APPROACH RESOURCES INC. 7,666,667 Shares of Common Stock Underwriting Agreement
Exhibit 1.1
7,666,667 Shares of Common Stock
November 7, 2007
X.X. Xxxxxx Securities Inc.
Wachovia Capital Markets, LLC
Wachovia Capital Markets, LLC
As Representatives of the
several Underwriters listed
in Schedule 1 hereto
several Underwriters listed
in Schedule 1 hereto
c/o X.X. Xxxxxx Securities Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Approach Resources Inc., a Delaware corporation (the “Company”), proposes to issue and sell to
the several Underwriters listed in Schedule 1 hereto (the “Underwriters”), for whom X.X. Xxxxxx
Securities Inc. (“JPMorgan”) and Wachovia Capital Markets, LLC (“Wachovia”) are acting as
representatives (each a “Representative” and together, the “Representatives”), an aggregate of
5,605,377 shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”),
and Neo Canyon Exploration, L.P., a Texas limited partnership (the “Selling Stockholder”), proposes
to sell to the Underwriters 2,061,290 shares of the Common Stock of the Company. The aggregate of
7,666,667 shares to be sold by the Company and the Selling Stockholder is herein called the
“Underwritten Shares.” At the option of the Underwriters, the Company proposes to issue and sell up
to an additional 993,195 shares of Common Stock and the Selling Stockholder proposes to sell an
additional 156,805 shares of Common Stock. The aggregate of 1,150,000 additional shares to be sold
by the Company and the Selling Stockholder is herein called the “Option Shares.” The Underwritten
Shares and the Option Shares are herein referred to as the “Shares.” The shares of Common Stock of
the Company to be outstanding after giving effect to the sale of the Shares are herein referred to
as the “Stock.”
The Company and the Selling Stockholder hereby confirm their agreement with the several
Underwriters concerning the purchase and sale of the Shares, as follows:
1. Registration Statement. The Company has prepared and filed with the Securities and
Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended, and the rules
and regulations of the Commission thereunder (collectively, the “Securities Act”), a registration
statement (File No. 333-144512) including a prospectus, relating to the Shares. Such registration
statement, as amended at the time it becomes effective, including the information, if any, deemed
pursuant to Rule 430A, 430B or 430C under the Securities Act to be part of the registration
statement at the time of its effectiveness (“Rule 430 Information”), is referred to herein as the
“Registration Statement,” and as used herein, the term “Preliminary Prospectus” means each
prospectus included in such registration statement (and any amendments thereto) before it becomes
effective, any prospectus filed with the Commission pursuant to Rule 424(a) under the Securities
Act and the prospectus included in the Registration Statement at the time of its effectiveness that
omits Rule 430 Information, and the term “Prospectus” means the prospectus in the form first used
(or made available upon request of purchasers pursuant to Rule 173 under the Securities Act) in
connection with confirmation of sales of the Shares. If the Company has filed an abbreviated
registration statement pursuant to Rule 462(b) under the Securities Act (the “Rule 462
Registration Statement”), then any reference herein to the term “Registration Statement” shall
be deemed to include such Rule 462 Registration Statement. Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Registration Statement and the
Prospectus.
At the Time of Sale (as defined below), the Company had prepared the following information
(collectively with the pricing information set forth on Annex C hereto, the “Time of Sale
Information”): a Preliminary Prospectus dated October 24, 2007 (the “Marketing Preliminary
Prospectus”), and each “free-writing prospectus” (as defined pursuant to Rule 405 under the
Securities Act) listed on Annex C hereto. “Time of Sale” means 5:00 P.M. (Eastern time) on the
date of this Agreement.
2. Purchase of the Shares by the Underwriters.
(a) The Company agrees to issue and sell, and the Selling Stockholder agrees, severally and
not jointly, to sell the Underwritten Shares to the several Underwriters as provided in this
Agreement, and each Underwriter, on the basis of the representations, warranties and agreements set
forth herein and subject to the conditions set forth herein, agrees, severally and not jointly, to
purchase from the Company and the Selling Stockholder at a price per share of $11.16 (the “Purchase
Price”) the number of Underwritten Shares (to be adjusted by you so as to eliminate fractional
shares) determined by multiplying the aggregate number of Underwritten Shares to be sold by the
Company and the Selling Stockholder by a fraction, the numerator of which is the aggregate number
of Underwritten Shares to be purchased by such Underwriter as set forth opposite the name of such
Underwriter in Schedule 1 hereto and the denominator of which is the aggregate number of
Underwritten Shares to be purchased by all the Underwriters from the Company and the Selling
Stockholder hereunder. The public offering price of the Shares is not in excess of the price
recommended by Wachovia, acting as a “qualified independent underwriter” within the meaning of Rule
2720 of the Rules of Conduct of the National Association of Securities Dealers, Inc. (the “NASD”).
In addition, the Company agrees to issue and sell, and the Selling Stockholder agrees,
severally and not jointly, to sell the Option Shares pro rata to the several Underwriters as
provided in this Agreement, and each Underwriter, on the basis of the representations, warranties
and agreements herein contained and subject to the conditions set forth herein, shall have the
option to purchase, severally and not jointly, from the Company and the Selling Stockholder at the
Purchase Price that portion of the number of Option Shares as to which such election shall have
been exercised (to be adjusted by you so as to eliminate fractional shares) determined by
multiplying such number of Option Shares to be sold by the Company and the Selling Stockholder by a
fraction, the numerator of which is the maximum number of Option Shares which such Underwriter
shall be entitled to be purchased as set forth opposite the name of such Underwriter in Schedule 1
hereto and the denominator of which is the aggregate number of Option Shares which all of the
Underwriters are entitled to be purchased.
The Underwriters may exercise the option to purchase the Option Shares at any time in whole,
or from time to time in part, on or before the thirtieth day following the date of the Prospectus,
by written notice from the Representatives to the Company and the Selling Stockholder; provided,
however, that such option may be exercised only for the purpose of covering any over-allotments
that may be made by the Underwriters in the sale of the Firm Shares. No Option Shares shall be
sold or delivered unless the Underwritten Shares previously have been, or simultaneously are, sold
and delivered. Such notice shall set forth the aggregate number of Option Shares as to which the
option is being exercised and the date and time when the Option Shares are to be delivered and paid
for, which may be the same date and time as the Closing Date (as hereinafter defined) but shall not
be earlier than the Closing Date nor later than the tenth full business day (as hereinafter
defined) after the date of such notice (unless such time and date are postponed
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in accordance with the provisions of Section 12 hereof). Any such notice shall be given
at least two business days prior to the date and time of delivery specified therein.
(b) The Company and the Selling Stockholder understand that the Underwriters intend to make a
public offering of the Shares as soon after the effectiveness of this Agreement as in the judgment
of the Representatives is advisable, and initially to offer the Shares on the terms set forth in
the Prospectus. The Company and the Selling Stockholder acknowledge and agree that the
Underwriters may offer and sell Shares to or through any affiliate of an Underwriter and that any
such affiliate may offer and sell Shares purchased by it to or through any Underwriter.
(c) Payment for the Shares shall be made by wire transfer in immediately available funds to
the account specified by the Company with respect to the Shares to be purchased from the Company
and to the account specified by the Attorneys-in-Fact (as defined below) with respect to the Shares
to be purchased from the Selling Stockholder to the Representatives in the case of the Underwritten
Shares, at the offices of Xxxxxxxx & Knight LLP, 0000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx
00000 at 9:00 A.M., Dallas time, on November 14, 2007, or at such other time or place on the same
or such other date, not later than the fifth business day thereafter, as the Representatives, the
Company and the Attorneys-in-Fact may agree upon in writing in the case of the Underwritten Shares
or, in the case of the Option Shares, on the date and at the time and place specified by the
Representatives in the written notice of the Underwriters’ election to purchase such Option Shares.
The time and date of such payment for the Underwritten Shares is referred to herein as the
“Closing Date,” and the time and date for such payment for the Option Shares, if other than the
Closing Date, is herein referred to as the “Additional Closing Date.”
Payment for the Shares to be purchased on the Closing Date or the Additional Closing Date, as
the case may be, shall be made against delivery through the facilities of the Depository Trust
Company (“DTC”) to the Representatives for the respective accounts of the several Underwriters of
the Shares to be purchased on such date in definitive form registered in such names and in such
denominations as the Representatives shall request in writing not later than two full business days
prior to the Closing Date or the Additional Closing Date, as the case may be, with any transfer
taxes payable in connection with the sale of the Shares duly paid by the Company or the Selling
Stockholder, as applicable. Any certificates for the Shares will be made available for inspection
and packaging by the Representatives at the office of DTC or its designated custodian not later
than 1:00 P.M., Dallas time, on the business day prior to the Closing Date or the Additional
Closing Date, as the case may be.
(d) The Company and the Selling Stockholder acknowledge and agree that the Underwriters are
acting solely in the capacity of an arm’s length contractual counterparty to the Company and the
Selling Stockholder with respect to the offering of Shares contemplated hereby (including in
connection with determining the terms of the offering) and not as a financial advisor or a
fiduciary to, or an agent of, the Company, the Selling Stockholder, or any other person.
Additionally, neither the Representatives nor any other Underwriter is advising the Company, the
Selling Stockholder, or any other person as to any legal, tax, investment, accounting or regulatory
matters in any jurisdiction. Each of the Company and the Selling Stockholder 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 Underwriters shall
have no responsibility or liability to the Company or the Selling Stockholder with respect thereto.
Any review by the Underwriters of the Company, the Selling Stockholder, the transactions
contemplated hereby or other matters relating to such transactions will be performed solely for the
benefit of the Underwriters and shall not be on behalf of the Company or the Selling Stockholder.
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3. Representations and Warranties of the Company. The Company represents and warrants
to each Underwriter that:
(a) Preliminary Prospectus. No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and the Marketing Preliminary Prospectus, at the time
of filing thereof, complied in all material respects with the Securities Act and did not contain
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; provided that the Company makes no representation and warranty with respect to
any statements or omissions made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by such Underwriter through the Representatives
expressly for use in any Preliminary Prospectus, it being understood and agreed that the only such
information furnished by any Underwriter consists of the information described as such in Section
9(c) hereof.
(b) Time of Sale Information. The Time of Sale Information, at the Time of Sale, did not, and
at the Closing Date and as of the Additional Closing Date, as the case may be, will not, contain
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; provided that the Company makes no representation and warranty with respect to
any statements or omissions made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by such Underwriter through the Representatives
expressly for use in such Time of Sale Information, it being understood and agreed that the only
such information furnished by any Underwriter consists of the information described as such in
Section 9(c) hereof. No statement of material fact included in the Prospectus has been omitted
from the Time of Sale Information, and no statement of material fact included in the Time of Sale
Information that is required to be included in the Prospectus has been omitted therefrom.
(c) Issuer Free Writing Prospectus. Other than the Registration Statement, the Preliminary
Prospectus and the Prospectus, the Company (including its agents and representatives, other than
the Underwriters in their capacity as such) has not prepared, made, used, authorized, approved or
referred to and will not prepare, make, use, authorize, approve or refer to any “written
communication” (as defined in Rule 405 under the Securities Act) that constitutes an offer to sell
or solicitation of an offer to buy the Shares (each such communication by the Company or its agents
and representatives (other than a communication referred to in clause (i) below), an “Issuer Free
Writing Prospectus”) other than (i) any document not constituting a prospectus pursuant to Section
2(a)(10)(a) of the Securities Act or Rule 134 under the Securities Act or (ii) the documents listed
on Annex C hereto, each electronic road show and any other written communications approved in
writing in advance by the Representatives. Each such Issuer Free Writing Prospectus complied in
all material respects with the Securities Act, has been filed in accordance with the Securities Act
(to the extent required thereby) and, when taken together with the Preliminary Prospectus
accompanying, or delivered prior to delivery of, such Issuer Free Writing Prospectus, did not, and
at the Closing Date and at the Additional Closing Date, as the case may be, will not, contain 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;
provided that the Company makes no representation and warranty with respect to any
statements or omissions made in each such Issuer Free Writing Prospectus in reliance upon and in
conformity with information relating to any Underwriter furnished to the Company in writing by such
Underwriter through the Representatives expressly for use in any Issuer Free Writing Prospectus, it
being understood and agreed that the only such information furnished by any Underwriter consists of
the information described as such in Section 9(c) hereof. Each such Issuer Free Writing
Prospectus, as of its issue date and at all subsequent times through the completion of the public
offer and sale of the Shares or until any earlier date that the issuer
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notified or notifies the Representatives as described in Section 5(e), did not, does not and
will not include any information that conflicted, conflicts or will conflict with the information
contained in the Registration Statement or the Prospectus, including any document incorporated by
reference therein and any Preliminary Prospectus deemed to be a part thereof that has not been
superseded or modified.
(d) Registration Statement and Prospectus. The Registration Statement has been declared
effective by the Commission. No order suspending the effectiveness of the Registration Statement
has been issued by the Commission and no proceeding for that purpose or pursuant to Section 8A of
the Securities Act against the Company or related to the offering of the Shares has been initiated
or threatened by the Commission; as of the applicable effective date of the Registration Statement
and any post-effective amendment thereto, the Registration Statement complied and will comply in
all material respects with the Securities Act, and did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and as of the date of the
Prospectus and any amendment or supplement thereto and as of the Closing Date and as of the
Additional Closing Date, as the case may be, the Prospectus does not and will not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided that the Company makes no representation and
warranty with respect to any statements or omissions made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by such Underwriter
through the Representatives expressly for use in the Registration Statement and the Prospectus and
any amendment or supplement thereto, it being understood and agreed that the only such information
furnished by any Underwriter consists of the information described as such in Section 9(c) hereof.
(e) Financial Statements. The financial statements and the related notes thereto of the
Company and its consolidated subsidiaries included in the Registration Statement, the Time of Sale
Information and the Prospectus comply in all material respects with the applicable requirements of
the Securities Act and present fairly in all material respects the financial position of the
Company and its consolidated subsidiaries as of the dates indicated and the results of their
operations and the changes in their cash flows for the periods specified; such financial statements
have been prepared in conformity with United States generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby, and the supporting schedules
included in the Registration Statement present fairly the information required to be stated
therein; the other financial information included in the Registration Statement, the Time of Sale
Information and the Prospectus has been derived from the accounting records of the Company and its
consolidated subsidiaries and presents fairly in all material respects the information shown
thereby; and the pro forma financial information and the related notes thereto included in the
Registration Statement, the Time of Sale Information and the Prospectus have been prepared in all
material respects consistently with the applicable requirements of the Securities Act and give
effect to assumptions made on a reasonable basis as set forth in the Registration Statement, the
Time of Sale Information and the Prospectus.
(f) No Material Adverse Change. Since the date of the most recent financial statements of the
Company included in the Registration Statement, the Time of Sale Information and the Prospectus,
except, in each case, as otherwise disclosed in the Registration Statement, the time of Sale
Information and the Prospectus, (i) there has not been any change in the capital stock or material
change in the long-term debt of the Company or any of its subsidiaries, or any dividend or
distribution of any kind declared, set aside for payment, paid or made by the Company on any class
of capital stock, or any material adverse change, or any development involving a prospective
material adverse change, in or affecting the business, properties, management, financial position,
stockholders’ equity, results of operations or prospects of the Company and its subsidiaries taken
as a whole; (ii) neither the Company nor any of its subsidiaries has
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entered into any transaction or agreement that is material to the Company and its subsidiaries
taken as a whole or incurred any liability or obligation, direct or contingent, that is material to
the Company and its subsidiaries taken as a whole; and (iii) neither the Company nor any of its
subsidiaries has sustained any material loss or interference with its business from fire,
explosion, flood, tornado or other calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or
regulatory authority.
(g) Organization and Good Standing. The Company and each of its subsidiaries have been duly
organized and are validly existing and in good standing under the laws of their respective
jurisdictions of organization, are duly qualified to do business and are in good standing in each
jurisdiction in which their respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all power and authority necessary to
own or hold their respective properties and to conduct the businesses in which they are engaged,
except where the failure to be so qualified or have such power or authority would not, individually
or in the aggregate, have a material adverse effect on the business, properties, management,
financial position, stockholders’ equity, results of operations or prospects of the Company and its
subsidiaries taken as a whole or on the performance by the Company of its obligations under this
Agreement (a “Material Adverse Effect”). The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the subsidiaries listed in
Exhibit 21.1 to the Registration Statement.
(h) Capitalization. The Company has authorized capital stock as set forth in the Registration
Statement, the Time of Sale Information and the Prospectus under the heading “Capitalization;” all
the shares of capital stock of the Company that will be outstanding immediately prior to the
Closing Date will have been duly and validly authorized and issued and will be fully paid and
non-assessable and will not be subject to any preemptive or similar rights; except as described in
or expressly contemplated by the Time of Sale Information and the Prospectus, immediately prior to
the Closing Date there will be no outstanding rights (including, without limitation, preemptive
rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other equity interest in the Company or any of its subsidiaries, or any
contract, commitment, agreement, understanding or arrangement of any kind relating to the issuance
of any capital stock of the Company or any such subsidiary, any such convertible or exchangeable
securities or any such rights, warrants or options; the capital stock of the Company conforms in
all material respects to the description thereof contained in the Registration Statement, the Time
of Sale Information and the Prospectus; and all the outstanding shares of capital stock or other
equity interests of each subsidiary owned directly or indirectly, the Company have been duly and
validly authorized and issued, are fully paid and non-assessable (except as otherwise described in
the Registration Statement, the Time of Sale Information and the Prospectus) and are owned directly
or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest,
restriction on voting or transfer or any other claim of any third party other than those arising
under the Company’s Amended and Restated Credit Agreement dated February 15, 2007, as amended.
(i) Stock Options. With respect to the stock options (the “Stock Options”) granted pursuant
to the stock-based compensation plans of the Company and its subsidiaries (the “Company Stock
Plans”), each such grant was made in accordance with the terms of the Company Stock Plans, and all
other applicable laws and regulatory rules or requirements.
(j) Due Authorization. The Company has full right, power and authority to execute and deliver
this Agreement and the Contribution Agreement by and among Approach Resources Inc. and the equity
holders identified therein, dated June 29, 2007 (the “Contribution Agreement,” and collectively
with this Agreement, the “Transaction Documents”) and to perform its obligations hereunder and
thereunder; and all action required to be taken for the due and proper authorization, execution and
delivery by it of
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each of
the Transaction Documents and the consummation by it of the transactions contemplated
thereby or by the Time of Sale Information and the Prospectus has been duly and validly taken.
(k) Underwriting Agreement. This Agreement has been duly authorized, executed and delivered
by the Company.
(l) The Shares. The Shares to be issued and sold by the Company hereunder have been duly
authorized by the Company and, when issued and delivered and paid for as provided herein, will be
duly and validly issued and will be fully paid and non-assessable and will conform to the
description thereof in the Registration Statement, the Time of Sale Information and the Prospectus;
and the issuance of the Shares to be sold by the Company is not subject to any preemptive or
similar rights. The Shares to be sold by the Selling Stockholder have been duly and validly issued
and are fully paid and non-assessable and conform to the description thereof in the Registration
Statement, the Time of Sale Information and the Prospectus.
(m) Other Transaction Documents. The Contribution Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and legally binding agreement of the
Company enforceable against the Company in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights
generally or by equitable principles relating to enforceability; provided that the
indemnity, contribution and exoneration provisions contained therein may be limited by applicable
laws and public policy.
(n) Descriptions of Transaction Documents. Each Transaction Document conforms in all material
respects to the description thereof contained in the Registration Statement, the Time of Sale
Information and the Prospectus.
(o) No Violation or Default. Neither the Company nor any of its subsidiaries is (i) in
violation of its charter or by-laws or similar organizational documents; (ii) in default, and no
event has occurred that, with notice or lapse of time or both, would constitute such a default, in
the due performance or observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or
to which any of the property or assets of the Company or any of its subsidiaries is subject; or
(iii) in violation of any law or statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority, except, in the case of clauses (ii) and (iii)
above, for any such default or violation that would not, individually or in the aggregate, have a
Material Adverse Effect.
(p) No Conflicts. The execution, delivery and performance by the Company of each of the
Transaction Documents, the issuance and sale of the Shares by the Company (including the use of
proceeds therefrom) and the consummation by the Company of the transactions contemplated by the
Transaction Documents will not (i) 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 property or assets of the Company or any of its
subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, (ii) result in any violation of the provisions of the charter or
by-laws or similar organizational documents of the Company or any of its subsidiaries or (iii)
result in the violation of any law or statute or any judgment, order, rule or regulation of any
court or arbitrator or governmental or regulatory authority, except in the cases of clauses (i) and
(iii) above, for such conflicts, breaches or violations that would not, individually or in the
aggregate, have a Material Adverse Effect..
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(q) No Consents Required. No consent, approval, authorization, order, registration or
qualification of or with any court or arbitrator or governmental or regulatory authority is
required for the execution, delivery and performance by the Company of each of the Transaction
Documents, the issuance and sale of the Shares (including the use of proceeds therefrom) and the
consummation of the transactions contemplated by the Transaction Documents, except for the
registration of the Shares under the Securities Act and such consents, approvals, authorizations,
orders and registrations or qualifications as may be required under applicable state securities
laws in connection with the purchase and distribution of the Shares by the Underwriters and any
consent, approval, authorization, order, registration or qualification that either has been, or
prior to the Closing Date will have been, obtained or made, or which if not obtained or made, would
not, individually or in the aggregate, have a Material Adverse Effect and would not adversely
affect the Company’s ability to fulfill its obligations under the Transaction Documents.
(r) Legal Proceedings. Except as described in the Registration Statement, the Time of Sale
Information and the Prospectus, there are no legal, governmental or regulatory investigations,
actions, suits or proceedings pending to which the Company or any of its subsidiaries is or may be
a party or to which any property of the Company or any of its subsidiaries is or may be the subject
that, individually or in the aggregate, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have a Material Adverse Effect or materially and
adversely affect the ability of the Company to perform its obligations under the Transaction
Documents; to the knowledge of the Company, no such investigations, actions, suits or proceedings
are threatened or contemplated by any governmental or regulatory authority or others; and (i) there
are no current or pending legal, governmental or regulatory actions, suits or proceedings that are
required under the Securities Act to be described in the Registration Statement that are not so
described in the Registration Statement, the Time of Sale Information and the Prospectus and (ii)
there are no statutes, regulations or contracts or other documents that are required under the
Securities Act to be filed as exhibits to the Registration Statement or described in the
Registration Statement, the Time of Sale Information or the Prospectus that are not so filed as
exhibits to the Registration Statement or described in the Registration Statement, the Time of Sale
Information and the Prospectus.
(s) Independent Accountants. Xxxx & Associates LLP, who has certified certain financial
statements of the Company and its subsidiaries, is an independent registered public accountants
with respect to the Company and its subsidiaries within the applicable rules and regulations
adopted by the Commission and the Public Company Accounting Oversight Board (United States) and as
required by the Securities Act.
(t) Title to Real and Personal Property. The Company and its subsidiaries have good and
marketable title to all real and other property they own, in each case free and clear of all liens,
encumbrances, and defects except those (i) described in the Registration Statement, the Time of
Sale Information and the Prospectus or (ii) that would not, individually or in the aggregate, have
a Material Adverse Effect. Except as described in the Registration Statement, the Time of Sale
Information and the Prospectus, all items of real and other property leased by the Company and its
subsidiaries are leased under valid and enforceable leases, except as would not, individually or in
the aggregate, have a Material Adverse Effect.
(u) Title to Intellectual Property. The Company and its subsidiaries own or possess adequate
rights to use all material patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service xxxx registrations, copyrights, licenses and know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of their respective businesses; and the Company
and its subsidiaries have not received any notice of any claim of infringement or conflict with any
such rights of others.
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(v) No Undisclosed Relationships. No relationship, direct or indirect, exists between or
among the Company or any of its subsidiaries, on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or any of its subsidiaries, on the other, that
is required by the Securities Act to be described in the Registration Statement and the Prospectus
and that is not so described in such documents and in the Time of Sale Information.
(w) Investment Company Act. The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described in the Registration
Statement, the Time of Sale Information and the Prospectus, will not be required to register as an
“investment company” or an entity “controlled” by an “investment company” within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations of the Commission
thereunder (collectively, “Investment Company Act”).
(x) Taxes. The Company and its subsidiaries have paid all federal, state, local and foreign
taxes and filed all tax returns required to be paid or filed through the date hereof; and except as
otherwise disclosed in the Registration Statement, the Time of Sale Information and the Prospectus
or as would not, individually or in the aggregate, have a Material Adverse Effect, there is no tax
deficiency that has been, or could reasonably be expected to be, asserted against the Company or
any of its subsidiaries or any of their respective properties or assets.
(y) Licenses and Permits. The Company and its subsidiaries possess all licenses,
certificates, permits and other authorizations issued by, and have made all declarations and
filings with, the appropriate federal, state, local or foreign governmental or regulatory
authorities that are necessary for the ownership or lease of their respective properties or the
conduct of their respective businesses as described in the Registration Statement, the Time of Sale
Information and the Prospectus, except where the failure to possess or make the same would not,
individually or in the aggregate, have a Material Adverse Effect; and except as described in the
Registration Statement, the Time of Sale Information and the Prospectus or as would not,
individually or in the aggregate, have a Material Adverse Effect, neither the Company nor any of
its subsidiaries has received notice of any revocation or modification of any such license,
certificate, permit or authorization or has any reason to believe that any such license,
certificate, permit or authorization will not be renewed in the ordinary course.
(z) No Labor Disputes. No labor disturbance by or dispute with employees of the Company or
any of its subsidiaries exists or, to the knowledge of the Company, is contemplated or threatened
and the Company is not aware of any existing or imminent labor disturbance by, or dispute with, the
employees of any of its or its subsidiaries’ principal suppliers, contractors or customers, except
as would not have a Material Adverse Effect.
(aa) Compliance With Environmental Laws. (i) The Company and its subsidiaries (x) are in
compliance with any and all applicable federal, state, local and foreign laws, rules, regulations,
requirements, decisions and orders relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively,
“Environmental Laws”); (y) have received and are in compliance with all permits, licenses,
certificates or other authorizations or approvals required of them under applicable Environmental
Laws to conduct their respective businesses; and (z) except as described in the Registration
Statement, the Time of Sale Information and the Prospectus, have not received notice of any actual
or potential liability for the investigation or remediation of any disposal or release of hazardous
or toxic substances or wastes, pollutants or contaminants, and (ii) there are no costs or
liabilities associated with Environmental Laws of or relating to the Company or its subsidiaries,
except in the case of each of (i) and (ii) above, for any such failure to comply, or failure to
receive
-9-
required permits, licenses or approvals, or cost or liability, as would not,
individually or in the aggregate, have a Material Adverse Effect.
(bb) Hazardous Substances. There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission, or other release of any kind of toxic wastes or hazardous
substances, including, but not limited to, any naturally occurring radioactive materials, brine,
drilling mud, crude oil, natural gas liquids and other petroleum materials, by, due to or caused by
the Company or any of its subsidiaries upon any of the property now owned or leased by the Company
or any of its subsidiaries, in violation of any Environmental Laws, except for any violation or
liability which would not, individually or in the aggregate, have a Material Adverse Effect.
(cc) Compliance with ERISA. Each employee benefit plan, within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that is maintained,
administered or contributed to by the Company or any of its affiliates for employees or former
employees of the Company and its affiliates has been maintained in compliance, in all material
respects, with its terms and the requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Internal Revenue Code of 1986, as amended
(the “Code”); no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975
of the Code, has occurred with respect to any such plan excluding transactions effected pursuant to
a statutory or administrative exemption, and transactions which, individually or in the aggregate,
would not have a Material Adverse Effect, and no such plan is subject to the funding rules of
Section 412 of the Code or Section 302 of ERISA.
(dd) Accounting Controls. The Company and its subsidiaries maintain systems of “internal
control over financial reporting” (as defined in Rule 13a-15(f) of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder (collectively, the
“Exchange Act”)) that comply with the requirements of the Exchange Act and have been designed by,
or under the supervision of, the Company’s principal executive and principal financial officers, or
persons performing similar functions, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles, including those policies and procedures that (i)
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles and that receipts and expenditures of the Company are
being made in accordance with and authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a material effect on the
Company’s financial statements. Except as disclosed in the Registration Statement, the Time of
Sale Information and the Prospectus, there are no material weaknesses in the Company’s internal
control over financial reporting. The Company’s auditors and the Audit Committee of the Board of
Directors of the Company have been advised of all significant deficiencies and material weaknesses
in the design or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the Company’s ability to record, process, summarize and report financial
information.
(ee) Insurance. The Company and its subsidiaries have insurance covering their respective
properties, operations, personnel and businesses, which insurance is in reasonable amounts and
insures against such losses and risks as are reasonably adequate to protect the Company and its
subsidiaries and their respective businesses; and neither the Company nor any of its subsidiaries
has (i) received notice from any insurer or agent of such insurer that capital improvements or
other expenditures are required or necessary to be made in order to continue such insurance or (ii)
any reason to believe that it will not be
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able to renew its existing insurance coverage as and when such coverage expires or to obtain
similar coverage at reasonable cost from similar insurers as may be necessary to continue its
business.
(ff) No Unlawful Payments. Neither the Company nor any of its subsidiaries nor, to the
knowledge of the Company, any director, officer, agent, employee or other person associated with or
acting on behalf of the Company or any of its subsidiaries has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; (iii) violated or is in violation of any provision of
the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(gg) Compliance with Money Laundering Laws. The operations of the Company and its
subsidiaries are and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, 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.
(hh) Compliance with OFAC. None of the Company, any of its subsidiaries or, 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. Department of the Treasury (“OFAC”); and the Company will not directly
or indirectly use the proceeds of the offering of the Shares hereunder, or lend, contribute or
otherwise make available such proceeds to any subsidiary, joint venture partner or other person or
entity, for the purpose of financing the activities of any person currently subject to any U.S.
sanctions administered by OFAC.
(ii) No Restrictions on Subsidiaries. Other than pursuant to the Company’s Amended and
Restated Credit Facility with The Frost National Bank, no subsidiary of the Company is currently
prohibited, directly or indirectly, under any agreement or other instrument to which it is a party
or is subject, from paying any dividends to the Company, from making any other distribution on such
subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary
from the Company or from transferring any of such subsidiary’s properties or assets to the Company
or any other subsidiary of the Company.
(jj) No Broker’s Fees. Neither the Company nor any of its subsidiaries is a party to any
contract, agreement or understanding with any person (other than this Agreement) that would give
rise to a valid claim against the Company or any of its subsidiaries or any Underwriter for a
brokerage commission, finder’s fee or like payment in connection with the offering and sale of the
Shares.
(kk) No Registration Rights. Except as disclosed in the Registration Statement, the Time of
Sale Information and the Prospectus, no person has the right to require the Company or any of its
subsidiaries to register any securities for sale under the Securities Act by reason of the filing
of the Registration Statement with the Commission or the issuance and sale of the Shares.
(ll) No Stabilization. The Company has not taken, directly or indirectly, any action designed
to or that could reasonably be expected to cause or result in any stabilization or manipulation of
the price of the Shares.
-11-
(mm) Margin Rules. The application of the proceeds from the sale of the Shares to be sold by
the Company pursuant to this Agreement as described in the Registration Statement, the Time of Sale
Information and the Prospectus will not violate Regulation T, U or X of the Board of Governors of
the Federal Reserve System or any other regulation of such Board of Governors.
(nn) Forward-Looking Statements. No forward-looking statement (within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act) contained in the Registration
Statement, the Time of Sale Information and the Prospectus has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.
(oo) Statistical and Market Data. Nothing has come to the attention of the Company that has
caused the Company to believe that the statistical and market-related data included in the
Registration Statement, the Time of Sale Information and the Prospectus is not based on or derived
from sources that are reliable and accurate in all material respects.
(pp) Xxxxxxxx-Xxxxx Act. There is and has been no failure on the part of the Company or any
of its directors and officers, in their capacity as such, to comply with any applicable provision
of the Xxxxxxxx-Xxxxx Act of 2002 and any applicable rules and regulations promulgated in
connection therewith (the “Xxxxxxxx-Xxxxx Act”) including Section 402 related to loans.
(qq) Status under the Securities Act. The Company is not an ineligible issuer as defined
under the Securities Act, at the times specified in the Securities Act in connection with the
offering of the Shares.
(rr) Reserve Data. (i) (A) The oil and natural gas reserve estimates of the Company and its
subsidiaries as of December 31, 2004, 2005 and 2006 contained in the Registration Statement, the
Time of Sale Information and the Prospectus are derived from reports that have been prepared by, or
have been audited by, either (a) XxXxxxxx & XxxXxxxxxxx or (b) Xxxxxx, Xxxxxxxxx & Associates,
Inc., as set forth and to the extent indicated therein, and (B) such estimates fairly reflect the
oil and natural gas reserves of the Company and its subsidiaries, as applicable, at the dates
indicated therein and are in accordance, in all material respects, with Commission guidelines
applied on a consistent basis throughout the periods involved; and
(ss) Independent Petroleum Engineers. Each of XxXxxxxx & XxxXxxxxxxx and Xxxxxx, Xxxxxxxxx &
Associates, Inc. have represented to the Company that they are, and the Company believes them to
be, independent petroleum engineers with respect to the Company and its subsidiaries and for the
periods set forth in the Registration Statement, the Time of Sale Information and the Prospectus.
(tt) No Ratings. There are no securities or preferred stock of or guaranteed by the Company
or any of its subsidiaries that are rated by a “nationally recognized statistical rating
organization,” as such term is defined by the Commission for purposes of Rule 436(g)(2) under the
Securities Act.
4. Representations and Warranties of the Selling Stockholder. The Selling Stockholder
represents and warrants to each Underwriter that:
(a) Required Consents; Authority. All consents, approvals, authorizations and orders
necessary for the execution and delivery by the Selling Stockholder of this Agreement and the Power
of Attorney (the “Power of Attorney”) and the Custody Agreement (the “Custody Agreement”)
hereinafter referred to, and for the sale and delivery of the Shares to be sold by the Selling
Stockholder hereunder, have been obtained; and the Selling Stockholder has full right, power and
authority to enter into this Agreement, the Power of Attorney and the Custody Agreement and to
sell, assign, transfer and deliver the
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Shares to be sold by the Selling Stockholder hereunder; this Agreement, the Power of Attorney
and the Custody Agreement has been duly authorized, executed and delivered by the Selling
Stockholder.
(b) No Conflicts. The execution, delivery and performance by the Selling Stockholder of this
Agreement, the Power of Attorney and the Custody Agreement, the sale of the Shares to be sold by
the Selling Stockholder and the consummation by the Selling Stockholder of the transactions
contemplated herein or therein will not (i) 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 property or assets of the Selling
Stockholder pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Selling Stockholder is a party or by which the Selling Stockholder is
bound or to which any of the property or assets of the Selling Stockholder is subject, (ii) result
in any violation of the provisions of the charter or by-laws or similar organizational documents of
the Selling Stockholder or (iii) result in the violation of any law or statute or any judgment,
order, rule or regulation of any court or arbitrator or governmental or regulatory agency.
(c) Title to Shares. The Selling Stockholder has good and valid title to the Shares to be
sold by the Selling Stockholder at the Closing Date or the Additional Closing Date, as the case may
be, by the Selling Stockholder hereunder, free and clear of all liens, encumbrances, equities or
adverse claims; the Selling Stockholder will have, immediately prior to the Closing Date or the
Additional Closing Date, as the case may be, good and valid title to the Shares to be sold by the
Selling Stockholder at the Closing Date or the Additional Closing Date, as the case may be, by the
Selling Stockholder, free and clear of all liens, encumbrances, equities or adverse claims; and,
upon delivery of the certificates representing such Shares and payment therefor pursuant hereto,
good and valid title to such Shares, free and clear of all liens, encumbrances, equities or adverse
claims, will pass to the several Underwriters.
(d) No Stabilization. The Selling Stockholder has not taken and will not take, directly or
indirectly, any action designed to or that could reasonably be expected to cause or result in any
stabilization or manipulation of the price of the Shares.
(e) Time of Sale Information. The Time of Sale Information, at the Time of Sale did not, and
at the Closing Date and as of the Additional Closing Date, as the case may be , will not, contain
any untrue statement of a material fact concerning or relating to the Selling Stockholder or omit
to state a material fact concerning or relating to the Selling Stockholder (or any trustee or
beneficiary thereof) necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. No statement of material fact concerning
or relating to the Selling Stockholder included in the Prospectus has been omitted from the Time of
Sale Information and no statement of material fact concerning or relating to the Selling
Stockholder included in the Time of Sale Information that is required to be included in the
Prospectus has been omitted therefrom.
(f) Issuer Free Writing Prospectus. Other than the Registration Statement, the Preliminary
Prospectus and the Prospectus, the Selling Stockholder (including its agents and representatives,
other than the Underwriters in their capacity as such) has not made, used, prepared, authorized,
approved or referred to and will not prepare, make, use, authorize, approve or refer to any Issuer
Free Writing Prospectus, other than (i) any document not constituting a prospectus pursuant to
Section 2(a)(10)(a) of the Securities Act or Rule 134 under the Securities Act or (ii) the
documents listed on Annex C hereto, each electronic road show and any other written communications
approved in writing in advance by the Company and the Representatives.
(g) Registration Statement and Prospectus. As of the applicable effective date of the
Registration Statement and any amendment thereto, the Registration Statement complied and will
comply in all material respects with the Securities Act, and did not and will not contain any
untrue statement of a material
-13-
fact or omit to state a material fact required to be stated therein or necessary in order
to make the statements therein not misleading; and as of the date of the Prospectus and any
amendment or supplement thereto and as of the Closing Date and as of the Additional Closing Date,
as the case may be, the Prospectus will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading;
provided that the Selling Stockholder makes no representation and warranty with respect to
any statements or omissions made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by such Underwriter through the Representatives
expressly for use in the Registration Statement, the Time of Sale Information and the Prospectus
and any amendment or supplement thereto, it being understood and agreed that the only such
information furnished by any Underwriter consists of the information described as such in Section
9(c) hereof.
(h) Material Information. (i) As of the date hereof, as of the Closing Date and as of the
Additional Closing Date, as the case may be, that the sale of the Shares to be sold by the Selling
Stockholder is not and will not be prompted by any material information concerning the Company
which is not set forth in the Registration Statement, the Time of Sale Information or the
Prospectus.
The Selling Stockholder represents and warrants that certificates in negotiable form
representing all of the Shares to be sold by the Selling Stockholder hereunder have been placed in
custody under a Custody Agreement relating to such Shares, in the form heretofore furnished to you,
duly executed and delivered by the Selling Stockholder to the Company, as custodian (the
“Custodian”), and that the Selling Stockholder has duly executed and delivered a Power of Attorney,
in the form heretofore furnished to you, appointing the persons indicated in Schedule 2 hereto, and
each of them, as the Selling Stockholder’s Attorneys-in-fact (the “Attorneys-in-Fact” or any one of
them, the “Attorney-in-Fact”) with authority to execute and deliver this Agreement on behalf of the
Selling Stockholder, to determine the purchase price to be paid by the Underwriters to the Selling
Stockholder as provided herein, to authorize the delivery of the Shares to be sold by the Selling
Stockholder hereunder and otherwise to act on behalf of the Selling Stockholder in connection with
the transactions contemplated by this Agreement, the Custody Agreement and the Power of Attorney.
The Selling Stockholder agrees that the Shares represented by the certificates held in custody
for the Selling Stockholder under the Custody Agreement are subject to the interests of the
Underwriters hereunder, and that the arrangements made by the Selling Stockholder for such custody,
and the appointment by the Selling Stockholder of the Attorneys-in-Fact by the Power of Attorney,
are to that extent irrevocable. The Selling Stockholder agrees that the obligations of the Selling
Stockholder hereunder shall not be terminated by operation of law, by the dissolution of such
partnership or by the occurrence of any other event. If the Selling Stockholder should be
dissolved, or if any other such event should occur, before the delivery of the Shares hereunder,
certificates representing such Shares shall be delivered by or on behalf of the Selling Stockholder
in accordance with the terms and conditions of this Agreement and the Custody Agreement, and
actions taken by the Attorneys-in-Fact pursuant to the Power of Attorney shall be as valid as if
such dissolution or other event had not occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such dissolution or other event.
5. Further Agreements of the Company. The Company covenants and agrees with each
Underwriter and the Selling Stockholder that:
(a) Required Filings. The Company will file the final Prospectus with the Commission within
the time periods specified by Rule 424(b) and Rule 430A, 430B or 430C under the Securities Act,
will file any Issuer Free Writing Prospectus (to the extent not previously delivered) to the extent
required
-14-
by Rule 433 under the Securities Act. The Company will furnish copies of the Prospectus and
each Issuer Free Writing Prospectus (to the extent not previously delivered) to the Underwriters in
New York City prior to 10:00 A.M., New York City time, on the business day next succeeding the date
of this Agreement in such quantities as the Representatives may reasonably request.
(b) Delivery of Copies. The Company will deliver, without charge, (i) to the Representatives,
three signed copies of the Registration Statement as originally filed and each amendment thereto,
in each case including all exhibits and consents filed therewith; and (ii) to each Underwriter (A)
a conformed copy of the Registration Statement as originally filed and each amendment thereto
(without exhibits) and (B) during the Prospectus Delivery Period (as defined below), as many copies
of the Prospectus (including all amendments and supplements thereto) and each Issuer Free Writing
Prospectus as the Representatives may reasonably request. As used herein, the term “Prospectus
Delivery Period” means such period of time after the first date of the public offering of the
Shares as in the opinion of counsel for the Underwriters a prospectus relating to the Shares is
required by law to be delivered (or required to be delivered but for Rule 172 under the Securities
Act) in connection with sales of the Shares by any Underwriter or dealer.
(c) Amendments or Supplements, Issuer Free Writing Prospectuses. Before preparing, using,
authorizing, approving, referring to or filing any Issuer Free Writing Prospectus, and before
filing any amendment or supplement to the Registration Statement or the Prospectus, the Company
will furnish to the Representatives and counsel for the Underwriters a copy of the proposed Issuer
Free Writing Prospectus, amendment or supplement for review and will not prepare, use, authorize,
approve, refer to or file any such Issuer Free Writing Prospectus or file any such proposed
amendment or supplement to which the Representatives reasonably object.
(d) Notice to the Representatives. The Company will advise the Representatives promptly, and
confirm such advice in writing, (i) when the Registration Statement has become effective; (ii) when
any amendment to the Registration Statement has been filed or becomes effective; (iii) when any
supplement to the Prospectus or any amendment to the Prospectus or any Issuer Free Writing
Prospectus has been filed; (iv) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or the receipt of any
comments from the Commission relating to the Registration Statement or any other request by the
Commission for any additional information; (v) of the issuance by the Commission of any order
suspending the effectiveness of the Registration Statement or preventing or suspending the use of
any Preliminary Prospectus, any of the Time of Sale Information or the Prospectus or the initiation
or threatening of any proceeding for that purpose or pursuant to Section 8A of the Securities Act;
(vi) of the occurrence of any event within the Prospectus Delivery Period as a result of which the
Prospectus, the Time of Sale Information or any Issuer Free Writing Prospectus as then amended or
supplemented would include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements therein, in the light of
the circumstances existing when the Prospectus, the Time of Sale Information or any such Issuer
Free Writing Prospectus is delivered to a purchaser, not misleading; and (vii) of the receipt by
the Company of any notice with respect to any suspension of the qualification of the Shares for
offer and sale in any jurisdiction or the initiation or threatening of any proceeding for such
purpose; and the Company will use its best efforts to prevent the issuance of any such order
suspending the effectiveness of the Registration Statement, preventing or suspending the use of any
Preliminary Prospectus, any of the Time of Sale Information or the Prospectus or suspending any
such qualification of the Shares and, if any such order is issued, will obtain as soon as possible
the withdrawal thereof.
(e) Ongoing Compliance. (1) If during the Prospectus Delivery Period (i) any event shall
occur or condition shall exist as a result of which the Prospectus as then amended or supplemented
would
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include any untrue statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in the light of the
circumstances existing when the Prospectus is delivered to a purchaser, not misleading or (ii) it
is necessary to amend or supplement the Prospectus to comply with law, the Company will immediately
notify the Underwriters thereof and forthwith prepare and, subject to paragraph (c) above, file
with the Commission and furnish to the Underwriters and to such dealers as the Representatives may
designate, such amendments or supplements to the Prospectus as may be necessary so that the
statements in the Prospectus as so amended or supplemented will not, in the light of the
circumstances existing when the Prospectus is delivered to a purchaser, be misleading or so that
the Prospectus will comply with law and (2) if at any time prior to the Closing Date (i) any event
shall occur or condition shall exist as a result of which the Time of Sale Information as then
amended or supplemented would include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of the circumstances
existing when the Time of Sale Information is delivered to a purchaser, not misleading or (ii) it
is necessary to amend or supplement the Time of Sale Information to comply with law, the Company
will immediately notify the Underwriters thereof and forthwith prepare and, subject to paragraph
(c) above, file with the Commission (to the extent required) and furnish to the Underwriters and to
such dealers as the Representatives may designate, such amendments or supplements to the Time of
Sale Information as may be necessary so that the statements in the Time of Sale Information as so
amended or supplemented will not, in the light of the circumstances, be misleading or so that the
Time of Sale Information will comply with law.
(f) Blue Sky Compliance. The Company will qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representatives shall reasonably request
and will continue such qualifications in effect so long as required for distribution of the Shares;
provided that the Company shall not be required to (i) qualify as a foreign corporation or
other entity or as a dealer in securities in any such jurisdiction which it would not otherwise be
required to so qualify, (ii) file any general consent to service of process in any such
jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not otherwise so
subject.
(g) Earning Statement. The Company will make generally available to its security holders and
the Representatives as soon as practicable an earning statement that satisfies the provisions of
Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder covering
a period of at least twelve months beginning with the first fiscal quarter of the Company occurring
after the “effective date” (as defined in Rule 158) of the Registration Statement.
(h) Clear Market. For a period of 180 days after the date of the initial public offering of
the Shares, the Company will not (i) offer, pledge, announce the intention to sell, sell, contract
to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of Stock or any securities convertible into or exercisable or exchangeable
for Stock or (ii) enter into any swap or other agreement that transfers, in whole or in part, any
of the economic consequences of ownership of the Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Stock or such other securities, in cash or
otherwise, without the prior written consent of JPMorgan, other than the Shares to be sold
hereunder, shares of Stock issued pursuant to those certain Convertible Promissory Notes issued by
the Company to each of Yorktown Energy Partners VII, L.P. and Lubar Equity Fund, LLC and each dated
June 25, 2007, and any shares of Stock of the Company issued upon the exercise of options granted
under existing employee stock option plans, grants by the Company of any Award (as defined in the
Plan) in accordance with the terms of the Company’s 2007 Stock Incentive Plan as in effect on the
date hereof (the “Plan”) and the filing by the Company of any registration statement with the
Commission on Form S-8 relating to the offering of securities pursuant to the terms of the Plan.
Notwithstanding the foregoing, if
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(1) during the last 17 days of the 180-day restricted period, the Company issues an earnings
release or material news or a material event relating to the Company occurs; or (2) prior to the
expiration of the 180-day restricted period, the Company announces that it will release earnings
results during the 16-day period beginning on the last day of the 180-day restricted period, the
restrictions imposed by this Agreement shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release or the occurrence of the material news or
material event; provided, however, that in no event shall such restrictions extend
past 214 days from the date of the Prospectus.
(i) Use of Proceeds. The Company will apply the net proceeds from the sale of the Shares as
described in the Registration Statement, the Time of Sale Information and the Prospectus under the
heading “Use of proceeds.”
(j) No Stabilization. The Company will not take, directly or indirectly, any action designed
to or that could reasonably be expected to cause or result in any stabilization or manipulation of
the price of the Shares.
(k) Exchange Listing. The Company will use its best efforts to list for quotation the Shares
on The Nasdaq Global Market (the “Nasdaq Global Market”).
(l) Reports. So long as the Shares are outstanding, the Company will furnish to the
Representatives, as soon as they are available, copies of all reports or other communications
(financial or other) furnished to holders of the Shares, and copies of any reports and financial
statements furnished to or filed with the Commission or any national securities exchange or
automatic quotation system.
(m) Record Retention. The Company will, pursuant to reasonable procedures developed in good
faith, retain copies of each Issuer Free Writing Prospectus that is not filed with the Commission
in accordance with Rule 433 under the Securities Act.
(n) Filings. The Company will file with the Commission such reports as may be required by
Rule 463 under the Securities Act.
6. Further Agreements of the Selling Stockholder.
(a) Clear Market. For a period of 180 days after the date of the initial public offering of
the Shares, the Selling Stockholder will not (i) offer, pledge, announce the intention to sell,
sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly
or indirectly, any shares of Stock or any securities convertible into or exercisable or
exchangeable for Stock or (ii) enter into any swap or other agreement that transfers, in whole or
in part, any of the economic consequences of ownership of the Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Stock or such other
securities, in cash or otherwise or (iii) make any demand for or exercise any right with respect to
the registration of any shares of Stock or any security convertible into or exercisable or
exchangeable for Stock without the prior written consent of JPMorgan other than the Shares to be
sold by the Selling Stockholder hereunder. Notwithstanding the foregoing, if (1) during the last 17
days of the 180-day restricted period, the Company issues an earnings release or material news or a
material event relating to the Company occurs; or (2) prior to the expiration of the 180-day
restricted period, the Company announces that it will release earnings results during the 16-day
period beginning on the last day of the 180-day restricted period, the restrictions imposed by this
Agreement shall continue to apply until the expiration of the 18-day period beginning on the
issuance of the earnings release or the occurrence of the material news or material event;
provided, however, that in no event shall such restrictions extend past 214 days
from the date of the Prospectus.
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(b) Tax Form. It will deliver to the Representatives prior to or at the Closing Date a
properly completed and executed United States Treasury Department Form W-9 (or other applicable
form or statement specified by the Treasury Department regulations in lieu thereof) in order to
facilitate the Underwriters’ documentation of their compliance with the reporting and withholding
provisions of the Tax Equity and Fiscal Responsibility Act of 1982 with respect to the transactions
herein contemplated.
7. Certain Agreements of the Underwriters. Each Underwriter hereby represents and
agrees that:
(a) It has not and will not use, authorize use of, refer to, or participate in the planning
for use of, any “free writing prospectus,” as defined in Rule 405 under the Securities Act (which
term includes use of any written information furnished to the Commission by the Company and not
incorporated by reference into the Registration Statement and any press release issued by the
Company), other than (i) a free writing prospectus that contains no “issuer information” (as
defined in Rule 433(h)(2) under the Securities Act) that was not included (including through
incorporation by reference) in the Preliminary Prospectus or a previously filed Issuer Free Writing
Prospectus, (ii) any Issuer Free Writing Prospectus listed on Annex C or prepared pursuant to
Section 3(c) or Section 5(c) above or (iii) any free writing prospectus prepared by such
Underwriter and approved by the Company in advance in writing (each such free writing prospectus
referred to in clauses (i) or (iii), an “Underwriter Free Writing Prospectus”).
(b) It has not and will not use, without the prior written consent of the Company, any free
writing prospectus that contains the final terms of the Shares unless such terms have previously
been included in a free writing prospectus filed with the Commission; provided that
Underwriters may use a term sheet substantially in the form of Annex D hereto without the consent
of the Company; provided further that any Underwriter using such term sheet shall
notify the Company, and provide a copy of such term sheet to the Company, prior to, or
substantially concurrently with, the first use of such term sheet.
(c) It is not subject to any pending proceeding under Section 8A of the Securities Act with
respect to the offering (and will promptly notify the Company and the Selling Stockholder if any
such proceeding against it is initiated during the Prospectus Delivery Period).
8. Conditions of Underwriters’ Obligations. The obligation of each Underwriter to
purchase the Underwritten Shares on the Closing Date or the Option Shares on the Additional Closing
Date, as the case may be, as provided herein is subject to the performance by the Company and the
Selling Stockholder of their respective covenants and other obligations hereunder and to the
following additional conditions:
(a) Registration Compliance; No Stop Order. No order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceeding for such purpose or pursuant to
Section 8A under the Securities Act shall be pending before or threatened by the Commission; the
Prospectus and each Issuer Free Writing Prospectus shall have been timely filed with the Commission
under the Securities Act (in the case of an Issuer Free Writing Prospectus, to the extent required
by Rule 433 under the Securities Act) and in accordance with Section 5(a) hereof; and all requests
by the Commission for additional information shall have been complied with to the reasonable
satisfaction of the Representatives.
(b) Representations and Warranties. The representations and warranties of the Company and the
Selling Stockholder contained herein shall be true and correct on the date hereof and on and as of
the Closing Date or the Additional Closing Date, as the case may be; and the statements of the
Company and its officers and of the Selling Stockholder made in any certificates delivered pursuant
to this Agreement shall be true and correct on and as of the Closing Date or the Additional Closing
Date, as the case may be.
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(c) No Material Adverse Change. No event or condition of a type described in Section 3(f)
hereof shall have occurred or shall exist, which event or condition is not described in the Time of
Sale Information (excluding any amendment or supplement thereto) and the Prospectus (excluding any
amendment or supplement thereto) and the effect of which in the judgment of the Representatives
makes it impracticable or inadvisable to proceed with the offering, sale or delivery of the Shares
on the Closing Date or the Additional Closing Date, as the case may be, on the terms and in the
manner contemplated by this Agreement, the Time of Sale Information and the Prospectus.
(d) Officer’s Certificate. The Representatives shall have received on and as of the Closing
Date or the Additional Closing Date, as the case may be, a certificate of each of (i) the chief
financial officer or chief accounting officer of the Company and one additional senior executive
officer of the Company who is satisfactory to the Representatives (A) confirming that such officers
have carefully reviewed the Registration Statement, the Time of Sale Information and the Prospectus
and, to the knowledge of such officers, the representations set forth in Sections 3(b) and 3(c)
hereof are true and correct, (B) confirming that the other representations and warranties of the
Company in this Agreement are true and correct and that the Company has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or
prior to such Closing Date and (C) to the effect set forth in paragraphs (a) and (c) above and (ii)
the Selling Stockholder confirming that the representations of the Selling Stockholder in this
Agreement are true and correct and that the Selling Stockholder has complied with all agreements
and satisfied all conditions on their part to be performed or satisfied hereunder at or prior to
such Closing Date.
(e) Comfort Letters. On the date of this Agreement and on the Closing Date or the Additional
Closing Date, as the case may be, Xxxx & Associates LLP shall have furnished to the
Representatives, at the request of the Company, letters, dated the respective dates of delivery
thereof and addressed to the Underwriters, in form and substance reasonably satisfactory to the
Representatives, containing statements and information of the type customarily included in
accountants’ “comfort letters” to underwriters with respect to the financial statements and certain
financial information contained in the Registration Statement, the Time of Sale Information and the
Prospectus; provided, that the letter delivered on the Closing Date or the Additional
Closing Date, as the case may be, shall use a “cut-off” date no more than three business days prior
to such Closing Date or such Additional Closing Date, as the case may be.
(f) Opinion of Counsel for the Company. Each of (i) Xxxxxxxx & Knight LLP, counsel for the
Company, and (ii) J. Xxxxxx Xxxxxxxxx, General Counsel of the Company, shall have furnished to the
Representatives, at the request of the Company, their respective written opinion, dated the Closing
Date or the Additional Closing Date, as the case may be, and addressed to the Underwriters, in form
and substance reasonably satisfactory to the Representatives, to the effect set forth in Annex A-1
and A-2 hereto.
(g) Opinion of Counsel for the Selling Stockholder. Carrington, Coleman, Xxxxxx & Xxxxxxxxxx,
L.L.P., counsel for the Selling Stockholder, shall have furnished to the Representatives, at the
request of the Selling Stockholder, their written opinion, dated the Closing Date or the Additional
Closing Date, as the case may be, and addressed to the Underwriters, in form and substance
reasonably satisfactory to the Representatives, to the effect set forth in Annex B hereto.
(h) Opinion of Counsel for the Underwriters. The Representatives shall have received on and
as of the Closing Date or the Additional Closing Date, as the case may be, an opinion of Xxxxxx
Xxxxxx & Xxxxxxx llp, counsel for the Underwriters, with respect to such matters as the
Representatives may reasonably request, and such counsel shall have received such documents and
information as they may reasonably request to enable them to pass upon such matters.
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(i) Reserve Letters. On the date of this Agreement and on the Closing Date or the Additional
Closing Date, as the case may be, each of XxXxxxxx & XxxXxxxxxxx and Xxxxxx, Xxxxxxxxx &
Associates, Inc. shall have furnished to the Representatives, at the request of the Company,
reserve report confirmation letters, dated the respective dates of delivery thereof and addressed
to the Underwriters, in form and substance reasonably satisfactory to the Representatives,
containing statements and information of the type customarily included in such letters to
underwriters with respect to the reserve and other operational information contained in the
Registration Statement, the Time of Sale Information and the Prospectus.
(j) No Legal Impediment to Issuance. No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any federal, state or foreign
governmental or regulatory authority that would, as of the Closing Date or the Additional Closing
Date, as the case may be, prevent the issuance or sale of the Shares; and no injunction or order of
any federal, state or foreign court shall have been issued that would, as of the Closing Date or
the Additional Closing Date, as the case may be, prevent the issuance or sale of the Shares.
(k) Good Standing. The Representatives shall have received on and as of the Closing Date or
the Additional Closing Date, as the case may be, satisfactory evidence of the good standing of the
Company and its subsidiaries in their respective jurisdictions of organization and their good
standing as foreign entities in such other jurisdictions as the Representatives may reasonably
request, in each case in writing or any standard form of telecommunication from the appropriate
Governmental Authorities of such jurisdictions.
(l) Exchange Listing. The Shares to be delivered on the Closing Date or Additional Closing
Date, as the case may be, shall have been approved for listing on the Nasdaq Global Market, subject
to official notice of issuance.
(m) Lock-up Agreements. The “lock-up” agreements, each substantially in the form of Exhibit A
hereto, between you and certain shareholders, officers and directors of the Company relating to
sales and certain other dispositions of shares of Stock or certain other securities, delivered to
you on or before the date hereof, shall be full force and effect on the Closing Date or Additional
Closing Date, as the case may be.
(n) Additional Documents. On or prior to the Closing Date or the Additional Closing Date, as
the case may be, the Company and the Selling Stockholder shall have furnished to the
Representatives such further certificates and documents as the Representatives may reasonably
request.
All opinions, letters, certificates and evidence mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to counsel for the Underwriters.
9. Indemnification and Contribution.
(a) Indemnification of the Underwriters by Company. The Company agrees to indemnify and hold
harmless each Underwriter, its affiliates, directors and officers and each person, if any, who
controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages and liabilities (including,
without limitation, legal fees and other expenses incurred in connection with any suit, action or
proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that
arise out of, or are based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or caused by any omission or alleged omission to state
therein a material fact required to be
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stated therein or necessary in order to make the statements therein, not misleading, or (ii)
any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (or
any amendment or supplement thereto), any Issuer Free Writing Prospectus or any Time of Sale
Information (including any Time of Sale Information that has been subsequently amended), or caused
by any omission or alleged omission to state therein 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, in each case except insofar as such losses, claims, damages or
liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with any information relating to any
Underwriter furnished to the Company in writing by such Underwriter through the Representatives
expressly for use therein, it being understood and agreed that the only such information furnished
by any Underwriter consists of the information described as such in subsection (c) below.
The Company also agrees to indemnify and hold harmless, Wachovia, its affiliates, directors
and officers and each person, if any, who controls Wachovia within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities incurred as a result of Wachovia’s participation as a “qualified
independent underwriter” within the meaning of the Rules of Conduct of the NASD in connection with
the offering of the Shares.
(b) Indemnification of Underwriters by the Selling Stockholder. The Selling Stockholder
agrees to indemnify and hold harmless each Underwriter, its affiliates, directors and officers and
each person, if any, who controls such Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in
paragraph (a) above but only with respect to any losses, claims, damages or liabilities that arise
out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission
concerning or relating to the Selling Stockholder in the Registration Statement, the Prospectus (or
any amendment or supplement thereto), any Issuer Free Writing Prospectus or any Time of Sale
Information.
The Selling Stockholder hereunder also agrees to indemnify and hold harmless Wachovia, its
affiliates, directors and officers and each person, if any, who controls Wachovia within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages and liabilities incurred as a result of Wachovia’s participation as
a “qualified independent underwriter” within the meaning of the Rules of Conduct of the NASD in
connection with the offering of the Shares.
(c) Indemnification of the Company and the Selling Stockholder. Each Underwriter agrees,
severally and not jointly, to indemnify and hold harmless the Company, its directors, their
officers who signed the Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and the
Selling Stockholder to the same extent as the indemnity set forth in paragraph (a) above, but only
with respect to any losses, claims, damages or liabilities that arise out of, or are based upon,
any untrue statement or omission or alleged untrue statement or omission made in reliance upon and
in conformity with any information relating to such Underwriter furnished to the Company in writing
by such Underwriter through the Representatives expressly for use in the Registration Statement,
the Prospectus (or any amendment or supplement thereto), any Issuer Free Writing Prospectus or any
Time of Sale Information, it being understood and agreed upon that the only such information
furnished by any Underwriter consists of the following information in the Prospectus furnished on
behalf of each Underwriter: the concession and reallowance figures appearing in the fourth
paragraph under the caption “Underwriting” and the information concerning stabilizing transactions
and other information appearing under the caption “Underwriting” in the two paragraphs beginning
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with the words “The underwriters have advised us that they may make short sales . . .” and
“The underwriters have advised us that, pursuant to Regulation M . . .”.
(d) Notice and Procedures. If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against any person in
respect of which indemnification may be sought pursuant to the preceding paragraphs of this Section
9, such person (the “Indemnified Person”) shall promptly notify the person against whom such
indemnification may be sought (the “Indemnifying Person”) in writing; provided that the
failure to notify the Indemnifying Person shall not relieve it from any liability that it may have
under paragraphs (a), (b) or (c) above except to the extent that it has been materially prejudiced
(through the forfeiture of substantive rights or defenses) by such failure; and provided
further, that the failure to notify the Indemnifying Person shall not relieve it from any
liability that it may have to an Indemnified Person otherwise than under paragraphs (a), (b) or (c)
above. If any such proceeding shall be brought or asserted against an Indemnified Person and it
shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel
reasonably satisfactory to the Indemnified Person (who shall not, without the consent of the
Indemnified Person, be counsel to the Indemnifying Person) to represent the Indemnified Person in
such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as
incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified
Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to
the contrary or (ii) the Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person. It is understood and agreed that the
Indemnifying Person shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to
any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be paid
or reimbursed as they are incurred; provided, however, that if indemnity may be
sought pursuant to the second paragraph of Section 9(a) above in respect of such proceeding, then
in addition to such separate firm of the Underwriters, their affiliates and such control persons of
the Underwriters the indemnifying party shall be liable for the fees and expenses of not more than
one separate firm (in addition to any local counsel) for Wachovia in its capacity as a “qualified
independent underwriter,” its affiliates and all persons, if any, who control Wachovia within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act. Any such
separate firm for any Underwriter, its affiliates, directors and officers and any control persons
of such Underwriter shall be designated in writing by the Representatives; any such separate firm
for the Company, its directors, its officers who signed the Registration Statement and any control
persons of the Company shall be designated in writing by the Company and any such separate firm for
the Selling Stockholder shall be designated in writing by the Attorneys-in-Fact. The Indemnifying
Person shall not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for the plaintiff, the
Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an Indemnified Person shall have requested that an Indemnifying Person reimburse the
Indemnified Person for fees and expenses of counsel as contemplated by this paragraph, the
Indemnifying Person shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after receipt by the
Indemnifying Person of such request and (ii) the Indemnifying Person shall not have reimbursed the
Indemnified Person in accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or
could have been a party and indemnification could have been sought hereunder by such Indemnified
Person, unless such settlement (x) includes an unconditional release of such Indemnified Person, in
form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims
that are the
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subject matter of such proceeding and (y) does not include any statement as to or any
admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.
(e) Contribution. If the indemnification provided for in paragraphs (a), (b), and (c) above
is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages
or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the Company and the
Selling Stockholder, on the one hand, and the Underwriters or Wachovia in its capacity as a
“qualified independent underwriter,” as the case may be, on the other, from the offering of the
Shares or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred to in clause (i)
but also the relative fault of the Company and the Selling Stockholder, on the one hand, and the
Underwriters or Wachovia in its capacity as a “qualified independent underwriter,” as the case may
be, on the other, in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Stockholder, on the one hand, and the
Underwriters or Wachovia in its capacity as a “qualified independent underwriter,” as the case may
be, on the other, shall be deemed to be in the same respective proportions as the net proceeds
(before deducting expenses) received by the Company and the Selling Stockholder from the sale of
the Shares and the total underwriting discounts and commissions received by the Underwriters in
connection therewith, in each case as set forth in the table on the cover of the Prospectus, or the
fee to be received by Wachovia in its capacity as a “qualified independent underwriter,” as the
case may be, bear to the aggregate offering price of the Shares. The relative fault of the Company
and the Selling Stockholder, on the one hand, and the Underwriters or Wachovia in its capacity as a
“qualified independent underwriter,” as the case may be, on the other, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to information supplied by the
Company and the Selling Stockholder or by the Underwriters or Wachovia in its capacity as a
“qualified independent underwriter,” as the case may be, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or omission.
(f) Limitation on Liability. The Company, the Selling Stockholder and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section 9 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by
any other method of allocation that does not take account of the equitable considerations referred
to in paragraph (e) above. The amount paid or payable by an Indemnified Person as a result of the
losses, claims, damages and liabilities referred to in paragraph (e) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses incurred by such
Indemnified Person in connection with any such action or claim. Notwithstanding the provisions of
this Section 9, in no event shall an Underwriter be required to contribute any amount in excess of
the amount by which the total underwriting discounts and commissions received by such Underwriter
with respect to the offering of the Shares exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters’ obligations to contribute pursuant
to this Section 9 are several in proportion to their respective purchase obligations hereunder and
not joint.
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(g) Non-Exclusive Remedies. The remedies provided for in this Section 9 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any Indemnified Person
at law or in equity.
10. Effectiveness of Agreement. This Agreement shall become effective upon the
execution and delivery hereof by the parties hereto.
11. Termination. This Agreement may be terminated in the absolute discretion of the
Representatives, by notice to the Company and the Selling Stockholder, if after the execution and
delivery of this Agreement and prior to the Closing Date or, in the case of the Option Shares,
prior to the Additional Closing Date (i) trading generally shall have been suspended or materially
limited on or by any of the New York Stock Exchange, the American Stock Exchange, the NASD, the
Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade; (ii)
trading of any securities issued or guaranteed by the Company shall have been suspended on any
exchange or in any over-the-counter market; (iii) a general moratorium on commercial banking
activities shall have been declared by federal or New York State authorities; or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis, either within or outside the United States, that, in the judgment of the
Representatives, is material and adverse and makes it impracticable or inadvisable to proceed with
the offering, sale or delivery of the Shares on the Closing Date or the Additional Closing Date, as
the case may be, on the terms and in the manner contemplated by this Agreement, the Time of Sale
Information and the Prospectus.
12. Defaulting Underwriter.
(a) If, on the Closing Date or the Additional Closing Date, as the case may be, any
Underwriter defaults on its obligation to purchase the Shares that it has agreed to purchase
hereunder on such date, the non-defaulting Underwriters may in their discretion arrange for the
purchase of such Shares by other persons satisfactory to the Company and the Selling Stockholder on
the terms contained in this Agreement. If, within 36 hours after any such default by any
Underwriter, the non-defaulting Underwriters do not arrange for the purchase of such Shares, then
the Company and the Selling Stockholder shall be entitled to a further period of 36 hours within
which to procure other persons satisfactory to the non-defaulting Underwriters to purchase such
Shares on such terms. If other persons become obligated or agree to purchase the Shares of a
defaulting Underwriter, either the non-defaulting Underwriters or the Company and the Selling
Stockholder may postpone the Closing Date or the Additional Closing Date, as the case may be, for
up to five full business days in order to effect any changes that in the opinion of counsel for the
Company, counsel for the Selling Stockholder or counsel for the Underwriters may be necessary in
the Registration Statement and the Prospectus or in any other document or arrangement, and the
Company agrees to promptly prepare any amendment or supplement to the Registration Statement and
the Prospectus that effects any such changes. As used in this Agreement, the term “Underwriter”
includes, for all purposes of this Agreement unless the context otherwise requires, any person not
listed in Schedule 1 hereto that, pursuant to this Section 12, purchases Shares that a defaulting
Underwriter agreed but failed to purchase.
(b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting
Underwriter or Underwriters by the non-defaulting Underwriters and the Company and the Selling
Stockholder as provided in paragraph (a) above, the aggregate number of Shares that remain
unpurchased on the Closing Date or the Additional Closing Date, as the case may be, does not exceed
one-eleventh of the aggregate number of Shares to be purchased on such date, then the Company and
the Selling Stockholder shall have the right to require each non-defaulting Underwriter to purchase
the number of Shares that such Underwriter agreed to purchase hereunder on such date plus such
Underwriter’s pro rata share (based on
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the number of Shares that such Underwriter agreed to purchase on such date) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not been made.
(c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting
Underwriter or Underwriters by the non-defaulting Underwriters and the Company and the Selling
Stockholder as provided in paragraph (a) above, the aggregate number of Shares that remain
unpurchased on the Closing Date or the Additional Closing Date, as the case may be, exceeds
one-eleventh of the aggregate amount of Shares to be purchased on such date, or if the Company and
the Selling Stockholder shall not exercise the right described in paragraph (b) above, then this
Agreement or, with respect to any Additional Closing Date, the obligation of the Underwriters to
purchase Shares on the Additional Closing Date, as the case may be, shall terminate without
liability on the part of the non-defaulting Underwriters. Any termination of this Agreement
pursuant to this Section 12 shall be without liability on the part of the Company and the Selling
Stockholder, except that the Company will continue to be liable for the payment of expenses as set
forth in Section 13 hereof and except that the provisions of Section 9 hereof shall not terminate
and shall remain in effect.
(d) Nothing contained herein shall relieve a defaulting Underwriter of any liability it may
have to the Company, the Selling Stockholder or any non-defaulting Underwriter for damages caused
by its default.
13. Payment of Expenses.
(a) Whether or not the transactions contemplated by this Agreement are consummated or this
Agreement is terminated, the Company will pay or cause to be paid all costs and expenses incident
to the performance of its obligations hereunder, including without limitation, (i) the costs
incident to the authorization, issuance, sale, preparation and delivery of the Shares and any taxes
payable in that connection; (ii) the costs (other than the fees and expenses of underwriters’
counsel related thereto) incident to the preparation, printing and filing under the Securities Act
of the Registration Statement, the Preliminary Prospectus, any Issuer Free Writing Prospectus, any
Time of Sale Information and the Prospectus (including all exhibits, amendments and supplements
thereto) and the distribution thereof; (iii) the costs of reproducing and distributing each of the
Transaction Documents; (iv) the fees and expenses of the Company’s counsel and independent
accountants; (v) the fees and expenses incurred in connection with the registration or
qualification of the Shares under the laws of such jurisdictions as the Representatives may
designate (including the related fees and expenses reasonably incurred of counsel for the
Underwriters); (vi) the cost of preparing stock certificates; (vii) the costs and charges of any
transfer agent and any registrar; (viii) all expenses and application fees incurred in connection
with any filing with, and clearance of the offering by, the NASD; (ix) all expenses incurred by the
Company in connection with any “road show” presentation to potential investors; and (x) all
expenses and application fees related to the listing of the Shares on the Nasdaq Global Market;
provided that notwithstanding clause (ix) above, the Underwriters shall pay one-half of the
expenses associated with any airplane, which is used for the purposes of such “road show”
presentations.
(b) If (i) the Company or the Selling Stockholder for any reason fails to tender the Shares
for delivery to the Underwriters or (ii) the Underwriters decline to purchase the Shares for any
reason permitted under this Agreement (other than Section 11), the Company agrees to reimburse the
Underwriters for all out-of-pocket costs and expenses (including the fees and expenses of their
counsel) reasonably incurred by the Underwriters in connection with this Agreement and the offering
contemplated hereby.
14. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective successors and the officers
and directors and any controlling persons referred to in Section 9 hereof. Nothing in this
Agreement is intended or shall be
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construed to give any other person any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein. No purchaser of Shares from any
Underwriter shall be deemed to be a successor merely by reason of such purchase.
15. Survival. The respective indemnities, rights of contribution, representations,
warranties and agreements of the Company, the Selling Stockholder and the Underwriters contained in
this Agreement or made by or on behalf of the Company, the Selling Stockholder or the Underwriters
pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery
of and payment for the Shares and shall remain in full force and effect, regardless of any
termination of this Agreement or any investigation made by or on behalf of the Company, the Selling
Stockholder or the Underwriters.
16. Certain Defined Terms. For purposes of this Agreement, (a) except where otherwise
expressly provided, the term “affiliate” has the meaning set forth in Rule 405 under the Securities
Act; (b) the term “business day” means any day other than a day on which banks are permitted or
required to be closed in New York City; and (c) the term “subsidiary” has the meaning set forth in
Rule 405 under the Securities Act.
17. Miscellaneous.
(a) Authority of the Representatives. Any action by the Underwriters hereunder may be taken
by the Representatives on behalf of the Underwriters, and any such action taken by Representatives
shall be binding upon the Underwriters.
(b) Notices. All notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted and confirmed by any standard form of
telecommunication. Notices to the Underwriters shall be given to the Representatives c/o X.X.
Xxxxxx Securities Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (fax: (000) 000-0000); Attention:
Equity Syndicate Desk. Notices to the Company and the Selling Stockholder shall be given to it at
Approach Resources Inc., One Ridgmar Centre, 0000 Xxxx Xxxxxxx, Xxxxx 000, Xxxx Xxxxx, XX 00000,
(fax: (000) 000-0000); Attention: J. Xxxxxx Xxxxxxxxx, Executive Vice President and General
Counsel.
(c) Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
(d) Counterparts. This Agreement may be signed in counterparts (which may include
counterparts delivered by any standard form of telecommunication), each of which shall be an
original and all of which together shall constitute one and the same instrument.
(e) Amendments or Waivers. No amendment or waiver of any provision of this Agreement, nor any
consent or approval to any departure therefrom, shall in any event be effective unless the same
shall be in writing and signed by the parties hereto.
(f) Headings. The headings herein are included for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this Agreement.
-26-
If the foregoing is in accordance with your understanding, please indicate your acceptance of
this Agreement by signing in the space provided below.
| Very truly yours, APPROACH RESOURCES INC. |
||||
| By: | /s/ X. Xxxx Craft | |||
| Name: | X. Xxxx Craft | |||
| Title: | President and CEO | |||
-27-
| NEO CANYON EXPLORATION, L.P. |
||||
| By: | /s/ X. Xxxx Craft | |||
| Name: | X. Xxxx Craft | |||
| Title: | President and CEO, Approach Resources Inc. | |||
| As Attorney-in-Fact acting on behalf of the Selling
Stockholder. |
||||
-28-
Accepted: November 7, 2007
X.X. XXXXXX SECURITIES INC.
WACHOVIA CAPITAL MARKETS, LLC
For themselves and on behalf of the
several Underwriters listed in
Schedule 1 hereto.
several Underwriters listed in
Schedule 1 hereto.
X.X. XXXXXX SECURITIES INC.
By:
|
/s/ Xxxxxxx Xxxxxxxxx
|
|||
| Title: Managing Director | ||||
| WACHOVIA CAPITAL MARKETS, LLC | ||||
By:
|
/s/ Xxxx Xxxxx | |||
| Name: Xxxx Xxxxx | ||||
| Title: Managing Director | ||||
Schedule 1
| Number of Underwritten | ||||||||
| Underwriter | Shares | Number of Option Shares | ||||||
X.X. Xxxxxx Securities Inc. |
4,600,000 | 690,000 | ||||||
Wachovia Capital Markets, LLC |
1,533,333 | 230,000 | ||||||
KeyBanc Capital Markets Inc. |
766,667 | 115,000 | ||||||
Tudor, Xxxxxxxxx & Co.
Securities, Inc. |
766,667 | 115,000 | ||||||
Total |
7,666,667 | 1,150,000 | ||||||
Sched 1-1
Schedule 2
| Attorneys-in-Fact | ||
X. Xxxx Craft
|
||
J. Xxxxxx Xxxxxxxxx
|
Sched 2-1
Annex A-1
Form of Opinion of Xxxxxxxx & Knight LLP
(a) The Registration Statement was declared effective under the Securities Act as of the date
and time specified in such opinion; the Prospectus was filed with the Commission pursuant to the
subparagraph of Rule 424(b) under the Securities Act specified in such opinion on the date
specified therein; and, to such counsel’s knowledge, no order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose or pursuant to Section 8A
of the Securities Act against the Company or in connection with the offering is pending or, to the
knowledge of such counsel, threatened by the Commission.
(b) The Company and each of its subsidiaries have been duly organized and are validly existing
and in good standing under the laws of their respective jurisdictions of organization, are duly
qualified to do business and are in good standing in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective businesses requires such
qualification, and have all power and authority necessary to own or hold their respective
properties and to conduct the businesses in which they are engaged, except where the failure to be
in good standing or so qualified or have such power or authority would not, individually or in the
aggregate, have a Material Adverse Effect.
(c) The Registration Statement, the Marketing Preliminary Prospectus, each Issuer Free Writing
Prospectus included in the Time of Sale Information and the Prospectus (other than the financial
statements and notes and related schedules and other financial and accounting data and the oil and
natural gas reserve estimates included therein or omitted therefrom as to which such counsel need
express no opinion) apear on their face to comply as to form in all material respects with the
requirements of the Securities Act.
(d) The Company has the requisite corporate power and authority to execute and deliver each of
the Transaction Documents and to perform its obligations thereunder.
(e) The Underwriting Agreement has been duly authorized, executed and delivered by the
Company.
(f) The Contribution Agreement has been duly authorized, executed and delivered by the Company
and constitutes a valid and legally binding agreement of the Company enforceable against the
Company in accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors’ rights generally or by equitable
principles relating to enforceability; provided that the indemnity, contribution and exoneration
provisions contained therein may be limited by applicable laws and public policy.
(g) The Shares to be issued and sold by the Company hereunder have been duly authorized, and
when delivered to and paid for by the Underwriters in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable and the issuance of the Shares is not subject
to any preemptive rights granted under its Amended and Restated Certificate of Incorporation or
Restated Bylaws of the Delaware General Corporation Law.
(h) The execution, delivery and performance by the Company of each of the Transaction
Documents, the issuance and sale of the Shares by the Company being delivered on the Closing Date
or the Additional Closing Date, as the case may be, and compliance by the Company with the terms
of, and the consummation of the transactions contemplated by, the Transaction Documents will not
(i) conflict
A-1-1
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
property or assets of the Company or any of its subsidiaries pursuant to, any document filed as an
exhibit to the Registration Statement, (ii) result in any violation of the provisions of the
charter or by-laws or similar organizational documents of the Company or any of its subsidiaries or
(iii) result in the violation of any law or statute or any judgment, order or regulation of any
court or arbitrator or governmental or regulatory authority known to such counsel except, in the
case of clauses (i) and (iii) above, for such conflict, breach or violation that would not,
individually or in the aggregate, have a Material Adverse Effect. With respect to clause (iii)
above, we express no opinion as to the application of any state securities or Blue Sky laws or
federal or state antifraud laws, rules or regulations.
(i) No consent, approval, authorization, order, registration or qualification of or with any
court or arbitrator or governmental or regulatory authority is required for the execution, delivery
and performance by the Company of each of the Transaction Documents, the issuance and sale of the
Shares being delivered on the Closing Date or the Additional Closing Date, as the case may be, and
compliance by the Company with the terms thereof and the consummation of the transactions
contemplated by the Underwriting Agreement, except for the registration of the Shares under the
Securities Act and such consents, approvals, authorizations, orders and registrations or
qualifications as may be required under applicable state securities laws in connection with the
purchase and distribution of the Shares by the Underwriters, and any consent, approval,
authorization, order, registration or qualification that either has been, or prior to the Closing
Date will have been, obtained or made, or which if not obtained or made, would not individually or
in the aggregate, have a Material Adverse Effect.
(j) The descriptions in the Registration Statement, the Time of Sale Information and the
Prospectus under the headings “Material United States federal income and estate tax considerations
for non-U.S. holders”, “Description of Capital Stock”, “Business — Regulation” and “Underwriting”,
and in the Registration Statement in items 14 and 15, to the extent that they constitute summaries
of the terms of stock, matters of law or regulation or legal conclusions, are accurate in all
material respects; and, to the knowledge of such counsel, there are no current or pending legal,
governmental or regulatory actions, suits or proceedings that are required under the Securities Act
to be described in the Registration Statement and that are not so described in the Registration
Statement, the Time of Sale Information and the Prospectus.
(k) The Company is not and, after giving effect to the offering and sale of the Shares and the
application of the proceeds thereof as described in the Registration Statement, the Time of Sale
Information and the Prospectus, will not be required to register as an “investment company” within
the meaning of the Investment Company Act.
Such counsel shall also state that they have participated in conferences with representatives
of the Company and with representatives of its independent accountants and counsel at which
conferences the contents of the Registration Statement, the Time of Sale Information and the
Prospectus and any amendment and supplement thereto and related matters were discussed and,
although such counsel assume no responsibility for, or express any opinion regarding (other than as
listed in opinion (j) above), the accuracy, completeness or fairness of the Registration Statement,
the Time of Sale Information, the Prospectus and any amendment or supplement thereto (except as
expressly provided above), based upon the participation described above (relying as to factual
matters upon statements of fact made to us by representatives of the Company) and subject to the
next succeeding sentence, nothing has come to the attention of such counsel to cause such counsel
to believe that the Registration Statement, at the time of its effective date (including the
information, if any, deemed pursuant to Rule 430A, 430B or 430C to be part of the Registration
Statement at the time of effectiveness), contained any untrue
statement of a material fact or omitted
A-1-2
to state a material fact required to be stated therein or necessary to make the statements
therein not misleading, that the Time of Sale Information, at the Time of Sale (which such counsel
may assume to be the date of the Underwriting Agreement) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading or that the Prospectus or any
amendment or supplement thereto as of its date and the Closing Date contains any untrue statement
of a material fact or omits to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. In making the foregoing
statement, such counsel will not express any comment or belief with respect to the financial
statements and notes and related schedules (and other financial and accounting data derived
therefrom), and the oil and natural gas reserve estimates included in or omitted from the
Registration Statement, the Time of Sale Information or the Prospectus.
In rendering such opinion, such counsel may rely as to matters of fact on certificates of
responsible officers of the Company and public officials that are furnished to the Underwriters.
The opinion of Xxxxxxxx & Xxxxxx LLP described above shall be rendered to the Underwriters at
the request of the Company and shall so state therein.
X-0-0
Xxxxx X-0
[Form of Opinion of General Counsel of the Company]
(a) The Company has authorized capital stock as set forth in the Registration Statement, the
Time of Sale Information and the Prospectus under the heading “Capitalization”; all of the
outstanding shares of capital stock of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Registration Statement, the Time of Sale
Information and the Prospectus.
(b) The execution, delivery and performance by the Company of each of the Transaction
Documents, the issuance and sale of the Shares by the Company being delivered on the Closing Date
or the Additional Closing Date, as the case may be, and the consummation of the transactions
contemplated by, the Transaction Documents will not conflict with or result in the breach or
violation of any of the terms or provisions of, or constitute a default under any contract to which
the Company is a party.
(c) To the knowledge of such counsel, except as described in the Registration Statement, the
Time of Sale Information and the Prospectus, there are no legal, governmental or regulatory
investigations, actions, suits or proceedings pending to which the Company or any of its
subsidiaries is or may be a party or to which any property of the Company or any of its
subsidiaries is or may be the subject which, individually or in the aggregate, if determined
adversely to the Company or any of its subsidiaries, could reasonably be expected to have a
Material Adverse Effect; and to the knowledge of such counsel, no such investigations, actions,
suits or proceedings are threatened or contemplated by any governmental or regulatory authority or
threatened by others.
X-0-0
Xxxxx X
[Form of Opinion of Counsel For
The Selling Stockholder]
The Selling Stockholder]
(a) The Underwriting Agreement has been duly authorized, executed and delivered by or on
behalf of the Selling Stockholder.
(b) A Power of Attorney and a Custody Agreement have been duly authorized, executed and
delivered by the Selling Stockholder and constitute valid and binding agreements of the Selling
Stockholder in accordance with their terms.
(b) The sale of the Shares and the execution and delivery by the Selling Stockholder of, and
the performance by the Selling Stockholder of its obligations under, the Underwriting Agreement,
and the consummation of the transactions contemplated therein, (i) have been duly authorized on the
part of the Selling Stockholder, and (ii) will not conflict with or result in a breach of any of
the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other material agreement or instrument to which the Selling Stockholder is a
party or by which the Selling Stockholder is bound or to which any of the property or assets of the
Selling Stockholder is subject, nor will any such action result in any violation of limited
partnership agreement of the Selling Stockholder or any applicable law or statute or any order,
rule or regulation of any court or governmental agency or body having jurisdiction over the Selling
Stockholder or any of its properties.
(c) No consent, approval, authorization or order of any governmental agency or body under
United States federal or Texas state law that in such counsel’s experience is normally applicable
to limited partnerships in relation to transactions of the type contemplated by the Underwriting
Agreement or by the Time of Sale Information and the Prospectus is required to be obtained or made
by the Selling Stockholder for the execution, delivery and performance of the Underwriting
Agreement or in connection with the sale to the Underwriter of the Shares sold by each Selling
Stockholder, except such as have been obtained and such as may be required under federal or state
securities laws, as to which such counsel need not express any opinion.
(d) Upon (a) payment for the Shares to be sold by the Selling Stockholder to the Underwriter
as provided in the Underwriting Agreement, (b) the delivery of such Shares to Cede & Co. (“Cede”)
or such other nominee as may be designated by The Depository Trust Company (“DTC”), (c) the
registration of such Shares in the name of Cede or such other nominee and (d) the crediting of such
Shares on the records of DTC to security accounts in the name of the Underwriter (assuming that
neither DTC nor the Underwriter has notice of any adverse claim (as such phrase is defined in
Section 8-105 of the Uniform Commercial Code as in effect in the State of New York (the “UCC”)) to
such Shares or any security entitlement in respect thereof), (i) DTC shall be a “protected
purchaser” of such Shares within the meaning of Section 8-303 of the UCC, (ii) under Section 8-501
of the UCC, the Underwriter will acquire a security entitlement in respect of such Shares and (iii)
to the extent governed by Article 8 of the UCC, no action based on any “adverse claim” (as defined
in Section 8-102 of the UCC) to such Shares may be asserted against the Underwriter; it being
understood that for purposes of this opinion, such counsel may assume that when such payment,
delivery and crediting occur, (x) such Shares will have been registered in the name of Cede or such
other nominee as may be designated by DTC, in each case on the Company’s share registry in
accordance with its certificate of incorporation, by laws and applicable law, (y) DTC will be
registered as a “clearing corporation” within the meaning of Section 8-102 of the UCC and (z)
appropriate entries to the securities account or accounts in the name of the Underwriter on the
records of DTC will have been made pursuant to the UCC.
B-1
The opinion of counsel described above shall be rendered to the Underwriters at the request of
the Selling Stockholder and shall so state therein.
B-2
Annex C
Time of Sale Information
Issuer Free Writing Prospectus
Filed Pursuant to Rule 433
November 7, 2007
Registration Statement No. 333-144512
Filed Pursuant to Rule 433
November 7, 2007
Registration Statement No. 333-144512
7,666,667
Shares of Common Stock
Shares of Common Stock
Issuer: |
Approach Resources Inc. | |
Common stock offered by the issuer: |
5,605,377 shares | |
Common stock offered by the selling
stockholder: |
2,061,290 shares | |
Common stock to be outstanding after this offering: |
19,629,551 shares | |
Public offering price: |
$12.00 per share | |
Net proceeds to the issuer, after |
||
deducting underwriting discounts |
||
and estimated offering expenses: |
$61.3 million (or $72.3 million if the underwriters exercise their over-allotment option in full) | |
The following table restates certain pro forma as adjusted balance sheet amounts set forth in our
preliminary prospectus in order to reflect the public offering price set forth above and the
application of the net proceeds as described in “Use of proceeds.” A copy of our preliminary
prospectus can be accessed through the following link:
xxxx://xxx.xxx.xxx/Xxxxxxxx/xxxxx/xxxx/0000000/000000000000000000/x00000x0xx0xx.xxx
| Pro forma as adjusted | ||||
| (In thousands) | As of June 30, 2007 | |||
Cash and cash equivalents |
$ | 9,549 | ||
Property and equipment, net,
successful efforts method |
$ | 193,692 | ||
Total assets |
$ | 213,963 | ||
Stockholders’ equity |
$ | 180,450 | ||
Total liabilities and stockholders’ equity |
$ | 213,963 | ||
Total capitalization |
$ | 180,450 | ||
Approach Resources Inc. has filed a registration statement (including a prospectus) with the SEC
for the offering to which this communication relates. Before you invest, you should read the
prospectus in that registration statement and other documents the issuer has filed with the SEC for
more complete information about the issuer and this offering. You may get these documents for free
by visiting XXXXX on the SEC Web site at xxx.xxx.xxx. Alternatively, the issuer, any underwriter or
any dealer participating in the offering will arrange to send you the prospectus if you request it
by calling toll-free 0-000-000-0000.
C-1
Annex D
Pricing Term Sheet
| Underwriter | Shares | |||||||||
Price |
$ | 12.00 | JPMorgan | 4,600,000 | ||||||
| Wachovia | 1,533,333 | |||||||||
Shares |
7,666,667 | KeyBanc | 766,667 | |||||||
| TudorPickering | 766,667 | |||||||||
Spread % |
7.00 | % | ||||||||
| 7,666,667 | ||||||||||
Spread $ |
$ | 0.8400 | ||||||||
Selling Concession |
$ | 0.5040 | ||||||||
Reallowance |
$ | 0.1000 | ||||||||
Trade |
8-Nov | |||||||||
Settle |
14-Nov | |||||||||
D-1
Exhibit A
FORM OF LOCK-UP AGREEMENT
, 2007
X.X. XXXXXX SECURITIES INC.
WACHOVIA CAPITAL MARKETS, LLC
As Representatives of
the several Underwriters listed in
Schedule 1 to the Underwriting
Agreement referred to below
c/o X.X. Xxxxxx Securities Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
WACHOVIA CAPITAL MARKETS, LLC
As Representatives of
the several Underwriters listed in
Schedule 1 to the Underwriting
Agreement referred to below
c/o X.X. Xxxxxx Securities Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Re: Approach Resources Inc. — Public Offering
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of the several Underwriters, propose
to enter into an Underwriting Agreement (the “Underwriting Agreement”) with Approach Resources
Inc., a Delaware corporation (the “Company”), providing for the public offering (the “Public
Offering”) by the several Underwriters to be named in Schedule 1 to the Underwriting Agreement (the
“Underwriters”) of common stock of the Company (the “Securities”).
In consideration of the Underwriters’ agreement to purchase and make the Public Offering of
the Securities, and for other good and valuable consideration receipt of which is hereby
acknowledged, the undersigned hereby agrees that, without the prior written consent of X.X. Xxxxxx
Securities Inc. (“JPMorgan”) on behalf of the Underwriters, the undersigned will not, during the
period ending 180 days after the date of the prospectus relating to the Public Offering (the
“Prospectus”), (1) offer, pledge, announce the intention to sell, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock, par value $0.01 per share, of the Company (the “Common Stock”) or any securities
convertible into or exercisable or exchangeable for Common Stock (including, without limitation,
Common Stock which may be deemed to be beneficially owned by the undersigned in accordance with the
rules and regulations of the Securities and Exchange Commission and securities which may be issued
upon exercise of a stock option or warrant) or (2) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (1) or (2) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise. In addition, the undersigned agrees
that, without the prior written consent of JPMorgan, it will not, during the period ending 180 days
after the date of the Prospectus, make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock.
Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted
period, the Company issues an earnings release or material news or a material event relating to the
Company occurs; or (2) prior to the expiration of the 180-day restricted period, the Company
announces that it will release earnings results during the 16-day period beginning on the last day
of the 180-day period, the restrictions
Exh A-1
imposed by this Letter Agreement shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release or the occurrence of the material news or
material event; provided, however, that in no event shall such restrictions extend
past 214 days from the date of the Prospectus.
In furtherance of the foregoing, the Company, and any duly appointed transfer agent for the
registration or transfer of the securities described herein, are hereby authorized to decline to
make any transfer of securities if such transfer would constitute a violation or breach of this
Letter Agreement.
The undersigned hereby represents and warrants that the undersigned has full power and
authority to enter into this Letter Agreement. All authority herein conferred or agreed to be
conferred and any obligations of the undersigned shall be binding upon the successors, assigns,
heirs or personal representatives of the undersigned.
The undersigned understands that, if the Underwriting Agreement does not become effective, or
if the Underwriting Agreement (other than the provisions thereof which survive termination) shall
terminate or be terminated prior to payment for and delivery of the Common Stock to be sold
thereunder, the undersigned shall be released from all obligations under this Letter Agreement.
The undersigned understands that the Underwriters are entering into the Underwriting Agreement
and proceeding with the Public Offering in reliance upon this Letter Agreement.
In addition, the undersigned hereby waives any rights the undersigned may have, if any, to
require registration of Common Stock in connection with the filing of a registrations statement
relating to the Public Offering.
This Letter Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without regard to the conflict of laws principles thereof.
| Very truly yours, |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
Exh A-2
