section 2(b) hereof, and
agrees with each Underwriter, as follows:
(i) Registration Statement,
Prospectus and Disclosure at Time of Sale . The Original
Registration Statement became effective on June 25, 2008. No
stop order suspending the effectiveness of the Registration
Statement has been issued under the 1933 Act and no proceedings for
that purpose have been instituted or are pending or, to the
knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional
information has been complied with.
Any offer that is a written
communication relating to the Securities made prior to the filing
of the Original Registration Statement by the Company or any person
acting on its behalf (within the meaning, for this paragraph only,
of
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Rule 163(c) of the 1933 Act
Regulations) has been filed with the Commission in accordance with
the exemption provided by Rule 163 of the 1933 Act Regulations
(“Rule 163”) and otherwise complied with the
requirements of Rule 163, including without limitation the
legending requirement, to qualify such offer for the exemption from
Section 5(c) of the 1933 Act provided by Rule 163.
At the respective times the Original
Registration Statement and each amendment thereto became effective,
at each deemed effective date with respect to the Underwriters
pursuant to Rule 430B(f)(2) of the 1933 Act Regulations and at the
Closing Time (and, if any Option Securities are purchased, at the
Date of Delivery), the Registration Statement complied and will
comply in all material respects with the requirements of the 1933
Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and the Prospectus, any
preliminary prospectus and any supplement thereto or prospectus
wrapper prepared in connection therewith, at their respective times
of issuance and at the Closing Time, complied and will comply in
all material respects with any applicable laws or regulations of
foreign jurisdictions in which the Prospectus and such preliminary
prospectus, as amended or supplemented, if applicable, are
distributed in connection with the offer and sale of Reserved
Securities.
Neither the Prospectus nor any
amendments or supplements thereto (including any prospectus
wrapper), at the time the Prospectus or any such amendment or
supplement was issued and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), included or
will include an untrue statement of a material fact or omitted or
will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
Each preliminary prospectus
(including the prospectus or prospectuses filed as part of the
Original Registration Statement or any amendment thereto) complied
when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this
offering was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
As of the Applicable Time, neither
(x) the Issuer General Use Free Writing Prospectus(es) (as
defined below) issued at or prior to the Applicable Time (as
defined below), the Statutory Prospectus (as defined below) and the
information included on Schedule B hereto, all
considered together (collectively, the “General Disclosure
Package”), nor (y) any individual Issuer Limited Use
Free Writing Prospectus, when considered together with the General
Disclosure Package, included any untrue statement of a material
fact or omitted to state any material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading.
As used in this subsection and
elsewhere in this Agreement:
“Applicable Time” means
5:45 p.m. (Eastern time) on May 13, 2009 or such other time as
agreed by the Company and Merrill Lynch.
“Issuer Free Writing
Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433 of the 1933 Act
Regulations (“Rule 433”), relating to the Securities
that (i) is required to be filed with the Commission by the
Company,
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(ii) is a “road show that
is a written communication” within the meaning of Rule
433(d)(8)(i), whether or not required to be filed with the
Commission or (iii) is exempt from filing pursuant to Rule
433(d)(5)(i) because it contains a description of the Securities or
of the offering that does not reflect the final terms, in each case
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).
“Issuer General Use Free
Writing Prospectus” means any Issuer Free Writing Prospectus
that is intended for general distribution to prospective investors
(other than a Bona Fide Electronic Road Show (as defined below)),
as evidenced by its being specified in Schedule D
hereto.
“Statutory Prospectus”
as of any time means the prospectus relating to the Securities that
is included in the Registration Statement immediately prior to that
time, including any document incorporated by reference therein and
any preliminary or other prospectus deemed to be a part
thereof.
The Company has made available a
“bona fide electronic road show,” as defined in Rule
433, in compliance with Rule 433(d)(8)(ii) (the “Bona Fide
Electronic Road Show”) such that no filing of any “road
show” (as defined in Rule 433(h)) is required in connection
with the offering of the Securities.
Each Issuer Free Writing Prospectus,
as of its issue date and at all subsequent times through the
completion of the public offer and sale of the Securities or until
any earlier date that the issuer notified or notifies Merrill Lynch
as described in Section 3(e), did not, does not and will not
include any information that conflicted, conflicts or will conflict
with the information contained in the Registration Statement or the
Prospectus, including any document incorporated by reference
therein and any preliminary or other prospectus deemed to be a part
thereof that has not been superseded or modified.
The representations and warranties
in this subsection shall not apply to statements in or omissions
from the Registration Statement, the Prospectus or any Issuer Free
Writing Prospectus made in reliance upon and in conformity with
written information furnished to the Company by any Underwriter
through Merrill Lynch expressly for use therein.
(ii) Incorporated Documents .
The documents incorporated or deemed to be incorporated by
reference in the Registration Statement and the Prospectus, at the
time they were or hereafter are filed with the Commission, complied
and will comply in all material respects with the requirements of
the 1934 Act and the rules and regulations of the Commission
thereunder (the “1934 Act Regulations”) and, when read
together with the other information in the Prospectus, (a) at
the time the Original Registration Statement became effective,
(b) at the earlier of time the Prospectus was first used and
the date and time of the first contract of sale of Securities in
this offering and (c) at the Closing Time (and if any Option
Securities are purchased, at the Date of Delivery), did not and
will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(iii) Independent Accountants
. Smith, Carney & Co., the accounting firm that has issued
an opinion on the financial statements filed with or incorporated
by reference in and as a part of the Registration Statement, is an
independent registered public accounting firm within the meaning of
the 1933 Act and the 1933 Act Regulations and the rules and
regulations of the Public Company Accounting Oversight Board of the
United States.
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(iv) Financial Statements .
The financial statements included in the Registration Statement,
the General Disclosure Package and the Prospectus, together with
the related schedules and notes, present fairly the financial
position of the Company and its consolidated subsidiaries at the
dates indicated and the statement of operations,
stockholders’ equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted
accounting principles (“GAAP”) applied on a consistent
basis throughout the periods involved. The supporting schedules, if
any, present fairly in accordance with GAAP the information
required to be stated therein. The selected financial data and the
summary financial information included in the General Disclosure
Package and the Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with that of
the audited financial statements included in the Registration
Statement. All disclosures contained in the Registration Statement,
the General Disclosure Package or the Prospectus regarding
“non-GAAP financial measures” (as such term is defined
by the rules and regulations of the Commission) comply with
Regulation G under the 1934 Act and Item 10 of Regulation S-K
of the 1933 Act Regulations, to the extent applicable.
(v) No Material Adverse Change in
Business . Since the respective dates as of which information
is given in the Registration Statement, the General Disclosure
Package or the Prospectus, except as otherwise stated therein,
(A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the
ordinary course of business (a “Material Adverse
Effect”), (B) there have been no transactions entered
into by the Company or any of its subsidiaries, other than those in
the ordinary course of business, which are material with respect to
the Company and its subsidiaries considered as one enterprise, and
(C) except for regular dividends on the Common Stock in
amounts per share that are consistent with past practice, there has
been no dividend or distribution of any kind declared, paid or made
by the Company on any class of its capital stock.
(vi) Good Standing of the
Company . The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the
State of Oklahoma and has corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the General Disclosure Package and the Prospectus and
to enter into and perform its obligations under this Agreement; and
the Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect.
(vii) Good Standing of
Subsidiaries . Each “significant subsidiary” of the
Company (as such term is defined in Rule 1-02 of Regulation S-X)
(each a “Subsidiary” and, collectively, the
“Subsidiaries”) has been duly organized and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct
its business as described in the General Disclosure Package and the
Prospectus and is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed
in the
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Registration Statement, all of the
issued and outstanding capital stock of each such Subsidiary has
been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation
of the preemptive or similar rights of any securityholder of such
Subsidiary. The only subsidiaries of the Company are (a) the
subsidiaries listed on Schedule F hereto and
(b) certain other subsidiaries which, considered in the
aggregate as a single Subsidiary, do not constitute a
“significant subsidiary” as defined in Rule 1-02 of
Regulation S-X.
(viii) Capitalization . The
authorized, issued and outstanding capital stock of the Company is
as set forth in the General Disclosure Package and the Prospectus
in the column entitled “Actual” under the caption
“Capitalization” (except for subsequent issuances, if
any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the General
Disclosure Package and the Prospectus or pursuant to the exercise
of convertible securities or options referred to in the General
Disclosure Package and the Prospectus). The shares of issued and
outstanding capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; none of
the outstanding shares of capital stock of the Company was issued
in violation of the preemptive or other similar rights of any
securityholder of the Company.
(ix) Authorization of
Agreement . This Agreement has been duly authorized, executed
and delivered by the Company.
(x) Authorization and Description
of Securities . The Securities have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement
and, when issued and delivered by the Company pursuant to this
Agreement against payment of the consideration set forth herein,
will be validly issued, fully paid and non-assessable; the Common
Stock conforms to all statements relating thereto contained in the
General Disclosure Package and the Prospectus and such description
conforms to the rights set forth in the instruments defining the
same; no holder of the Securities will be subject to personal
liability by reason of being such a holder; and the issuance of the
Securities is not subject to the preemptive or other similar rights
of any securityholder of the Company 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 and issuance of the Shares has been duly and validly
taken.
(xi) Absence of Defaults and
Conflicts . Neither the Company nor any of its subsidiaries is
in violation of its charter or by-laws or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a
party or by which it or any of them may be bound, or to which any
of the property or assets of the Company or any subsidiary is
subject (collectively, “Agreements and Instruments”)
except for such defaults that would not result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
herein and in the Registration Statement (including the issuance
and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the General Disclosure
Package and the Prospectus under the caption “Use of
Proceeds”) and compliance by the Company with its obligations
hereunder have been duly
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authorized by all necessary
corporate action and do not and will not, whether with or without
the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or
any subsidiary pursuant to, the Agreements and Instruments (except
for such conflicts, breaches, defaults or Repayment Events or
liens, charges or encumbrances that would not result in a Material
Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or any
subsidiary or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any subsidiary or any of their assets,
properties or operations. As used herein, a “Repayment
Event” means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any
person acting on such holder’s behalf) the right to require
the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any subsidiary.
(xii) Absence of Labor
Dispute . No labor dispute with the employees of the Company or
any subsidiary exists or, to the knowledge of the Company, is
imminent, and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its or any
subsidiary’s principal suppliers, manufacturers, customers or
contractors, which, in either case, would result in a Material
Adverse Effect.
(xiii) Absence of Proceedings
. There is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might result
in a Material Adverse Effect, or which might materially and
adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement or
the performance by the Company of its obligations hereunder; the
aggregate of all pending legal or governmental proceedings to which
the Company or any subsidiary is a party or of which any of their
respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not result in a
Material Adverse Effect.
(xiv) Accuracy of Exhibits .
There are no contracts or documents which are required to be
described in the Registration Statement, the General Disclosure
Package and the Prospectus or the documents incorporated by
reference therein or to be filed as exhibits thereto which have not
been so described and filed as required.
(xv) Possession of Intellectual
Property . The Company and its subsidiaries own or possess, or
can acquire on reasonable terms, adequate patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks,
service marks, trade names or other intellectual property
(collectively, “Intellectual Property”) necessary to
carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of
others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid
or inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result
in a Material Adverse Effect.
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(xvi) Absence of Manipulation
. Neither the Company nor any affiliate of the Company has taken,
nor will the Company or any affiliate take, directly or indirectly,
any action which is designed to or which has constituted or which
would be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.
(xvii) Absence of Further
Requirements . No filing with, or authorization, approval,
consent, license, order, registration, qualification or decree of,
any court or governmental authority or agency is necessary or
required for the performance by the Company of its obligations
hereunder, in connection with the offering, issuance or sale of the
Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except (i) such as have been
already obtained or as may be required under the 1933 Act or the
1933 Act Regulations or state securities laws and (ii) such as
have been obtained under the laws and regulations of jurisdictions
outside the United States in which the Reserved Securities are
offered.
(xviii) Possession of Licenses
and Permits . The Company and its subsidiaries possess such
permits, licenses, approvals, consents and other authorizations
(collectively, “Governmental Licenses”) issued by the
appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them,
except where the failure so to possess would not, singly or in the
aggregate, result in a Material Adverse Effect; the Company and its
subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply
would not, singly or in the aggregate, result in a Material Adverse
Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not, singly or in the aggregate, result in a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse
Effect.
(xix) Title to Property . The
Company and its subsidiaries have (i) good and Defensible (as
defined below) title to all its interests in its producing natural
gas and oil properties (including oil and gas wells, producing
leasehold interests and appurtenant personal property) as described
in the General Disclosure Package and the Prospectus as owned by
it, (ii) investigated title in accordance with customary
industry procedures prior to acquiring any non-producing leasehold
properties (including undeveloped locations or leases held by
production, and those leases not held by production and including
exploration prospects) described in the Disclosure Package and the
Prospectus as owned by it, (iii) good and indefeasible title
to its other real property as described in the General Disclosure
Package and the Prospectus as owned by it and (iv) good title
to its personal property as described in the General Disclosure
Package and the Prospectus as owned by it, in each case, free and
clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as
(a) are described in the General Disclosure Package and the
Prospectus or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the
Company or any of its subsidiaries; and all of the leases and
subleases material to the business of the Company and its
subsidiaries, considered as one enterprise, and under which the
Company or any of its subsidiaries holds properties described in
the General Disclosure Package and the Prospectus, are in full
force and effect, and neither the Company nor any subsidiary has
any notice of any material claim of any sort that has been asserted
by anyone adverse to the rights of the Company or any subsidiary
under any of the leases or subleases mentioned above, or affecting
or questioning the rights of the Company or such subsidiary to
the
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continued possession of the leased
or subleased premises under any such lease or sublease. As used
herein, “ Defensible ” means, with respect to
title to the producing properties (including oil and gas wells and
producing leasehold interests) described in the General Disclosure
Package and the Prospectus as being owned by the Company or its
subsidiaries, that the Company and its subsidiaries (1) are
entitled to receive not less than the net revenue interests of such
properties as set forth in the reserve report of MHA Petroleum
Consultants, dated as of February 13, 2009 (the “
Reserve Report ”) of all hydrocarbons and minerals
produced, saved and marketed from such properties, and proceeds
thereof, all without reduction, suspension or termination of such
interests throughout the productive life of such properties, and
(2) are obligated to bear a share of the costs and expenses
relating to the maintenance, exploration, drilling, completion,
development, operation, plugging and abandonment of such properties
not greater than the working interests of such properties as set
forth in the Reserve Report, without increase throughout the life
of such properties.
(xx) Investment Company Act .
The Company is not required, and upon the issuance and sale of the
Securities as herein contemplated and the application of the net
proceeds therefrom as described in the General Disclosure Package
and the Prospectus will not be required, to register as an
“investment company” under the Investment Company Act
of 1940, as amended (the “1940 Act”).
(xxi) Environmental Laws .
Except as described in the Registration Statement and except as
would not, singly or in the aggregate, result in a Material Adverse
Effect, (A) neither the Company nor any of its subsidiaries is
in violation of any federal, state, local or foreign statute, law,
rule, regulation, ordinance, code, policy or rule of common law or
any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent, decree or judgment,
relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products, asbestos-containing materials or
mold (collectively, “Hazardous Materials”) or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials
(collectively, “Environmental Laws”), (B) the
Company and its subsidiaries have all permits, authorizations and
approvals required under any applicable Environmental Laws and are
each in compliance with their requirements, (C) there are no
pending or threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating
to any Environmental Law against the Company or any of its
subsidiaries and (D) there are no events or circumstances that
would reasonably be expected to form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting
the Company or any of its subsidiaries relating to Hazardous
Materials or any Environmental Laws.
(xxii) Accounting Controls and
Disclosure Controls . The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient to
provide reasonable assurances 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 GAAP
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
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect
to any differences. Except as described in
9
the General Disclosure Package and
the Prospectus, since the end of the Company’s most recent
audited fiscal year, there has been (I) no material weakness
in the Company’s internal control over financial reporting
(whether or not remediated) and (II) no change in the
Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting. The
Company and its consolidated subsidiaries employ disclosure
controls and procedures that 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 recorded, processed,
summarized and reported, within the time periods specified in the
Commission’s rules and forms, and is accumulated and
communicated to the Company’s management, including its
principal executive officer or officers and principal financial
officer or officers, as appropriate, to allow timely decisions
regarding disclosure.
(xxiii) Compliance with the
Sarbanes-Oxley Act . There is and has been no failure on the
part of the Company or any of the Company’s directors or
officers, in their capacities as such, to comply in all material
respects with any provision of the Sarbanes-Oxley Act of 2002 and
the rules and regulations promulgated in connection therewith (the
“Sarbanes-Oxley Act”), including Section 402
related to loans and Sections 302 and 906 related to
certifications.
(xxiv) Pending Proceedings and
Examinations . The Registration Statement is not the subject of
a pending proceeding or examination under Section 8(d) or 8(e)
of the 1933 Act, and the Company is not the subject of a pending
proceeding under Section 8A of the 1933 Act in connection with
the offering of the Securities.
(xxv) Payment of Taxes . All
United states federal income tax returns of the Company and its
subsidiaries required by law to be filed have been filed (taking
into account timely filed extensions) and all taxes shown by such
returns or otherwise assessed, which are due and payable, have been
paid, except assessments against which appeals have been or will be
promptly taken and as to which adequate reserves have been
provided. The United States federal income tax returns of the
Company through the fiscal year ended December 31, 2004 have
been examined by the Internal Revenue Service, and no unpaid
assessment in connection therewith has been made against the
Company. The Company and its subsidiaries have filed all other tax
returns that are required to have been filed (taking into account
timely filed extensions) by them pursuant to applicable foreign,
state, local or other law except insofar as the failure to file
such returns would not result in a Material Adverse Effect, and has
paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company and its subsidiaries, except for
such taxes, if any, as are being contested in good faith and as to
which adequate reserves have been provided. The charges, accruals
and reserves on the books of the Company in respect of any income
and other tax liability for any years (including the tax liability
for any year for which a return has not been filed because of an
unexpired extension) not finally determined are adequate to meet
any assessments or re-assessments for additional income tax for any
years not finally determined, except to the extent of any
inadequacy that would not result in a Material Adverse
Effect.
(xxvi) Insurance . The
Company and its Subsidiaries carry or are entitled to the benefits
of insurance, with financially sound and reputable insurers, in
such amounts and covering such risks as is generally maintained by
companies of established repute engaged in the same or similar
business, and all such insurance is in full force and effect. The
Company has no reason to believe that it or any subsidiary will not
be able (A) to renew its existing insurance coverage as and
when such policies expire or (B) to obtain comparable coverage
from similar institutions as may be necessary or appropriate to
conduct its business as now conducted and at a cost that would not
result in a Material Adverse Change. Neither of the Company nor any
subsidiary has been denied any insurance coverage which it has
sought or for which it has applied.
10
(xxvii) Statistical and
Market-Related Data . Any statistical and market-related data
included in the Registration Statement, the General Disclosure
Package and the Prospectus are based on or derived from sources
that the Company believes to be reliable and accurate, and the
Company has obtained the written consent to the use of such data
from such sources.
(xxviii) Engineering Firm .
MHA Petroleum Consultants, Inc. (“ MHA ”) is a
natural gas engineering firm from whose reserve reports information
is contained or incorporated by reference in the Registration
Statement, the General Disclosure Package and the Prospectus, and
acts as independent natural gas engineers with respect to the
Company. Other than (i) the production of reserves in the
ordinary course of business, (ii) intervening price
fluctuations or (iii) as described in the General Disclosure
Package, the Company is not aware of any facts or circumstances
that would result in a material adverse change in its proved
reserves in the aggregate, or the aggregate present value of
estimated future net revenues of the Company or the standardized
measure of discounted future net cash flows therefrom, as described
in the General Disclosure Package and reflected in the reserve
information as of the respective dates such information is given.
Except as described in each of the General Disclosure Package and
the Prospectus, the General Disclosure Package, including the oil
and natural gas production and reserve information and estimates of
future net revenues and discounted future net cash flows, complies
and the Prospectus, including the oil and natural gas production
and reserve information and estimates of future net revenues and
discounted future net cash flows, will comply, in all material
respects with the applicable requirements of Regulation S-X of the
1933 Act Rules and Regulations, Industry Guide 2 under the 1933 Act
and Statement of Financial Accounting Standards Board No. 69,
Disclosures about Oil and Petroleum Producing Activities, as
amended to date (“ SFAS 69 ”).
(xxix) Foreign Corrupt Practices
Act . Neither the Company nor, to the knowledge of the Company,
any director, officer, agent, employee, affiliate or other person
acting on behalf of the Company or any of its subsidiaries is aware
of or has taken any action, directly or indirectly, that would
result in a violation by such persons of the Foreign Corrupt
Practices Act of 1977, as amended, and the rules and regulations
thereunder (the “FCPA”), including without limitation,
making use of the mails or any means or instrumentality of
interstate commerce corruptly in the furtherance of an offer,
payment, promise to pay or authorization of the payment of any
money, or other property, gift, promise to give, or authorization
of the giving of anything of value to any “foreign
official” (as such term is defined in the FCPA) or any
foreign political party or official therof or any candidate for
foreign political office, in contravention of the FCPA and the
Company and to the knowledge of the Company, its affiliates have
conducted their businesses in compliance with the FCPA and have
instituted and maintain policies and procedures designed to ensure
and which are reasonable expected to continue to ensure, continued
compliance therewith.
(xxx) Money Laundering Laws .
The operations of the Company are and have been conducted at all
times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions
Reporting Act of 1970, as amended, the money laundering statutes of
all jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively,
the “Money Laundering Laws” and no action, suit or
proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Company with respect to the
Money Laundering Laws is pending or, to the best knowledge of the
Company, threatened.
11
(xxxi) OFAC . Neither the
Company nor, to the knowledge of the Company, any director,
officer, agent, employee, affiliate or person acting on behalf of
the Company is currently subject to any U.S. sanctions administered
by the Office of Foreign Assets Control of the U.S. Treasure
Department (“OFCA”); and the Company will not directly
or indirectly use the proceeds of the offering, or lend, contribute
or otherwise make available such proceeds to any subsidiary, joint
venture partner or other person or entity, for the purpose of
financing the activities of any person currently subject to any
U.S. sanctions administered by OFCA.
(xxxii) Commission Comments .
The Company has received no written comments from the SEC staff
regarding its periodic or current reports under the 1934 Act that
remain unresolved, other than comments disclosed in the
Registration Statement, General Disclosure Package and
Prospectus.
(xxxiii) Relationships . 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 General 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
General Disclosure Package and the Prospectus.
(xxxiv) Change in Law . 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 General Disclosure Package and the Prospectus.
(xxxv) Customers . No
customer of or supplier to the Company or any of its subsidiaries
has ceased purchases or shipments of merchandise to the Company or
indicated, to the Company’s knowledge, an interest in
decreasing or ceasing its purchases from the Company or otherwise
modifying its relationship with the Company, other than in the
normal and ordinary course of business consistent with past
practices in a manner which would not, singly or in the aggregate,
result in a Material Adverse Effect.
(xxxvi) ERISA . 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.
12
(xxxvii) Minute Books . The
minute books of each of the Company and its Subsidiaries have been
made available to the Representative and contain a complete summary
of all meetings and other actions of the directors and shareholders
of each such entity in all material respects, and reflect all
transactions referred to in such minutes accurately in all material
respects.
(xxxviii) Reserve Securities
Sales . The Company has not offered, or caused the
Representative to offer, Reserved Securities to any person with the
specific intent to unlawfully influence (i) a customer or
supplier of the Company or any of its affiliates to alter the
customer’s or supplier’s level or type of business with
any such entity or (ii) a trade journalist or publication to
write or publish favorable information about the Company or its
affiliates, or their respective businesses or products.
(b) Officer’s
Certificates . Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Representative
or to counsel for the Underwriters shall be deemed a representation
and warranty by the Company to each Underwriter as to the matters
covered thereby.
SECTION 2. Sale and Delivery to
Underwriters; Closing .
(a) Initial Securities . On
the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to
purchase from the Company, at the price per share set forth in
Schedule C , the number of Initial Securities set
forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which
such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof.
(b) Option Securities . In
addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth,
the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase up to an additional 750,000 shares of
Common Stock at the price per share set forth in Schedule C, less
an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial Securities but
not payable on the Option Securities. The option hereby granted
will expire 30 days after the date hereof and may be exercised in
whole or in part from time to time only for the purpose of covering
overallotments which may be made in connection with the offering
and distribution of the Initial Securities upon notice by Merrill
Lynch to the Company setting forth the number of Option Securities
as to which the several Underwriters are then exercising the option
and the time and date of payment and delivery for such Option
Securities. Any such time and date of delivery (a “Date of
Delivery”) shall be determined by Merrill Lynch, but shall
not be later than seven full business days after the exercise of
said option, nor in any event prior to the Closing Time, as
hereinafter defined. If the option is exercised as to all or any
portion of the Option Securities, each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the
total number of Option Securities then being purchased which the
number of Initial Securities set forth in Schedule A
opposite the name of such Underwriter bears to the total number of
Initial Securities, subject in each case to such adjustments as
Merrill Lynch in its discretion shall make to eliminate any sales
or purchases of fractional shares.
(c) Payment . Payment of the
purchase price for, and delivery of certificates for, the Initial
Securities shall be made at the offices of Merrill Lynch at 4 World
Financial Center, New York, New York 10080, or at such other place
as shall be agreed upon by the
13
Representative and the Company, at 9:00 A.M.
(Eastern time) on the third (fourth, if the pricing occurs after
4:30 P.M. (Eastern time) on any given day) business day after the
date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business
days after such date as shall be agreed upon by the Representative
and the Company (such time and date of payment and delivery being
herein called “Closing Time”).
In addition, in the event that any
or all of the Option Securities are purchased by the Underwriters,
payment of the purchase price for, and delivery of certificates
for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the
Representative and the Company, on each Date of De
