TETON ENERGY CORPORATION 964,060 Shares of Common Stock ($0.001 Par Value) 337,421 Warrants PLACEMENT AGENCY AGREEMENT
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
000 Xxxxx Xxxxxx, 0xx xxxxx
Xxx Xxxx, XX 00000
000 Xxxxx Xxxxxx, 0xx xxxxx
Xxx Xxxx, XX 00000
Xxxxxx, Xxxxx Xxxxx, Incorporated
000 Xxxxx Xxxxxx, 0xx xxxxx
Xxxxxxxxx, XX 00000
000 Xxxxx Xxxxxx, 0xx xxxxx
Xxxxxxxxx, XX 00000
The undersigned, Teton Energy Corporation, a Delaware corporation (the “Company”),
hereby addresses Commonwealth Associates, LP (“COMW”), Xxxxxx, Xxxxx Xxxxx, 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 Xxxxxxx Xxxxxx
LLP, 600 Lexington Avenue, 9th 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 (“XXXXX”), 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
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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
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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
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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
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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
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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.”
11
(xxiii) Xxxxxxxx Xxxxx Xxxxxxx and Xxxxxxx 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 Xxxxxxxx-Xxxxx Act of 2002
(“Xxxxxxxx-Xxxxx”) 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 Xxxxxxxx-Xxxxx 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 made
available to the Placement Agent 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.
(xxxv) Neither the Company nor any of its Subsidiaries, nor any director, officer,
agent, employee or other person associated with or acting on behalf of the Company or any of
its Subsidiaries, has, directly or indirectly, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic government official
or employee or to foreign or domestic political parties or campaigns from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.
14
(xxxvi) The operations of the Company and its Subsidiaries are and have been conducted
at all times in compliance in all material respects with applicable financial recordkeeping
and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, the money laundering statutes of all jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued, administered
or enforced by any governmental agency (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Company or any of its Subsidiaries with respect to
the Money Laundering Laws is pending, or to the knowledge of the Company, threatened.
(xxxvii) Neither the Company nor any of its Subsidiaries nor, to the knowledge of the
Company, any director, officer, agent, employee or affiliate of the Company or any of its
Subsidiaries is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company
will not directly or indirectly use the proceeds of the offering, or lend, contribute or
otherwise make available such proceeds to any Subsidiary, joint venture partner or other
person or entity that, to the Company’s knowledge, will use such proceeds, for the purpose
of financing the activities of any person currently subject to any U.S. sanctions
administered by OFAC.
(xxxviii) 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.
(b) Any certificate signed by any officer of the Company and delivered to the Placement Agents
or to their respective counsel shall be deemed a representation and warranty by the Company to the
Placement Agents as to the matters covered thereby.
4. Additional Covenants. The Company covenants and agrees with the Placement Agents
and each of them that:
(a) The Company will timely transmit copies of the Prospectus, and any amendments or
supplements thereto, to the SEC for filing pursuant to Rule 424(b) of the 1933 Act Rules and
Regulations.
(b) The Company has furnished or will deliver to the Placement Agents and to their respective
counsel (i) such number of signed copies of the Registration Statement as originally filed,
including copies of exhibits thereto (other than any exhibits incorporated by reference therein),
and any amendments and supplements to the Registration Statement (including all documents
incorporated by reference therein), as may be reasonably requested by the Placement Agents or their
respective counsel and (ii) a signed copy of each consent and certificate included or incorporated
by reference in, or filed as an exhibit to, the Registration Statement as so amended or
supplemented; the Company will deliver to the Placement Agents as
15
soon as practicable after the date of this Agreement as many copies of the Disclosure Package
and the Prospectus (including all documents incorporated by reference therein) as the Placement
Agents may reasonably request for the purposes contemplated by the 1933 Act; the Company will
promptly advise the Placement Agents of any request of the SEC for amendment of the Registration
Statement or for supplement to the Disclosure Package or the Prospectus or for any additional
information, and of the issuance by the SEC or any state or other jurisdiction or other regulatory
body of 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, Disclosure Package or the Prospectus or suspending the qualification or
registration of the Securities, or the Offered Warrant Shares for offering or sale in any
jurisdiction, and of the institution or threat of any proceedings therefor, of which the Company
shall have received notice or otherwise have knowledge prior to the completion of the distribution
of the Securities; and the Company will use its best efforts to prevent the issuance of any such
stop order or other order and, if issued, to secure the prompt removal thereof.
(c) The Company will obtain the Placement Agent’s consent before taking, or failing to take,
any action that would cause the Company to make an offer of Securities that would constitute an
Issuer Free Writing Prospectus or to be required to file a Free Writing Prospectus pursuant to Rule
433(d) of the 1933 Act Rules and Regulations, other than the Issuer Free Writing Prospectuses, if
any, listed on Schedule I hereto.
(d) The Company will not take any action that would result in the Placement Agent being
required to file with the SEC pursuant to Rule 433(d) of the 1933 Act Rules and Regulations a Free
Writing Prospectus prepared by or on behalf of the Placement Agents that the Placement Agents
otherwise would not have been required to file thereunder.
(e) If the Disclosure Package is being used to solicit offers to buy the Securities at a time
when the Prospectus is not yet available to prospective purchasers and any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the Disclosure Package
in writing in order to make the statements therein, in light of the circumstances under which they
were made, not misleading, or if, in the opinion of counsel for the Placement Agent, it is
necessary to amend or supplement the Disclosure Package to comply with applicable law, the Company
will forthwith prepare, file with the SEC and furnish, at its own expense, to the Placement Agent,
either amendments or supplements to the Disclosure Package so that statements in the Disclosure
Package as so amended or supplemented will not, in light of the circumstances when delivered to a
prospective purchaser, be misleading or so that the Disclosure Package, as amended or supplemented,
will comply with law.
(f) The Company will not file any amendment or supplement to the Registration Statement, the
Disclosure Package, the Prospectus (or any other prospectus relating to the Securities filed
pursuant to Rule 424(b) of the 1933 Act Rules and Regulations that differs from the Prospectus as
filed pursuant to such Rule 424(b)) and will not file any document under the 1934 Act before the
termination of the offering of the Securities by the Company if the document would be deemed to be
incorporated by reference into the Registration Statement, the Disclosure Package, or the
Prospectus, of which the Placement Agent shall not previously have been advised and furnished with
a copy or to which the Placement Agent shall have reasonably objected or which is not in compliance
with the 1933 Act Rules and Regulations; and the
16
Company will promptly notify the Placement Agent after it shall have received notice thereof
of the time when any amendment to the Registration Statement becomes effective or when any
supplement to, the Disclosure Package, the Prospectus has been filed.
(g) During the period when a prospectus (or in lieu thereof, the notice contemplated by Rule
173(a) of the 1933 Act Rules and Regulations) relating to any of the Securities is required to be
delivered under the 1933 Act by any Placement Agent, the Company will comply, at its own expense,
with all requirements imposed by the 1933 Act and the 1933 Act Rules and Regulations, as now and
hereafter amended, and by the rules and regulations of the SEC thereunder, as from time to time in
force, as necessary to permit the continuance of sales of or dealing in the Securities during such
period in accordance with the provisions hereof and as contemplated by the Prospectus.
(h) If, during the period when a prospectus (or in lieu thereof, the notice contemplated by
Rule 173(a) of the 1933 Act Rules and Regulations) relating to any of the Securities is required to
be delivered under the 1933 Act by any Placement Agent, (i) any event relating to or affecting the
Company or of which the Company shall be advised in writing by the Placement Agent shall occur as a
result of which, in the opinion of the Company or the Placement Agent, the Disclosure Package or
the Prospectus as then amended or supplemented would include any untrue statement of a material
fact or 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, (ii) any event shall occur
as a result of which any Free Writing Prospectus conflicted or would conflict with the information
in the Registration Statement, or (iii) it shall be necessary to amend or supplement the
Registration Statement, the Disclosure Package or the Prospectus to comply with the 1933 Act, the
1933 Act Rules and Regulations, the 1934 Act or the 1934 Act Rules and Regulations, the Company
will forthwith at its expense prepare and file with the SEC, and furnish to the Placement Agents a
reasonable number of copies of, such amendment or supplement or other filing that will correct such
statement or omission or effect such compliance.
(i) During the period when a prospectus (or in lieu thereof, the notice contemplated by Rule
173(a) of the 1933 Act Rules and Regulations) relating to any of the Securities is required to be
delivered under the 1933 Act by any Placement Agent, the Company will furnish such proper
information as may be lawfully required and otherwise cooperate in qualifying the Securities for
offer and sale under the securities or blue sky laws of such jurisdictions as such Placement Agent
may reasonably designate and will file and make in each year such statements or reports as are or
may be reasonably required by the laws of such jurisdictions; provided, however, that the Company
shall not be required to qualify as a foreign corporation or shall be required to qualify as a
dealer in securities or to file a general consent to service of process under the laws of any
jurisdiction.
(j) In accordance with Section 11(a) of the 1933 Act and Rule 158 of the 1933 Act Rules and
Regulations, the Company has made generally available to its security holders and to holders of the
Securities an earnings statement (which need not be audited) in reasonable detail covering the 12
months beginning not later than the first day of the month next succeeding the month in which
occurred the effective date (within the meaning of Rule 158) of the Registration Statement.
17
(k) The Company will apply the proceeds from the sale of the Securities as set forth in the
description under “Use of Proceeds” in the Disclosure Package and the Prospectus, which
description complies in all respects with the requirements of Item 504 of Regulation S-K.
(l) The Company will promptly provide the Placement Agents with copies of all correspondence
to and from, and all documents issued to and by, the SEC in connection with the registration of the
Securities under the 1933 Act or relating to any documents incorporated by reference into the
Registration Statement, the Disclosure Package or the Prospectus.
(m) Prior to the Closing Date, the Company will furnish to the Placement Agents, as soon as
they have been prepared, copies of any unaudited interim consolidated financial statements of the
Company and its Subsidiaries for any periods subsequent to the periods covered by the financial
statements appearing in the Registration Statement and the Prospectus or incorporated therein by
reference.
(n) The Company will use its best efforts to obtain approval for, and maintain the listing of
the Offered Common Shares, the Offered Warrant Shares and the Placement Warrant Shares for trading
on, the American Stock Exchange (the “AMEX”).
(o) [Reserved]
(p) [Reserved]
(q) [Reserved].
(r) The Company and its Subsidiaries will maintain and keep accurate books and records
reflecting their assets and maintain internal accounting controls that 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 the preparation of the
Company’s consolidated financial statements in conformity with generally accepted accounting
principles and to maintain accountability for the assets of the Company and its Subsidiaries, (3)
access to the assets of the Company and its Subsidiaries is permitted only in accordance with
management’s general or specific authorization, and (4) the recorded accounts of the assets of the
Company and its Subsidiaries are compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(s) During any period in which a prospectus (or in lieu thereof, a notice contemplated by Rule
173(a) of the 1933 Act Rules and Regulations) is required by law to be delivered by the Placement
Agents, the Company will promptly file all documents required to be filed with the SEC pursuant to
Sections 13, 14 or 15(d) of the 1934 Act and will furnish to its security holders annual reports
containing financial statements audited by independent public accountants and quarterly reports
containing financial statements and financial information, which may be unaudited. The Company
will deliver to the Placement Agents similar reports with respect to any significant Subsidiaries,
as that term is defined in the 1933 Act Rules and Regulations, that are not consolidated in the
Company’s financial statements. Any report, document or other information required to be furnished
under this paragraph (s) shall be furnished as soon as practicable after such report, document or
information becomes available.
18
(t) The Company will comply with all applicable securities and other applicable laws, rules
and regulations, including, without limitation, the Xxxxxxxx-Xxxxx Act of 2002, and will use its
best efforts to cause the Company’s directors and officers, in their capacities as such, to comply
with such laws, rules and regulations, including, without limitation, the provisions of the
Xxxxxxxx-Xxxxx Act of 2002.
(u) Except as required by law, prior to the Closing Date, the Company will issue no press
release or other communication, directly or indirectly, and will hold no press conferences with
respect to the Company or any of its Subsidiaries, the financial condition, results of operations,
business, properties, assets or liabilities of the Company or any of its Subsidiaries, or the
offering of the Securities, without the Placement Agents’ prior written consent which shall include
e-mail. In the event that any such disclosure is required by law, the Company will promptly notify
the Placement Agent of such required disclosure prior to issuing any press release or other
communication or holding any press conference, and, to the extent reasonably practicable, the
Company will permit the Placement Agents to comment on any press release or other communication.
(v) The Company shall reserve and keep available at all times a sufficient number of shares of
Common Stock for the purpose of enabling the Company to issue shares of Common Stock and upon
exercise of the Offered Warrants and Placement Warrants.
(w) If the Company elects to rely on Rule 462(b) under the 1933 Act, the Company shall both
file an Abbreviated Registration Statement with the SEC in compliance with Rule 462(b) and pay the
applicable fees in accordance with Rule 111 of the 1933 Act by the earlier of (i) 10:00 p.m.,
Eastern Standard time, or Eastern Daylight Savings time, whichever is in effect, on the date of
this Agreement, and (ii) the time that confirmations are given or sent, as specified by Rule
462(b)(2).
5. Conditions of Closing. The Closing shall be subject to the accuracy, as of the
date hereof and as of the Closing Date, of the representations and warranties of the Company
contained herein, to the performance by the Company of its covenants and obligations hereunder, and
to the following additional conditions, and the Company shall not issue or sell the Securities
unless and until all of the conditions of this Section 5 shall have been satisfied or waived by the
Placement Agents:
(a) The Registration Statement has been declared effective by the SEC and the offering of the
Securities by the Company complies with Rule 415 of the 1933 Act Rules and Regulations. All
filings required by Rule 424, Rule 430A, Rule 430B and Rule 433(d) of the 1933 Act Rules and
Regulations will be promptly made. No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and no proceeding for that purpose
shall have been initiated or, to the knowledge of the Company or any Placement Agents, threatened
or contemplated by the SEC, and any request of the SEC for additional information (to be included
in the Registration Statement, the Disclosure Package or the Prospectus or otherwise) shall have
been complied with to the reasonable satisfaction of the Placement Agents.
19
(b) The Placement Agents shall not have advised the Company on or prior to the Closing Date,
that the Registration Statement, the Disclosure Package or Prospectus or any amendment or
supplement thereto contains an untrue statement of fact that, in the opinion of counsel to the
Placement Agents, is material, or omits to state a fact that, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On the Closing Date, the Placement Agents shall have received the opinion of Xxxxxxx
Xxxxxx LLP, counsel for the Company, addressed to the Placement Agents and the Investors and dated
the Closing Date, in substance as set forth on Exhibit B hereto.
(d) [Reserved].
(e) On the date of this Agreement and on the Closing Date, each of the Placement Agent shall
have received from Xxxxxxxx Xxxxx Xxxxxxx and Xxxxxxx PC, a letter or letters, dated the date of
this Agreement and the Closing Date, respectively, in form and substance satisfactory to each
Placement Agent and its respective counsel, confirming that they are independent registered public
accountants with respect to the Company within the meaning of the 1933 Act and the published Rules
and Regulations and the rules and regulations of the PCAOB, and stating the conclusions and
findings of such firm with respect to the financial information and other matters ordinarily
covered by accountants’ “comfort letters” to placement agents in connection with registered public
offerings.
(f) Except as contemplated in each of the Disclosure Package and the Prospectus, (i) neither
the Company nor any of its Subsidiaries shall have sustained since the date of the latest audited
financial statements included or incorporated by reference in the Disclosure Package and the
Prospectus any loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or court or governmental
action, order or decree; and (ii) subsequent to the respective dates as of which information is
given in the Registration Statement, the Disclosure Package and the Prospectus, neither the Company
nor any of its Subsidiaries shall have incurred any liability or obligation, direct or contingent,
or entered into any transactions, and there shall not have been any change in the capital stock or
short-term or long-term debt of the Company and its Subsidiaries or any change, or any development
involving or which is reasonably expected to involve a prospective change in the condition
(financial or other), net worth, business, affairs, management, results of operations or cash flow
of the Company or its Subsidiaries, the effect of which, in any such case described in clause (i)
or (ii), is in your reasonable judgment so material or adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Securities being delivered
on such Closing Date on the terms and in the manner contemplated in each of the Disclosure Package
and the Prospectus.
(g) There shall not have occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New York Stock Exchange or the AMEX or the
establishing on such exchanges by the SEC or by such exchanges of minimum or maximum prices that
are not in force and effect on the date hereof; (ii) a suspension or material limitation in trading
in the Company’s securities on the AMEX or the establishing on such exchange by the SEC or by such
exchange of minimum or maximum prices that are not in force
20
and effect on the date hereof; (iii) a general moratorium on commercial banking activities
declared by either federal or any state authorities; (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of a national emergency or war,
which in your reasonable judgment makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Securities in the manner contemplated in the Prospectus; or (v) any
calamity or crisis, change in national, international or world affairs, act of God, change in the
international or domestic markets, or change in the existing financial, political or economic
conditions in the United States or elsewhere, that in your reasonable judgment makes it
impracticable or inadvisable to proceed with the public offering or the delivery of the Securities
in the manner contemplated in each of the Disclosure Package and the Prospectus.
(h) The Placement Agents shall have received a certificate, dated the Closing Date and signed
by the Chief Executive Officer and the Chief Financial Officer of the Company, in their capacities
as such, stating that:
(i) the conditions set forth in Section 5(a) have been fully satisfied;
(ii) they have carefully examined the Registration Statement, the Disclosure Package
and the Prospectus as amended or supplemented and all documents incorporated by reference
therein and nothing has come to their attention that would lead them to believe that any of
the Registration Statement, the Disclosure Package or the Prospectus, or any amendment or
supplement thereto or any documents incorporated by reference therein as of their respective
effective, issue or filing dates, contained, and the Prospectus as amended or supplemented
and all documents incorporated by reference therein and when read together with the
documents incorporated by reference therein, at such Closing Date, contains any untrue
statement of a material fact, or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(iii) since the Effective Date, there has occurred no event required to be set forth in
an amendment or supplement to the Registration Statement, the Disclosure Package or the
Prospectus which has not been so set forth; there has been no Issuer Free Writing Prospectus
required to be filed under Rule 433(d) of the 1933 Act Rules and Regulations that has not
been so filed; and there has been no document required to be filed under the 1934 Act and
the 1934 Act Rules and Regulations that upon such filing would be deemed to be incorporated
by reference into the Disclosure Package or the Prospectus that has not been so filed;
(iv) all representations and warranties made herein by the Company are true and correct
in all respects at such Closing Date, with the same effect as if made on and as of such
Closing Date, and all agreements herein to be performed or complied with by the Company on
or prior to such Closing Date have been duly performed and complied with by the Company;
(v) 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
21
each of the Disclosure Package and the Prospectus 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; and
(vi) except as disclosed in each of the Disclosure Package and the Prospectus,
subsequent to the respective dates as of which information is given in the Registration
Statement, each of the Disclosure Package and the Prospectus, neither the Company nor any of
its Subsidiaries has incurred any liabilities or obligations, direct or contingent, other
than in the ordinary course of business, or entered into any transactions not in the
ordinary course of business, which in either case are material to the Company or such
Subsidiary; and there has not been any change in the capital stock or material increase in
the short-term debt or long-term debt of the Company or any of its Subsidiaries or any
material adverse change or any development involving or that is reasonably expected to
involve a prospective material adverse change, in the condition (financial or other), net
worth, business, affairs, management, results of operations or cash flow of the Company and
its Subsidiaries taken as a whole; and there has been no dividend or distribution of any
kind, paid or made by the Company on any class of its capital stock.
(i) The Company shall have furnished to the Placement Agents at the Closing Date such further
information, opinions, certificates, letters and documents as the Placement Agents or each of them
may have reasonably requested.
(j) The Offered Common Shares, the Offered Warrant Shares and the Placement Warrant Shares
shall have been listed for trading on the AMEX.
(k) The Placement Agents shall have received duly and validly executed letter agreements
referred to in Section 4(o) hereof.
(l) The NASD shall have confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the placement agency terms and conditions.
(m) [Reserved].
(n) All such opinions, certificates, letters and documents will be in compliance with the
provisions hereof only if they are satisfactory in form and substance to COMW and FBW and to Xxxxxx
& Xxxxxx LLP, counsel for COMW and FBW.
(o) If any of the conditions specified above in this Section 5 shall not have been satisfied
at or prior to the Closing Date or waived by the Placement Agents in writing, this Agreement may be
terminated by the Placement Agents on written notice to the Company, whereupon the Company shall
not issue or sell the Securities.
6. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless the Placement Agents and each of them from
and against any losses, damages or liabilities, joint or several, to which the Placement Agents may
become subject, under the 1933 Act or otherwise, insofar as such
22
losses, damages or liabilities (or actions or claims in respect thereof) arise out of or are
based upon (i) an untrue statement or alleged untrue statement of a material fact contained (A) in
any Preliminary Prospectus, the Registration Statement, any Issuer Free Writing Prospectus that the
Company has filed or is required to file pursuant to Rule 433(d) of the 1933 Act Rules and
Regulations, the Prospectus or any other prospectus relating to the Securities, or any amendment or
supplement thereto, (B) in any blue sky application or other document executed by the Company or
based on any information furnished in writing by the Company, filed in any state or other
jurisdiction in order to qualify any or all of the Securities under the securities laws thereof
(the “Blue Sky Application”) or (C) in any materials or information provided to investors
by, or with the approval of, the Company in connection with the marketing of the offering of the
Securities (“Marketing Materials”), including any road show or investor presentations made
to investors by the Company (whether in person or electronically), when read together with the
Registration Statement and the Prospectus, (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement, any Issuer Free Writing Prospectus that the
Company has filed or is required to file pursuant to Rule 433(d) of the 1933 Act Rules and
Regulations, the Prospectus or any other prospectus relating to the Securities, or any amendment or
supplement thereto or in any Blue Sky Application or in any Marketing Materials, when read together
with the Registration Statement and the Prospectus, a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (iii) any act or failure to act or
any alleged act or failure to act by the Placement Agent in connection with, or relating in any
manner to, the Securities or the offering contemplated hereby, and that is the result of the
matters giving rise to any loss, damage or liabilities (or actions or claims in respect thereof)
arising out of or based upon matters covered by clause (i) or (ii) above (provided that the Company
shall not be liable under this clause (iii) to the extent that it is determined in a final judgment
by a court of competent jurisdiction that such loss, damage or liabilities (or actions or claims in
respect thereof) resulted directly from any such acts or failures to act undertaken or omitted to
be taken by the Placement Agents through their gross negligence or willful misconduct), and will
reimburse the Placement Agents promptly upon demand for any legal or other expenses incurred by the
Placement Agents in connection with investigating, preparing, pursuing or defending against or
appearing as a third party witness in connection with any such loss, damage, liability or action or
claim, including, without limitation, any investigation or proceeding by any governmental agency or
body, commenced or threatened, including the reasonable fees and expenses of counsel to the
indemnified party, as such expenses are incurred (including such losses, damages, liabilities or
expenses to the extent of the aggregate amount paid in settlement of any such action or claim,
provided that (subject to Section 6(d) hereof) any such settlement is effected with the written
consent of the Company); provided, however, that the Company shall not be liable in any such case
to the extent, but only to the extent, that any such loss, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement, any Issuer Free Writing Prospectus that the
Company has filed or is required to file pursuant to Rule 433(d) of the 1933 Act Rules and
Regulations, the Prospectus or any other prospectus relating to the Securities, or any such
amendment or supplement, or in any Blue Sky Application or in any Marketing Materials, read
together with the Registration Statement and the Prospectus, in reliance upon and in conformity
with written information relating to the Placement Agents furnished to the Company by the Placement
Agents expressly for use in the preparation thereof (as provided in Section 12 hereof).
23
(b) The Placement Agents will indemnify and hold harmless the Company from and against any
losses, damages or liabilities to which the Company may become subject, under the 1933 Act or
otherwise, insofar as such losses, damages or liabilities (or actions or claims in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement, any Issuer Free Writing
Prospectus that the Company has filed or is required to file pursuant to Rule 433(d) of the 1933
Act Rules and Regulations, the Prospectus or any other prospectus relating to the Securities, or
any amendment or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement, any Issuer Free Writing Prospectus that the
Company has filed or is required to file pursuant to Rule 433(d) of the 1933 Act Rules and
Regulations, the Prospectus or any other prospectus relating to the Securities, or any such
amendment or supplement, in reliance upon and in conformity with written information relating to
the Placement Agents furnished to the Company by the Placement Agents, expressly for use in the
preparation thereof (as provided in Section 12 hereof). The Placement Agents will reimburse the
Company for any legal or other expenses incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred (including such losses, damages,
liabilities or expenses to the extent of the aggregate amount paid in settlement of any such action
or claim, provided that (subject to Section 6(c) hereof) any such settlement is effected with the
written consent of the Placement Agents). Notwithstanding the provisions of this Section 6(b), in
no event shall any indemnity by the Placement Agents under this Section 6(b) exceed the total
compensation received by such Placement Agents in accordance with this Agreement.
(c) Promptly after receipt by an indemnified party under Section 6(a) or 6(b) hereof of notice
of the commencement of any action, such indemnified party shall, if a claim in respect thereof is
to be made against an indemnifying party under Section 6(a) or 6(b) hereof, notify each such
indemnifying party in writing of the commencement thereof, but the failure so to notify such
indemnifying party shall not relieve such indemnifying party from any liability except to the
extent that it has been prejudiced in any material respect by such failure or from any liability
that it may have to any such indemnified party otherwise than under Section 6(a) or 6(b) hereof.
In case any such action shall be brought against any such indemnified party and it shall notify
each indemnifying party of the commencement thereof, each such indemnifying party shall be entitled
to participate therein and, to the extent that it shall wish, jointly with any other indemnifying
party under Section 6(a) or 6(b) hereof similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the consent of such
indemnified party, be counsel to such indemnifying party), and, after notice from such indemnifying
party to such indemnified party of its election so to assume the defense thereof, such indemnifying
party shall not be liable to such indemnified party under Section 6(a) or 6(b) hereof for any
legal expenses of other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable costs of
investigation. The indemnified party shall have the right to employ its own counsel in any such
action, but the fees and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of counsel by such indemnified party at the expense of the indemnifying
party has been authorized by the indemnifying party, (ii) the
24
indemnified party shall have been advised by such counsel that there may be a conflict of
interest between the indemnifying party and the indemnified party in the conduct of the defense, or
certain aspects of the defense, of such action (in which case the indemnifying party shall not have
the right to direct the defense of such action with respect to those matters or aspects of the
defense on which a conflict exists or may exist on behalf of the indemnified party) or (iii) the
indemnifying party shall not in fact have employed counsel reasonably satisfactory to such
indemnified party to assume the defense of such action, in any of which events such fees and
expenses to the extent applicable shall be borne, and shall be paid as incurred, by the
indemnifying party. If at any time such indemnified party shall have requested such indemnifying
party under Section 6(a) or 6(b) hereof to reimburse such indemnified party for fees and expenses
of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature
contemplated by Section 6(a) or 6(b) hereof effected without its written consent if (I) such
settlement is entered into more than 45 days after receipt by such indemnifying party of such
request for reimbursement, (II) such indemnifying party shall have received notice of the terms of
such settlement at least 30 days prior to such settlement being entered into and (III) such
indemnifying party shall not have reimbursed such indemnified party in accordance with such request
for reimbursement prior to the date of such settlement. No such indemnifying party shall (1)
without the written consent of such indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened action, claim or
proceeding in respect of which indemnification or contribution may be sought hereunder (whether or
not such indemnified party is an actual or potential party to such action, claim or proceeding)
unless such settlement, compromise or judgment (A) includes an unconditional release of such
indemnified party from all liability arising out of such action, claim or proceeding and (B) does
not include a statement as to or an admission of fault, culpability or a failure to act, by or on
behalf of any such indemnified party or (2) be liable for any settlement or any such action
effected without its written consent, but if settled with the consent of the indemnifying party or
if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or liability by reason
of such settlement or judgment. In no event shall such indemnifying parties be liable for the fees
and expenses of more than one counsel, in addition to any local counsel, for all such indemnified
parties in connection with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
(d) If the indemnification provided for in this Section 6 is by its terms due and owing but is
unavailable or insufficient to indemnify or hold harmless an indemnified party under Section 6(a)
or 6(b) hereof in respect of any losses, damages or liabilities (or actions or claims in respect
thereof) referred to therein, then each indemnifying party under Section 6(a) or 6(b) hereof shall
contribute to the amount paid or payable by such indemnified party as a result of such losses,
damages or liabilities (or actions or claims in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one hand, and the
Placement Agents, on the other hand, from the offering of the Securities. If, however, the
allocation provided by the immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under Section 6(c) hereof and such
indemnifying party was prejudiced in a material respect by such failure, then each such
indemnifying party shall contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative benefits but also the relative
25
fault, as applicable, of the Company, on the one hand, and the Placement Agents, on the other
hand, in connection with the statements or omissions that resulted in such losses, damages or
liabilities (or actions or claims in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by, as applicable, the Company, on the one hand,
and the Placement Agents, on the other hand, shall be deemed to be in the same proportion as the
total net proceeds from such offering (before deducting expenses) received by the Company bear to
the portion of the total Placement Fee received by the Placement Agents. The relative fault, as
applicable, of the Company, on the one hand, and the Placement Agents, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or the Placement Agents, on the other hand, and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Placement Agents agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable considerations
referred to above in this Section 6(d). The amount paid or payable by such an indemnified party as
a result of the losses, damages or liabilities (or actions or claims in respect thereof) referred
to above in this Section 6(d) shall be deemed to include any legal or other expenses incurred by
such indemnified party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 6(d), the Placement Agents shall not be required to
contribute any amount in excess of the amount by which the total price at which the Securities were
sold to the Investors exceeds the amount of any damages that the Placement Agents have otherwise
been required to pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The obligations of the Company under this Section 6 shall be in addition to any liability
that the Company may otherwise have and shall extend, upon the same terms and conditions, to each
officer, director, employee, agent or other representative and to each person, if any, who controls
the Placement Agents within the meaning of the 1933 Act; and the obligations of the Placement
Agents under this Section 6 shall be in addition to any liability that the Placement Agents may
otherwise have and shall extend, upon the same terms and conditions, to each officer and director
of the Company who signed the Registration Statement and to each person, if any, who controls the
Company within the meaning of the 1933 Act.
(f) The parties to this Agreement hereby acknowledge that they are sophisticated business
persons who were represented by counsel during the negotiations regarding the provisions hereof,
including, without limitation, the provisions of this Section 6, and are fully informed regarding
such provisions. They further acknowledge that the provisions of this Section 6 fairly allocate
the risks in light of the ability of the parties to investigate the Company and its business in
order to assure that adequate disclosure is made in the Registration Statement, any Preliminary
Prospectus, the Disclosure Package, the Prospectus, and any supplement or amendment thereof, as
required by the 1933 Act.
7. Representations and Agreements to Survive Delivery. The respective
representations, warranties, agreements and statements of the Company and the Placement
26
Agents, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement, shall remain operative and in full force and effect regardless of any
investigation (or any statement as to the results thereof) made by or on behalf of the Placement
Agents or any controlling person of the Placement Agents, the Company or any of its officers,
directors or any controlling persons, and shall survive the Closing.
8. [Reserved].
9. Effective Date and Termination. This Agreement may be terminated by the mutual
agreement of the Placement Agents at any time at or prior to the Closing Date (by telephone,
facsimile or telegram, confirmed by letter) if any condition specified in Section 5 hereof shall
not have been satisfied on or prior to the Closing Date; provided, however, that the provisions of
this Section 9 and of Section 6 and Section 10 hereof shall at all times be effective. Any such
termination shall be without liability of any party to any other party except as provided in
Section 6 or Section 10 hereof.
10. Costs and Expenses. The Company, whether or not the transactions contemplated
hereby are consummated or this Agreement is terminated, will bear and pay the costs and expenses
incident to the registration of the Securities and offering thereof, including, without limitation,
(a) all expenses (including stock transfer taxes) incurred in connection with the delivery to the
several Investors of the Securities, the filing fees of the SEC, and the fees and expenses of the
Company’s counsel and accountants, (b) the preparation, printing, filing, delivery and shipping of
the Registration Statement, each Preliminary Prospectus, the Disclosure Package, any Free Writing
Prospectus, the Prospectus and any amendments or supplements thereto and the printing, delivery and
shipping of this Agreement and other offering documents, including the Blue Sky Memoranda, and any
instruments or documents related to any of the foregoing, (c) the furnishing of copies of such
documents to the Placement Agents, (d) the registration or qualification of the Securities for
offering and sale under the securities laws of the various states and other jurisdictions, (e) the
filing fees of the NASD (if any), (f) the fees and disbursements of respective counsel to the
Placement Agents relating to the Securities and the offering thereof, including, without
limitation, relating to any review of the offering by the NASD, (g) all printing and engraving
costs related to preparation of the certificates for the Securities, including transfer agent and
registrar fees, (h) all fees and expenses relating to the listing of the Offered Common Shares and
the Offered Warrant Shares for trading on the AMEX, (i) the costs and expenses relating to any
investor presentations or any “road show” undertaken in connection with the marketing of the
offering of the Securities, including, without limitation, expenses associated with the production
of road show slides and graphics, fees and expenses of any consultants engaged in connection with
the road show presentations, travel and lodging expenses of the representatives and officers or
representatives of the Company or the Placement Agents and any such consultants, and the cost of
any aircraft chartered in connection with the road show and (j) all of the other costs and expenses
incident to the performance by the Company of the registration and offering of the Securities;
provided, that each Placement Agent will bear and pay any advertising costs and expenses incurred
by such Placement Agent incident to the offering of the Securities. Notwithstanding the foregoing,
in no event shall the Company be obligated to reimburse the Placement Agents for expenses in excess
of $50,000 in the aggregate.
27
11. Notices. All notices or communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to COMW, shall be mailed, delivered, sent
by facsimile transmission, or telegraphed and confirmed, to Commonwealth Associates, LP, 000 Xxxxx
Xxxxxx, 0xx Xxxxx, Xxx Xxxx, XX 00000, Attn.: Xxxxxx X. X’Xxxxxxxx, facsimile number
(000) 000-0000, with a copy (which shall not constitute notice) to: Xxxxxx & Xxxxxx LLP, Attn.:
Xxxxxx Xxxxx, Esq., facsimile number (000) 000-0000; and, if sent to FBW, shall be mailed,
delivered, sent by facsimile transmission, or telegraphed and confirmed, to Xxxxxx, Xxxxx Xxxxx,
Incorporated, 000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxxxx, XX 00000, Attn.: Xxxxxx Xxxxxxxxx,
facsimile number (000) 000-0000, with a copy (which shall not constitute notice) to: Xxxxxx &
Xxxxxx LLP, Attn.: Xxxxxx Xxxxx, Esq., facsimile number (000) 000-0000; or if sent to the Company,
shall be mailed, delivered, sent by facsimile transmission, or telegraphed and confirmed to Teton
Energy Corporation, 000 00xx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000, Attn.: Chief
Financial Officer, facsimile number (000) 000-0000, with a copy (which shall not constitute notice)
to: Xxxxxxx Xxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attn.: Xxxxx X. Xxxxxxxxx, Esq., facsimile number (000) 000-0000.
12. Information Furnished by Placement Agent. The statements set forth in the first,
fourth and sixth paragraphs under the caption “Plan of Distribution” in the Preliminary Prospectus,
Prospectus and the Disclosure Package, solely to the extent included in reliance upon and in
conformity with written information related to the Placement Agents furnished to the Company by the
Placement Agents, expressly for use in the preparation thereof, constitute the only information
furnished by or on behalf of the Placement Agents as such information is referred to herein.
13. Parties. This Agreement shall inure to the benefit of and be binding upon the
Placement Agents, the Company and, to the extent provided in Sections 6 and 7, the officers and
directors of the Company and each person who controls the Company or the Placement Agents and their
respective heirs, executors, administrators, and successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, corporation or other entity
any legal or equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained; this Agreement and all conditions and provisions hereof being intended
to be and being for the sole and exclusive benefit of the parties hereto and their respective
successors and said controlling persons and with respect to said Sections 6 and 7 said officers and
directors, and for the benefit of no other person, corporation or other entity.
14. Entire Agreement; Amendments and Waivers. This Agreement, between and among the
Company, COMW and FBW, constitutes the entire agreement between the parties hereto pertaining to
the subject matter hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no warranties, representations
or other agreements among the parties in connection with the subject matter hereof except as set
forth specifically herein or contemplated hereby. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound thereby. The failure
of a party to exercise any right or remedy shall not be deemed or constitute a waiver of such right
or remedy in the future. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall
any such waiver constitute a continuing waiver unless otherwise expressly provided.
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15. Counterparts. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
16. Pronouns. Whenever a pronoun of any gender or number is used herein, it shall,
where appropriate, be deemed to include any other gender and number.
17. Time of Essence. Time shall be of the essence of this Agreement.
18. Headings. The headings herein are inserted for convenience of reference only and
are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.
19. Applicable Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to the principles of conflicts of
law that would require the application of the laws of any other jurisdiction.
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If the foregoing is in accordance with your understanding, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a binding agreement between
the Company and the Placement Agents.
| TETON ENERGY CORPORATION | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
Accepted as of the date
first above written.
first above written.
COMMONWEALTH ASSOCIATES, LP
By: |
||||
Name:
|
||||
Title: |
XXXXXX, XXXXX XXXXX, INCORPORATED
By: |
||||
Name:
|
||||
Title: |
30
SCHEDULE I
FREE WRITING PROSPECTUSES
Power Point presentation
31
SCHEDULE II
SUBSIDIARIES
Teton North America LLC, which is the parent company of the following entities:
Teton DJ LLC
Teton Piceance LLC
Teton Williston LLC
Teton Big Horn LLC
Teton Piceance LLC
Teton Williston LLC
Teton Big Horn LLC
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Exhibit A
Form of Offered Warrant
TETON ENERGY CORPORATION
COMMON STOCK PURCHASE WARRANT
Original Issue Date: JULY 25, 2007
Void After: 11:59 P.M., JULY 25, 2012
Void After: 11:59 P.M., JULY 25, 2012
This Warrant is Issued to
(hereinafter called the “Holder,” which term shall include the Holder’s legal
representatives, heirs, successors and assigns) by Teton Energy Corporation, a Delaware corporation
(hereinafter referred to as the “Company”). This Warrant may be transferred by the Holder
only in accordance with the provisions of Section 11.
1. Exercise of Warrant. For value received and subject to the terms and conditions
hereinafter set forth, the Holder is entitled, upon surrender of this Warrant at any time on or
after July 25, 2007 and on or prior to July 25, 2012 (the “Exercise Date”) (with the
subscription form annexed hereto (the “Subscription Form”) duly executed) at the office of
the Company at 000 00xx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000, or such other office
in the United States of which the Company shall notify the Holder hereof in writing, to purchase
from the Company, at the purchase price hereinafter specified (as adjusted from time to time, the
“Exercise Price”), shares (the “Warrant Shares”) (as adjusted from time
to time) of the Common Stock, $0.001 par value per share, of the Company (the “Common
Stock”). The initial Exercise Price shall be $6.06 per share.
2. Issuance of Stock Certificates. As promptly as practicable after surrender of this
Warrant and receipt of payment of the Exercise Price, the Company shall issue and deliver to the
Holder a certificate or certificates for the shares purchased hereunder, in certificates of such
denominations and in such names as the Holder may specify.
3. Payment of Exercise Price. Payment of the Exercise Price shall be made by check
made payable to the order of the Company or wire transfer of immediately available funds to a bank
account designated by the Company.
4. Limitation on Exercise. Notwithstanding anything to the contrary contained herein,
the number of Warrant Shares that may be acquired by the Holder upon any exercise of this Warrant
(or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following
such exercise (or other issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common
Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does
not exceed 9.999% of the total number of issued and outstanding shares of Common Stock (including
for such purpose the shares of Common Stock issuable upon such exercise). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder.
5. Adjustment for Dividends, Distributions, Subdivisions, Combinations, Mergers,
Consolidations or Sale of Assets.
5.1 Manner of Adjustment.
33
(a) Stock Dividends, Distributions or Subdivisions. In the event the Company shall
issue shares of Common Stock in a stock dividend, stock distribution or subdivision, the Exercise
Price in effect immediately before such stock dividend, stock distribution or subdivision shall,
concurrently with the effectiveness of such stock dividend, stock distribution or subdivision, be
proportionately decreased and the number of shares of Common Stock purchasable by exercise of this
Warrant shall be proportionately increased.
(b) Combinations or Consolidations. In the event the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, the Exercise Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such combination or consolidation, be
proportionately increased and the number of shares of Common Stock purchasable by exercise of this
Warrant shall be proportionately decreased.
(c) Adjustment for Reclassification, Exchange or Substitution. In the event that the
class of securities issuable upon the exercise of this Warrant shall be changed into the same or a
different number of shares of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than any event addressed by Sections 5.1(a), 5.1(b) or
5.1(d)), then and in each such event the Holder shall have the right thereafter to exercise this
Warrant for the kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification, or other change, by holders of the number of shares of
the class of securities into which such Warrant might have been exercisable for immediately prior
to such reorganization, reclassification, or change, all subject to further adjustment as provided
herein.
(d) Adjustment for Merger, Consolidation or Sale of Assets. In the event that the
Company shall merge or consolidate with or into another entity or sell all or substantially all of
its assets, this Warrant shall thereafter be exercisable for the kind and amount of shares of stock
or other securities or property to which a holder of the number of shares of Common Stock of the
Company deliverable upon exercise of this Warrant would have been entitled upon such consolidation,
merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the
Company’s Board of Directors) shall be made in the application of the provisions set forth in this
Section 5 with respect to the rights and interest thereafter of the Holder of this Warrant, to the
end that the provisions set forth in this Section 5 shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon
the exercise of this Warrant.
5.2 Certificate as to Adjustments. Upon the occurrence of each adjustment or
readjustment of the Exercise Price pursuant to this Section 5, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to
the Holder a certificate setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based.
5.3 Closing of Books. The Company shall at no time close its transfer books against
the transfer of any shares of Common Stock issued or issuable upon the exercise of this Warrant in
any manner which interferes with the timely and proper issuance of such shares.
6. Covenants of the Company. During the period within which the rights represented by
this Warrant may be exercised, the Company shall at all times have authorized and reserved for the
purpose of issue upon exercise of the rights evidenced hereby, a sufficient number of shares of the
class of securities issuable upon exercise of this Warrant to provide for the exercise of such
rights. All
securities which may be issued upon the exercise of the rights represented by this Warrant
shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable and free
from all taxes, liens
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and charges with respect to the issue thereof. Upon surrender for exercise,
this Warrant shall be canceled and shall not be reissued; provided, however, that
upon the partial exercise hereof a substitute Warrant of like tenor and date representing the
rights to subscribe for and purchase any such unexercised portion hereof shall be issued.
7. No Rights as Shareholder Until Exercise. This Warrant shall not entitle the Holder
to any voting rights or any other rights as a stockholder of the Company but upon presentation of
this Warrant with the Subscription Form duly executed and the tender of payment of the Exercise
Price at the office of the Company pursuant to the provisions of this Warrant, the Holder shall
forthwith be deemed a stockholder of the Company in respect of the securities for which the Holder
has so subscribed and paid.
8. No Change Necessary. The form of this Warrant need not be changed because of any
adjustment in the Exercise Price or in the number of shares issuable upon its exercise. A Warrant
issued after any adjustment or any partial exercise or upon replacement may continue to express the
same Exercise Price and the same number of shares (appropriately reduced in the case of partial
exercise) as are stated on this Warrant as initially issued, and that Exercise Price and that
number of shares shall be considered to have been so changed as of the close of business on the
date of adjustment.
9. Addresses for Notices. All notices, requests, consents and other communications
hereunder shall be in writing, either delivered in hand or mailed by registered or certified mail,
return receipt requested, or sent by facsimile, and shall be deemed to have been duly made when
delivered:
If to the Holder, to the Holder’s address as shown on the books of the Company; or
If to the Company, to the address set forth on the first page of this Warrant.
10. Substitution. In the case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new Warrant of like tenor and denomination and deliver the
same (a) in exchange and substitution for and upon surrender and cancellation of any mutilated
Warrant, or (b) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence
satisfactory to the Company of the loss, theft, or destruction of such Warrant (including, without
limitation, a reasonably detailed affidavit with respect to the circumstances of any loss, theft or
destruction), and of indemnity (or, in the case of the initial Holder or any other institutional
holder, an indemnity agreement) satisfactory to the Company.
11. Transfer Restrictions. This Warrant shall be freely transferable by the Holder,
and may be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise).
12. Taxes. The Company makes no representation about tax treatment to the Holder with
respect to receipt or exercise of the Warrant or acquiring, holding or disposing of the Common
Stock, and the Holder represents that the Holder has had the opportunity to discuss such treatment
with the Holder’s tax advisers.
13. Remedies. Each party stipulates that the remedies at law in the event of any
default or threatened default by the other party in the performance or compliance with any of the
terms of this Warrant are and shall not be adequate, and that such terms may be specifically
enforced by a decree for that specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
14. Governing Law. This Warrant shall be construed and enforced in accordance with,
and governed by, the laws of the State of New York without regard to its principles of conflicts of
laws.
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15. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the Holder and the Company.
[remainder of page intentionally left blank]
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* * *
IN WITNESS WHEREOF, the parties have caused this Warrant to be executed this 25th
day of July, 2007.
| TETON ENERGY CORPORATION | ||||||
| By: | ||||||
| Chief Financial Officer and Executive | ||||||
| Vice President | ||||||
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Exhibit B
Form of Company Counsel Legal Opinion
(i) The Company has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware with corporate power and authority to own, lease
and operate its properties and assets, and to conduct its business as described in the Disclosure
Package and the Prospectus and to carry out and perform its obligations under the Placement Agency
Agreement, the Subscription Agreements, the Offered Warrants and the Placement Warrants.
(ii) The Company is duly qualified as a foreign corporation for the transaction of business and is
in good standing in the State of Colorado.
(iii) The Company has an authorized equity capitalization as set forth in the Disclosure Package
and the Prospectus.
(iv) The Offered Common Shares to be issued and sold by the Company pursuant to the Placement
Agency Agreement and the Subscription Agreements have been duly authorized and reserved for
issuance and, when issued and delivered in accordance with the provisions of the Placement Agency
Agreement and the Subscription Agreements, will be duly and validly issued and fully paid and
non-assessable, and will conform in all material respects to the description thereof contained in
the Disclosure Package, and the Prospectus.
(v) The number of Offered Warrant Shares issuable upon exercise of the Offered Warrants based on
the exercise price in effect on the date hereof have been duly authorized and reserved for issuance
and, when issued and delivered upon exercise by a holder in accordance with the provisions of the
Offered Warrants, will be duly and validly issued and fully paid and non-assessable.
(vi) The number of Placement Warrant Shares issuable upon exercise of the Placement Warrants based
on the exercise price in effect on the date hereof have been duly authorized and reserved for
issuance and, when issued and delivered upon exercise by a holder in accordance with the provisions
of the Placement Warrants, will be duly and validly issued and fully paid and non-assessable.
(vii) There are no preemptive rights or similar rights to subscribe for or purchase, nor any
restrictions upon the voting or transfer of, the shares of Common Stock, Offered Warrant Shares or
Placement Warrant Shares pursuant to the Certificate of Incorporation, Bylaws or DGCL.
(viii) Each of the Placement Agency Agreement, the Subscription Agreements, the Offered Warrants
and the Placement Warrants has been duly authorized, executed and delivered by the Company, and
each of the Placement Agency Agreement, the Subscription Agreements, the Offered Warrants and the
Placement Warrants is a valid and legally binding obligation of the Company, enforceable in
accordance with its terms.
(ix) The Offered Warrants and Placement Warrants being issued on the date hereof have been duly
authorized by the Company and, when executed by the Company and issued and delivered in accordance
with the terms of the Placement Agency Agreement
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and the Subscription Agreements, will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their 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 and will conform in all material respects to the description thereof contained in the
Disclosure Package and the Prospectus.
(x) The execution, delivery and performance by the Company of the Placement Agency Agreement, the
Subscription Agreements, the Offered Warrants and the Placement Warrants, and the consummation of
the transactions contemplated thereby, including the issuance and sale of the Securities being
delivered on the date hereof, do not conflict with and do not result in a breach or violation by
the Company of any of the terms or provisions of, or constitute a default under, any Material
Agreement (“Material Agreement” means only a contract that is expressly identified on Exhibit B
hereto), nor will such actions result in any violation by the Company of (i) the Certificate of
Incorporation or the Bylaws, (ii) any U.S. federal, New York or Colorado state statute or the DGCL,
or (iii) any rule or any order, judgment, decree or regulation known to us of any U.S. federal, New
York or Colorado state court or governmental agency or body having jurisdiction over the Company or
any of its properties.
(xii) No consent, approval, authorization, order, registration or qualification of or with any U.S.
federal, New York, Colorado or Delaware state court or governmental agency or body is required
under New York or Colorado law or the DGCL for the execution, delivery and performance of the
Placement Agency Agreement, the Subscription Agreements, the Offered Warrants and the Placement
Warrants and the issue and sale of the Securities on the date hereof or the consummation by the
Company of the transactions contemplated by the Placement Agency Agreement, the Subscription
Agreements, the Offered Warrants and the Placement Warrants, except (i) such as may have been
obtained or made under the Securities Act, (ii) such consents, approvals, authorizations, orders,
registrations or qualifications as may be required under applicable state securities or Blue Sky
laws in connection with the purchase and distribution of the Securities, and (iii) as may be
expressly contemplated by the Placement Agency Agreement, the Subscription Agreements, the Offered
Warrants and the Placement Warrants.
(xiii) The statements set forth in the Disclosure Package and the Prospectus under the captions
“Description of Common Stock”, and “Description of Warrants” with respect to the issuance of the
Offered Common Shares, the Offered Warrants and the Placement Warrants, pursuant to the Placement
Agency Agreement and the Subscription Agreements, insofar as such statements purport to constitute
summaries of the legal matters, documents or proceedings referred to therein, fairly summarize in
all material respects the matters referred to therein.
(xiv) To our knowledge, there are no legal or governmental proceedings pending against the Company
required to be disclosed in the Disclosure Package or the Prospectus by the Securities Act or the
Rules and Regulations, other than those described therein.
(xv) As of immediately prior to the Closing Date, the Company is not required to register as an
“investment company,” as such term is defined in the Investment Company Act of 1940, as amended.
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(xvi) The Registration Statement is effective under the Securities Act and the Prospectus was filed
on , 2007 pursuant to Rule 424(b) of the Rules and Regulations and, to our knowledge, no
stop order suspending the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or threatened by the Commission.
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