EXHIBIT 1.1
5,700,000 Shares
CARRIZO OIL & GAS, INC.
Common Stock
UNDERWRITING AGREEMENT
February 5, 2004
CIBC World Markets Corp.
First Albany Capital, Inc.
Hibernia Southcoast Capital, Inc.
Johnson Rice & Company L.L.C.
as Representatives of the several
Underwriters named in Schedule I hereto
c/o CIBC World Markets Corp.
417 5th Avenue, 2nd Floor
New York, New York 10016
Ladies and Gentlemen:
Carrizo Oil & Gas, Inc., a Texas corporation (the "Company"),
and the persons listed on Schedule II hereto (the "Selling Stockholders"),
propose severally, subject to the terms and conditions contained herein, to sell
to you and the other underwriters named on Schedule I to this Agreement (the
"Underwriters"), for whom you are acting as Representatives (the
"Representatives"), an aggregate of 5,700,000 shares (the "Firm Shares") of the
Company's common stock, $0.01 par value per share (the "Common Stock"). Of the
5,700,000 Firm Shares, 3,420,000 are to be issued and sold by the Company and
2,280,000 are to be sold severally by the Selling Stockholders. The respective
amounts of the Firm Shares to be purchased by each of the several Underwriters
are set forth opposite their names on Schedule I hereto. In addition, the
Company proposes to grant to the Underwriters an option to purchase up to an
additional 256,500 shares (the "Company Option Shares") of Common Stock from the
Company, and the Selling Stockholders propose to grant to the Underwriters an
option to purchase up to an additional 598,500 shares (the "Selling Stockholder
Option Shares" and, together with the Company Option Shares, the "Option
Shares") of Common Stock from the Selling Stockholders for the purpose of
covering over-allotments in connection with the sale of the Firm Shares. The
Firm Shares and the Option Shares are collectively called the "Shares."
The Company represents that it has prepared and filed in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the published
rules and regulations thereunder (the "Rules") adopted by the Securities and
Exchange Commission (the "Commission") a Registration Statement (as hereinafter
defined) on Form S-2 (No. 333-111475), including a preliminary prospectus
relating to the Shares, and such amendments thereof as may have been required to
the date of this Agreement. Copies of such Registration Statement (including all
amendments thereof) and of the related Preliminary Prospectus (as hereinafter
defined) have heretofore been delivered by the Company to you. The term
"Preliminary Prospectus" means any preliminary prospectus included at any time
as a part of the Registration Statement or filed with the Commission by the
Company pursuant to Rule 424(a) of the Rules. The term "Registration Statement"
as used in this Agreement means the initial registration statement (including
all exhibits, financial schedules and all documents and information deemed to be
a part of the Registration Statement through incorporation by reference or
otherwise), as amended at the time and on the date it becomes effective (the
"Effective Date"), including the information (if any) contained in the form of
final prospectus filed with the Commission pursuant to Rule 424(b) of the Rules
and deemed to be part thereof at the time of effectiveness pursuant to Rule 430A
of the Rules. If the Company has filed an abbreviated registration statement to
register additional Shares pursuant to Rule 462(b) under the Rules (the "462(b)
Registration Statement"), then any reference herein to the Registration
Statement shall also be deemed to include such 462(b) Registration Statement.
The term "Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement at the time of effectiveness or, if Rule
430A of the Rules is relied on, the term Prospectus shall also include the final
prospectus filed with the Commission pursuant to Rule 424(b) of the Rules.
Reference made herein to any Preliminary Prospectus or to the Prospectus shall
be deemed to refer to and include any documents incorporated by reference
therein pursuant to Item 12 of Form S-2 under the Securities Act, as of the date
of such Preliminary Prospectus or the Prospectus, as the case may be, and any
reference to any amendment or supplement to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include any document filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the date
of such Preliminary Prospectus or the Prospectus, as the case may be, and
incorporated by reference in such Preliminary Prospectus or the Prospectus, as
the case may be.
The Company and the Selling Stockholders understand that the
Underwriters propose to make a public offering of the Shares, as set forth in
and pursuant to the Prospectus, as soon after the Effective Date and the date of
this Agreement as the Representatives deem advisable. The Company hereby
confirms that the Underwriters and dealers have been authorized to distribute or
cause to be distributed each Preliminary Prospectus and are authorized to
distribute the Prospectus (as from time to time amended or supplemented if the
Company furnishes amendments or supplements thereto to the Underwriters).
1. Sale, Purchase, Delivery and Payment for the Shares. On the
basis of the representations, warranties and agreements contained in, and
subject to the terms and conditions of, this Agreement:
(a) The Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at a purchase price of
$7.00 per share (the "Initial Price"), the number of Firm Shares
set forth opposite the name of such Underwriter under the column
"Number of Firm Shares to be Purchased from the Company" on
Schedule I to this Agreement,
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subject to adjustment in accordance with Section 9 hereof. Each
of the Selling Stockholders agrees, severally and not jointly, to
sell to each of the Underwriters the number of Firm Shares set
forth opposite the name of such Selling Stockholder under the
column "Number of Firm Shares to be Sold" on Schedule II to this
Agreement, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Selling Stockholders, at the
Initial Price, the number of Firm Shares set forth opposite the
name of such Underwriter under the column "Number of Firm Shares
to be Purchased from the Selling Stockholders" on Schedule I to
this Agreement, subject to adjustment in accordance with Section
9 hereof.
(b) The Company and the Selling Stockholders, severally and
not jointly, hereby grant to the several Underwriters an option
to purchase, severally and not jointly, all or any part of the
Option Shares at the Initial Price as described below. The number
of Option Shares to be purchased by each Underwriter shall be
purchased in the same percentage (adjusted by the Representatives
to eliminate fractions) of the total number of Option Shares to
be purchased by the Underwriters as such Underwriter is
purchasing of the Firm Shares, and the number of Selling
Stockholder Option Shares to be purchased from each Selling
Stockholder shall be as set forth opposite the name of such
Selling Stockholder under the column "Number of Option Shares to
be Sold" on Schedule II to this Agreement; provided however, that
if the option is exercised by the Underwriters in part but not in
full, the amount of Option Shares purchased by the Underwriters
from the Company and the Selling Stockholders shall be in exact
proportion to the amount of option shares purchased by the
Underwriters from the Company and the Selling Stockholders had
the option been exercised by the Underwriters in full. Such
option may be exercised only to cover over-allotments in the
sales of the Firm Shares by the Underwriters and may be exercised
in whole or in part at any time on or before 12:00 noon, New York
City time, on the business day before the Firm Shares Closing
Date (as defined below), and from time to time thereafter within
30 days after the date of this Agreement, in each case upon
written, facsimile or telegraphic notice by the Representatives
to the Company delivered no later than 12:00 noon, New York City
time, on the business day before the Firm Shares Closing Date or
at least two business days before the Option Shares Closing Date
(as defined below), as the case may be, setting forth the number
of Option Shares to be purchased and the time and date (if other
than the Firm Shares Closing Date) of such purchase. The Company
and the Selling Stockholders agree, severally and not jointly, to
sell to the Underwriters, the number of Option Shares specified
in such notice, and the Underwriters agree, severally and not
jointly, to purchase such Option Shares.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the offices of
CIBC World Markets Corp., One World Financial Center, New York,
New York 10281, at 10:00 a.m., New York City time, on the third
business day following the date of this Agreement or at such time
on such other date, not later than ten (10) business days after
the date of this Agreement, as shall be agreed upon by the
Company and the Representatives (such time and date of delivery
and payment are called the "Firm Shares Closing Date"). In
addition, in the event that any or all of the Option Shares are
purchased by the Underwriters, payment of the purchase price, and
delivery of the certificates, for such Option Shares shall be
made at the above-
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mentioned offices, or at such other place as shall be agreed upon
by the Representatives and the Company, on each date of delivery
as specified in the notice from the Representatives to the
Company (such time and date of delivery and payment are called
the "Option Shares Closing Date"). The Firm Shares Closing Date
and any Option Shares Closing Date are called, individually, a
"Closing Date" and, together, the "Closing Dates."
(d) Payment shall be made to the Company and the Selling
Stockholders by wire transfer of immediately available funds or
by certified or official bank check or checks payable in New York
Clearing House (same day) funds drawn to the order of the Company
and to the Selling Stockholders for the shares purchased from the
Company and the Selling Stockholders, against delivery of the
respective certificates to the Representatives for the respective
accounts of the Underwriters of the respective certificates for
the Shares to be purchased by them.
(e) Certificates evidencing the Shares shall be registered
in such names and shall be in such denominations as the
Representatives shall request at least two full business days
before the Firm Shares Closing Date or, in the case of Option
Shares, on the day of notice of exercise of the option as
described in Section 1(b) and shall be delivered by or on behalf
of the Company to the Representatives through the facilities of
the Depository Trust Company ("DTC") for the account of such
Underwriter.
2. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Firm Shares Closing Date and as of each Option Shares Closing Date (if any), as
follows:
(a) On the Effective Date, the Registration Statement
complied, and on the date of the Prospectus, the date any
post-effective amendment to the Registration Statement becomes
effective, the date any supplement or amendment to the Prospectus
is filed with the Commission and each Closing Date, the
Registration Statement and the Prospectus (and any amendment
thereof or supplement thereto) will comply, in all material
respects, with the requirements of the Securities Act and the
Rules and the Exchange Act and the rules and regulations of the
Commission thereunder. The Registration Statement did not, as of
the Effective Date, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and on the Effective Date and the other dates
referred to above neither the Registration Statement nor the
Prospectus, nor any amendment thereof or supplement thereto, will
contain any untrue statement of a material fact or will omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
When the preliminary prospectus dated January 20, 2004 was first
filed with the Commission (whether filed as part of the
Registration Statement or any amendment thereto or pursuant to
Rule 424(a) of the Rules) and when any amendment thereof or
supplement thereto was first filed with the Commission, such
preliminary prospectus as amended or supplemented complied in all
material respects with the applicable provisions of the
Securities Act and the Rules and did not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in
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light of the circumstances under which they were made, not
misleading. If applicable, each Preliminary Prospectus and the
Prospectus delivered to the Underwriters for use in connection
with this offering was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
Notwithstanding the foregoing, none of the representations and
warranties in this paragraph 2(a) shall apply to statements in,
or omissions from, the Registration Statement or the Prospectus
made in reliance upon, and in conformity with, information herein
or otherwise furnished in writing by the Representatives on
behalf of the several Underwriters for use in the Registration
Statement or the Prospectus. With respect to the preceding
sentence, the Company acknowledges that the only information
furnished in writing by the Representatives on behalf of the
several Underwriters for use in the Registration Statement or the
Prospectus is the statements contained in the fourth and twelfth
paragraphs under the caption "Underwriting" in the Prospectus.
(b) The Registration Statement is effective under the
Securities Act and no stop order preventing or suspending the
effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus has been issued by the
Commission and, to the knowledge of the Company, no proceedings
for that purpose have been instituted or are threatened under the
Securities Act. Any required filing of the Prospectus and any
supplement thereto pursuant to Rule 424(b) of the Rules has been
or will be made in the manner and within the time period required
by such Rule 424(b).
(c) The documents incorporated by reference in the
Registration Statement and the Prospectus, at the time they
became effective or were filed with the Commission, as the case
may be, complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of
such documents, when read together with the other information in
the Prospectus, contained an untrue statement of a material fact
or omitted 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, and any further documents so filed and incorporated
by reference in the Registration Statement and the Prospectus,
when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material
respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not, when read together with the
other information in the Prospectus, contain an untrue statement
of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not
misleading.
(d) The financial statements of the Company (including all
notes and schedules thereto) included or incorporated by
reference in the Registration Statement and Prospectus present
fairly in all material respects the financial position of the
Company and its consolidated subsidiaries at the dates indicated
and the statement of operations, stockholders' equity and cash
flows of the Company and its consolidated subsidiaries for the
periods specified; and such financial statements and related
schedules and notes thereto, and the unaudited financial
information filed with the Commission as part of the Registration
Statement, have been prepared in conformity with generally
5
accepted accounting principles, consistently applied throughout
the periods involved. The summary and selected financial data
included in the Prospectus present fairly in all material
respects the information shown therein as at the respective dates
and for the respective periods specified and have been presented
on a basis consistent with the consolidated financial statements
set forth in the Prospectus and other financial information.
(e) Ernst & Young LLP, whose reports are filed with the
Commission as a part of the Registration Statement, are and,
during the periods covered by their reports, were independent
public accountants as required by the Securities Act and the
Rules.
(f) The Company and each of its subsidiaries, including each
entity (corporation, partnership, joint venture, association or
other business organization) controlled directly or indirectly by
the Company, is duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of
incorporation or organization. The Company and each of its
subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which
the nature of the business conducted by it or location of the
assets or properties owned, leased or licensed by it requires
such qualification, except for such jurisdictions where the
failure to so qualify individually or in the aggregate would not
have a material adverse effect on the assets, properties,
condition, financial or otherwise, or in the results of
operations, business affairs or business prospects of the Company
and its subsidiaries considered as a whole (a "Material Adverse
Effect"); and to the Company's knowledge, no proceeding has been
instituted in any such jurisdiction revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power
and authority or qualification.
(g) The Company and each of its subsidiaries has all
requisite corporate power and authority, and all necessary
authorizations, approvals, consents, orders, licenses,
certificates and permits of and from all governmental or
regulatory bodies or any other person or entity (collectively,
the "Permits"), to own, lease and license its assets and
properties and conduct its business, all of which are valid and
in full force and effect, except where the lack of such Permits,
individually or in the aggregate, would not have a Material
Adverse Effect. The Company and each of its subsidiaries has
fulfilled and performed in all material respects all of its
material obligations with respect to such Permits and no event
has occurred that allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other
material impairment of the rights of the Company thereunder.
(h) Except as disclosed in the Registration Statement and
the Prospectus, the Company and each of its subsidiaries has (i)
defensible title to all their interests in the oil and gas
properties described in the Prospectus as being owned or leased
by them, title investigations having been carried out by the
Company in accordance with customary practice in the oil and gas
industry, and (ii) good and marketable title to all other real
property and all personal property described in the Prospectus as
being owned by them, in each case free and clear of all liens,
encumbrances, claims, security interests and defects, except (A)
such as would not have a Material Adverse Effect, (B) security
interests securing loans under the Company's senior credit
facility and senior
6
subordinated notes, (C) royalties, overriding royalties and other
burdens under oil and gas leases, (D) easements, restrictions,
rights-of-way and other matters that commonly affect oil and gas
properties and (E) liens and encumbrances under gas sales
contracts, geophysical exploration agreements, operating
agreements, farmout agreements, participation agreements,
unitization, pooling and commutation agreements, declarations and
orders and gas sales contracts, securing payment of amounts not
yet due and payable and of a scope and nature customary in the
oil and gas industry. All property held under lease by the
Company and its subsidiaries is held by them under valid,
existing and enforceable leases, free and clear of all liens,
encumbrances, claims, security interests and defects, except such
as would not have a Material Adverse Effect.
(i) There are no litigation or governmental proceedings to
which the Company or any of its subsidiaries are subject or which
is pending or, to the knowledge of the Company, threatened,
against the Company or any of its subsidiaries, which,
individually or in the aggregate, might have a Material Adverse
Effect, affect the consummation of this Agreement or which are
required to be disclosed in the Registration Statement and the
Prospectus that are not so disclosed.
(j) Subsequent to the respective dates as of which
information is given in the Registration Statement or the
Prospectus, except as described therein, (i) there has not been
any Material Adverse Effect; (ii) neither the Company nor any of
its subsidiaries has sustained any loss or interference with its
assets, businesses or properties (whether owned or leased) from
fire, explosion, earthquake, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or any court
or legislative or other governmental action, order or decree
which would have a Material Adverse Effect; and (iii) since the
date of the latest balance sheet included or incorporated by
reference in the Registration Statement and the Prospectus,
neither the Company nor its subsidiaries has (A) issued any
securities or incurred any liability or obligation, direct or
contingent, for borrowed money, except such liabilities or
obligations incurred in the ordinary course of business, (B)
entered into any transaction not in the ordinary course of
business or (C) except for regular dividends on the shares of the
Company's Series B Preferred Stock in amounts per share that are
consistent with past practice, declared or paid any dividend or
made any distribution on any shares of its stock or redeemed,
purchased or otherwise acquired or agreed to redeem, purchase or
otherwise acquire any shares of its capital stock.
(k) There is no document, contract or other agreement
required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration
Statement which is not described or filed as required by the
Securities Act or Rules. Each description of a contract, document
or other agreement in the Registration Statement and the
Prospectus accurately reflects in all material respects the terms
of the underlying contract, document or other agreement. Each
contract, document or other agreement described in the
Registration Statement and Prospectus or listed in the Exhibits
to the Registration Statement is in full force and effect and is
valid and enforceable by and against the Company or its
subsidiary, as the case may be, in accordance with its terms
except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to or
7
affecting the enforcement of creditors' rights generally and by
general principles of equity or public policy (regardless of
whether enforcement is sought in a proceeding at law or in
equity). Neither the Company nor any of its subsidiaries, if a
subsidiary is a party, nor to the Company's knowledge, any other
party is in default in the observance or performance of any term
or obligation to be performed by it under any such agreement, and
no event has occurred which with notice or lapse of time or both
would constitute such a default, in any such case which default
or event, individually or in the aggregate, would have a Material
Adverse Effect. No default exists, and no event has occurred
which with notice or lapse of time or both would constitute a
default, in the due performance and observance of any term,
covenant or condition, by the Company or its subsidiary, if a
subsidiary is a party thereto, of any other agreement or
instrument to which the Company or any of its subsidiaries is a
party or by which Company or its properties or business or a
subsidiary or its properties or business may be bound or affected
which default or event, individually or in the aggregate, would
have a Material Adverse Effect.
(l) Neither the Company nor any of its subsidiaries is in
violation of any term or provision of its charter or by-laws or
of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation, where the consequences of such
violation, individually or in the aggregate, would have a
Material Adverse Effect.
(m) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the
transactions contemplated hereby (including, without limitation,
the issuance and sale by the Company of the Shares) will give
rise to a right to terminate or accelerate the due date of any
payment due under, or conflict with or result in the breach of
any term or provision of, or constitute a default (or an event
which with notice or lapse of time or both would constitute a
default) under, or require any consent or waiver under, or result
in the execution or imposition of any lien, charge or encumbrance
upon any properties or assets of the Company or its subsidiaries
pursuant to the terms of, any indenture, mortgage, deed of trust
or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which either the Company or its
subsidiaries or any of their properties or businesses is bound,
or any franchise, license, permit, judgment, decree, order,
statute, rule or regulation applicable to the Company or any of
its subsidiaries or violate any provision of the charter or
by-laws of the Company or any of its subsidiaries, except for
such consents or waivers which have already been obtained and are
in full force and effect and except as would not have a Material
Adverse Effect.
(n) The Company has authorized and outstanding capital stock
as set forth under the captions "Capitalization" and "Description
of Capital Stock" in the Prospectus. The certificates evidencing
the Shares are in due and proper legal form and have been duly
authorized for issuance by the Company. All of the issued and
outstanding shares of Common Stock have been duly and validly
issued and are fully paid and nonassessable. There are no
statutory preemptive or other similar rights to subscribe for or
to purchase or acquire any of the Shares or any such rights
pursuant to its Articles of Incorporation or By-laws or any
agreement or instrument to or by which the Company or any of its
subsidiaries is a party or bound. The Shares, when issued and
sold pursuant to this
8
Agreement, will be duly and validly issued, fully paid and
nonassessable and none of them will be issued in violation of any
preemptive or other similar right. Except as disclosed in the
Registration Statement and the Prospectus, there is no
outstanding option, warrant or other right calling for the
issuance of, and there is no commitment, plan or arrangement to
issue, any share of stock of the Company or any of its
subsidiaries or any security convertible into, or exercisable or
exchangeable for, such stock. The Common Stock and the Shares
conform in all material respects to all statements in relation
thereto contained in the Registration Statement and the
Prospectus. All outstanding shares of capital stock of each of
the Company's subsidiaries have been duly authorized by all
necessary corporate action and validly issued, and are fully paid
and nonassessable and are owned directly by the Company or by
another wholly-owned subsidiary of the Company free and clear of
any security interests, liens, encumbrances, equities or claims,
other than those described in the Prospectus.
(o) No holder of any security of the Company has any right,
which has not been waived or satisfied, to have any security
owned by such holder included in the Registration Statement or to
demand registration of any security owned by such holder for a
period of 90 days after the date of this Agreement. Each director
and executive officer of the Company and each stockholder of the
Company listed on Schedule III has delivered to the
Representatives his enforceable written lock-up agreement in the
form attached to this Agreement as Exhibit A hereto ("Lock-Up
Agreement").
(p) All necessary corporate action has been duly and validly
taken by the Company to authorize the execution, delivery and
performance of this Agreement and the issuance and sale of the
Shares by the Company. This Agreement has been duly and validly
authorized by all necessary corporate action, executed and
delivered by the Company and constitutes and will constitute
legal, valid and binding obligations of the Company enforceable
against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other
similar laws relating to or affecting the enforcement of
creditors' rights generally and by general principles of equity
or public policy (regardless of whether enforcement is sought in
a proceeding at law or in equity).
(q) Neither the Company nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of the
Company, is any such dispute threatened, which dispute would have
a Material Adverse Effect. The Company is not aware of any
existing or imminent labor disturbance by the employees of any of
its principal suppliers or contractors which would have a
Material Adverse Effect. The Company is not aware of any
threatened or pending litigation between the Company or its
subsidiaries and any of its executive officers which, if
adversely determined, could have a Material Adverse Effect and
has no reason to believe that such officers will not remain in
the employment of the Company.
(r) No transaction has occurred between or among the Company
and any of its officers or directors, shareholders or any
affiliate or affiliates of any such officer or director or
shareholder that is required to be described in and is not
described in the Registration Statement and the Prospectus.
9
(s) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be
expected to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of the Common Stock or any security of
the Company to facilitate the sale or resale of any of the
Shares.
(t) The Company and each of its subsidiaries has filed all
Federal, state, local and foreign tax returns which are required
to be filed through the date hereof, except where the failure to
so file would not have a Material Adverse Effect, which returns
are true and correct in all material respects or has received
timely extensions thereof, and has paid all taxes shown on such
returns and all assessments received by it to the extent that the
same are material and have become due, except for such taxes as
are being contested in good faith and except as would not result
in a Material Adverse Effect. There are no tax audits or
investigations pending, which if adversely determined would have
a Material Adverse Effect; nor are there any material proposed
additional tax assessments against the Company or any of its
subsidiaries.
(u) The Shares have been duly authorized for quotation on
the National Association of Securities Dealers Automated
Quotation ("Nasdaq") National Market System, subject to official
notice of issuance.
(v) The Company has taken no action designed to, or likely
to have the effect of, terminating the registration of the Common
Stock under the Exchange Act or the quotation of the Common Stock
on the Nasdaq National Market, nor has the Company received any
notification that the Commission or the Nasdaq National Market is
contemplating terminating such registration or quotation.
(w) The books, records and accounts of the Company and its
subsidiaries accurately and fairly reflect, in reasonable detail,
the transactions in, and dispositions of, the assets of, and the
results of operations of, the Company and its subsidiaries. The
Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(x) The written engineering reports prepared by Ryder Scott
Company, L.P., Petroleum Consultants and Fairchild & Wells, Inc.,
Independent Petroleum Engineers (collectively, the "Independent
Petroleum Engineers"), as of December 31, 2002, setting forth the
engineering values attributed to the oil and gas properties of
the Company and its subsidiaries accurately reflect in all
material respects the ownership interests of the Company and its
subsidiaries in the properties therein as of December 31, 2002,
except as otherwise disclosed in the Registration Statement and
the Prospectus. The information
10
furnished by the Company to the Independent Petroleum Engineers
for purposes of preparing their reports, including, without
limitation, production, costs of operation and development,
current prices for production, agreements relating to current and
future operations and sales of production, was true, correct and
complete in all material respects on the date supplied and was
prepared in accordance with customary industry practices; each of
the Independent Petroleum Engineers, who prepared estimates of
the extent and value of proved oil and natural gas reserves, are
independent with respect to the Company.
(y) The Company and its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and
risks and in such amounts as are customary in the businesses in
which they are engaged or propose to engage after giving effect
to the transactions described in the Prospectus; all policies of
insurance and fidelity or surety bonds insuring the Company or
any of its subsidiaries or the Company's or its subsidiaries'
respective businesses, assets, employees, officers and directors
are in full force and effect; the Company and each of its
subsidiaries are in compliance with the terms of such policies
and instruments in all material respects; and neither the Company
nor any subsidiary of the Company has any reason to believe that
it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at
a cost that is not materially greater than the current cost,
except as would not have a Material Adverse Effect.
(z) Each approval, consent, order, authorization,
designation, declaration or filing of, by or with any regulatory,
administrative or other governmental body necessary in connection
with the execution and delivery by the Company of this Agreement
and the consummation of the transactions herein contemplated
required to be obtained or performed by the Company (except such
additional steps as may be required by the National Association
of Securities Dealers, Inc. (the "NASD") or may be necessary to
qualify the Shares for public offering by the Underwriters under
the state securities or Blue Sky laws) has been obtained or made
and is in full force and effect, except as would not have a
Material Adverse Effect.
(aa) There are no affiliations with the NASD among the
Company's officers, directors or, to the best of the knowledge of
the Company, any five percent or greater stockholder of the
Company, except as set forth in the Registration Statement or
otherwise disclosed in writing to the Representatives.
(bb) Except as described in the Prospectus, (i) each of the
Company and each of its subsidiaries is in compliance in all
material respects with all rules, laws and regulations relating
to the use, treatment, storage and disposal of toxic substances
and protection of health or the environment ("Environmental Law")
which are applicable to its business; (ii) neither the Company
nor its subsidiaries has received any notice from any
governmental authority or third party of an asserted claim under
Environmental Laws, which claim if determined adverse to the
Company or any subsidiary could have a Material Adverse Effect;
(iii) each of the Company and each of its subsidiaries has
received all material permits, licenses or other approvals
required of it under applicable
11
Environmental Laws to conduct its business and is in compliance
with all terms and conditions of any such permit, license or
approval, except where the absence of such permit, license,
approval or compliance would not result in a Material Adverse
Effect; (iv) to the Company's knowledge, no facts currently exist
that will require the Company or any of its subsidiaries to make
future material capital expenditures to comply with Environmental
Laws; (v) no property which is or has been owned, leased or
occupied by the Company or its subsidiaries has been designated
as a Superfund site pursuant to the Comprehensive Environmental
Response, Compensation of Liability Act of 1980, as amended (42
U.S.C. Section 9601, et. seq.) ("CERCLA") or otherwise designated
as a contaminated site under applicable state or local law; (vi)
neither the Company nor any of its subsidiaries has been named as
a "potentially responsible party" under CERCLA; (vii) there has
been no storage, disposal, generation, transportation, handling
or treatment of hazardous substances or solid wastes by the
Company (or to the knowledge of the Company, any of its
predecessors in interest) at, upon or from any of the property
now or previously owned or leased by the Company in violation of
any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require remedial action by the
Company under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or
remedial action which would not result in, or which would not be
reasonably likely to result in, singularly or in the aggregate
with all such violations and remedial actions, a Material Adverse
Effect; and (viii) there has been no spill, discharge, leak,
emission, injection, escape, dumping or release of any kind onto
such property or into the environment surrounding such property
of any solid wastes or hazardous substances due to or caused by
the Company, except for any spill, discharge, leak, emission,
injection, escape, dumping or release which would not result in
or would not be reasonably likely to result in, singularly or in
the aggregate will all such spills, discharges, leaks, emissions,
injections, escapes, dumpings and releases, a Material Adverse
Effect; and the terms "hazardous substances" and "solid wastes"
shall have the meanings specified in any applicable local, state
and federal laws or regulations with respect to environmental
protection.
(cc) In the ordinary course of its business, the Company
periodically reviews the effect of Environmental Laws on the
business, operations and properties of the Company and its
subsidiaries, in the course of which the Company identifies and
evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental
Laws, or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third
parties). On the basis of such review, the Company has reasonably
concluded that such associated costs and liabilities would not,
singly or in the aggregate, have a Material Adverse Effect.
(dd) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of proceeds
thereof as described in the Prospectus, will not be an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended (the "Investment Company Act").
(ee) The principal executive officer and principal financial
officer of the Company have made all certifications required by
the Sarbanes-Oxley Act or any related
12
rules and regulations promulgated by the Commission, and the
statements contained in any such certification are true and
correct in all material respects. The Company maintains
"disclosure controls and procedures" (as defined in Rule
13a-14(c) under the Exchange Act), and such controls and
procedures are designed (i) to ensure that information required
to be disclosed by the Company in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
Commission's rules and forms and (ii) to ensure that information
required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is accumulated and
communicated to the Company's management, including its principal
executive officer and principal financial officer, as appropriate
to allow timely decisions regarding required disclosure. The
Company does not have any material weaknesses in internal
controls, and there has been no material fraud that involves
management or other employees who have a significant role in the
Company's internal controls. The Company is otherwise in
compliance in all material respects with all applicable effective
provisions of the Sarbanes-Oxley Act and the rules and
regulations promulgated by the Commission (and intends to comply
with all applicable provisions that are not yet effective upon
effectiveness).
(ff) The Company or any other person associated with or
acting on behalf of the Company including, without limitation,
any director, officer, agent or employee of the Company or its
subsidiaries, has not, directly or indirectly, while acting on
behalf of the Company or its subsidiaries (i) used any corporate
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or
campaigns from corporate funds; (iii) violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any other unlawful payment.
(gg) Except as described in the Prospectus or in the
documents incorporated by reference into the Prospectus, the
Company has not sold or issued any shares of Common Stock during
the six-month period preceding the date of the Prospectus,
including any sales pursuant to Rule 144A under, or Regulations D
or S of, the Securities Act, other than shares issued pursuant to
employee benefit plans, qualified stock options plans or other
employee compensation plans or pursuant to outstanding options,
rights or warrants.
(hh) The Company has fulfilled its obligations, if any,
under the minimum funding standards of Section 302 of the U.S.
Employee Retirement Income Security Act of 1974 ("ERISA") and the
regulations and published interpretations thereunder with respect
to each "plan" as defined in Section 3(3) of ERISA and such
regulations and published interpretations in which its employees
are eligible to participate and each such plan is in compliance
in all material respects with the presently applicable provisions
of ERISA and such regulations and published interpretations. No
"Reportable Event" (as defined in 12 ERISA) has occurred with
respect to any "Pension Plan" (as defined in ERISA) for which the
Company could have any liability.
13
(ii) Each of the Company, its directors and officers has not
distributed and will not distribute prior to the later of (i) the
Firm Shares Closing Date, or the Option Shares Closing Date, and
(ii) completion of the distribution of the Shares, any offering
material in connection with the offering and sale of the Shares
other than any Preliminary Prospectus, the Prospectus, the
Registration Statement and other materials, if any, permitted by
the Securities Act.
3. Representations and Warranties of the Selling Stockholders.
Each Selling Stockholder hereby severally and not jointly represents and
warrants to each Underwriter as of the date hereof, as of the Firm Shares
Closing Date and, if such Selling Stockholder is selling Option Shares, as of
each such Option Shares Closing Date (if any), as to itself only, as follows:
(a) Except in the case of Shares issuable upon the exercise
of warrants (the "Warrants") previously issued by the Company
(the "Warrant Shares"), the Selling Stockholder has caused
certificates for the number of Shares to be sold by such Selling
Stockholder hereunder to be delivered to Computershare Trust
Company, Inc. (the "Custodian"), endorsed in blank or with blank
stock powers duly executed, with a signature appropriately
guaranteed, such certificates to be held in custody by the
Custodian for delivery, pursuant to the provisions of this
Agreement and an agreement among the Custodian and the Selling
Stockholder (the "Custody Agreement"). Each Selling Stockholder
selling Warrant Shares has (i) delivered to the Company an
exercise notice for the exchange of the Warrants, in whole or in
part, as the case may be, for the Warrant Shares; (ii) instructed
the Company to deliver the Warrant Shares to the persons named in
the Power of Attorney (as defined below) to be held on behalf of
such Selling Stockholder; and (iii) instructed the persons named
in the Power of Attorney to deliver such Warrant Shares to the
Custodian, endorsed in blank or with blank stock powers duly
executed, with a signature appropriately guaranteed, such
certificates to be held in custody by the Custodian for delivery,
pursuant to the provisions of this Agreement and the Custody
Agreement. The Selling Stockholder delivering Warrant Shares for
sale under this Agreement has taken all action required to
exercise the Warrants in an amount necessary such that, when
combined with other Shares represented by certificates delivered
to the Custodian, the Selling Stockholder can deliver the
specified number of Shares sold pursuant to this Agreement by
such Selling Shareholder on the Firm Shares Closing Date.
(b) The Selling Stockholder has granted an irrevocable power
of attorney (the "Power of Attorney") to the persons named
therein, on behalf of the Selling Stockholder, to execute and
deliver this Agreement and any other document necessary or
desirable in connection with the transactions contemplated hereby
and to deliver the shares to be sold by the Selling Stockholder
pursuant hereto.
(c) This Agreement and the transactions contemplated herein
have been duly authorized by the Selling Stockholder, and upon
execution and delivery of this Agreement by one of the Attorneys
(as defined in the Power of Attorney) on behalf of such Selling
Stockholder in accordance with the Power of Attorney, this
Agreement will have been duly executed and delivered by such
Selling Stockholder.
14
(d) Each of the Custody Agreement, the Power of Attorney,
the Lock-Up Agreement, and the transactions contemplated in each,
have been duly authorized, by or on behalf of the Selling
Stockholder, and each of the Custody Agreement, Power of Attorney
and the Lock-Up Agreement has been duly executed and delivered by
or on behalf of the Selling Stockholder, and, assuming due
authorization, execution and delivery by the other parties
thereto, constitutes the valid and legally binding agreement of
the Selling Stockholder, enforceable against the Selling
Stockholder in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium or
other similar laws relating to or affecting the enforcement of
creditors' rights generally and by general principles of equity
and public policy (regardless of whether enforcement is sought in
a proceeding at law or in equity).
(e) The execution and delivery by the Selling Stockholder of
this Agreement and the performance by the Selling Stockholder of
its obligations under this Agreement, do not and will not,
whether with or without the giving of notice or the passage of
time or both, (i) violate or contravene any provision of the
limited partnership agreement, limited liability company
agreement, trust agreement or declaration, charter or by-laws or
other organizational instrument of the Selling Stockholder, if
applicable, or any applicable law, statute, regulation, or any
agreement or other instrument binding upon the Selling
Stockholder or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Selling
Stockholder, (ii) conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any
tax, lien, charge or encumbrance upon the shares to be sold by
the Selling Stockholder or any property or assets of the Selling
Stockholder pursuant to the terms of any agreement or instrument
to which the Selling Stockholder is a party or by which the
Selling Stockholder may be bound or to which any of the property
or assets of the Selling Stockholder is subject or (iii) require
any consent, approval, authorization or order of or registration
or filing with any court or governmental agency or body having
jurisdiction over it, except such as may be required by the
federal securities laws or the Blue Sky laws of the various
states or under the rules of the NASD in connection with the
offer and sale of the Shares which have been or will be effected
in accordance with this Agreement, and, with respect to each of
(i), (ii) and (iii) above, except where such breach, violation,
default, creation, imposition or contravention or failure to
obtain such consent, approval, authorization or order,
individually or in the aggregate, would not have a material
adverse effect on the consummation by the Selling Stockholder of
the transactions contemplated by this Agreement.
(f) Except in the case of the Warrant Shares, the Selling
Stockholder is, and on the Firm Shares Closing Date and the
Option Share Closing Date, if applicable, will be the lawful
record owner of the Shares to be sold by such Selling Stockholder
at the Firm Shares Closing or the Option Shares Closing, as
applicable, free and clear of any lien, claim, security interest
or other encumbrance, including, without limitation, any
restriction on transfer, except as otherwise described in the
Registration Statement and Prospectus or pursuant to the Power of
Attorney or Custody Agreement. Each Selling Stockholder selling
Warrant Shares on the Firm Shares Closing Date and the Option
Share Closing Date, if applicable, will be the lawful record
owner of the Warrant Shares
15
to be sold by such Selling Stockholder at the Firm Shares Closing
or the Option Shares Closing, as applicable, free and clear of
any lien, claim, security interest or other encumbrance,
including, without limitation, any restriction on transfer,
except as otherwise described in the Registration Statement and
Prospectus or pursuant to the Power of Attorney or Custody
Agreement.
(g) If the certificates for the Shares to be sold by the
Selling Stockholder were delivered to the Underwriters in the
State of New York and assuming the Underwriters purchase the
Shares to be sold by such Selling Stockholder in good faith and
without "notice of adverse claim" (as such phrase is used in
Section 8-105 of the New York Uniform Commercial Code as
currently in effect in the State of New York (the "NY UCC"), upon
(i) delivery (as defined in Section 8-301(a) of the NY UCC) to
the Underwriters of the certificates representing such Shares
endorsed in blank by an effective endorsement (within the meaning
of Section 8-107 of the NY UCC), and (ii) payment therefore in
accordance with the terms of this Agreement and the Custody
Agreement, the Underwriters would become "protected purchasers"
(as defined in Section 8-303(a) of the NY UCC) of such Shares,
and will acquire such Shares free and clear of "adverse claims"
(as defined in Section 8-102 of the NY UCC) except for any such
adverse claims created by or at the request of the Underwriters.
(h) All information relating to the Selling Stockholder
furnished in writing by the Selling Stockholder to the Company
expressly for use in the Registration Statement and Prospectus
is, and on each Closing Date will be, true, correct, and complete
in all material respects, and does not, and on each Closing Date
will not, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make such information not misleading.
(i) Each Selling Stockholder who is an officer of the
Company has reviewed the Registration Statement and Prospectus
and, although the Selling Stockholder has not independently
verified the accuracy or completeness of all the information
contained therein, nothing has come to the attention of the
Selling Stockholder that would lead the Selling Stockholder to
believe that (i) on the Effective Date, the Registration
Statement contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein
in order to make the statements made therein not misleading and
(ii) on the Effective Date the Prospectus contained and, on each
Closing Date contains, no untrue statement of a material fact or
omitted or omits to state any material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, misleading.
(j) The sale of Shares by the Selling Stockholder pursuant
to this Agreement is not prompted by the Selling Stockholder's
knowledge of any material non-public information concerning the
Company or any of its subsidiaries which is not set forth in the
Prospectus.
(k) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or that might
reasonably be expected to cause or result
16
in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares.
4. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters under this Agreement are several and not joint.
The respective obligations of the Underwriters to purchase the Shares are
subject to each of the following terms and conditions:
(a) Notification that the Registration Statement has become
effective shall have been received by the Representatives and the
Prospectus shall have been timely filed with the Commission in
accordance with Section 5(a) of this Agreement.
(b) No order preventing or suspending the use of any
preliminary prospectus or the Prospectus shall have been or shall
be in effect and no order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for
such purpose shall be pending before or threatened by the
Commission. If the Company has elected to rely upon Rule 430A,
Rule 430A information previously omitted from the effective
Registration Statement pursuant to Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b)
within the prescribed time period and the Company shall have
provided evidence satisfactory to the Underwriters of such timely
filing, or a post-effective amendment providing such information
shall have been promptly filed and declared effective in
accordance with the requirements of Rule 430A.
(c) The representations and warranties of the Company and
the Selling Stockholders contained in this Agreement and in the
certificates delivered pursuant to Section 4(d) shall be true and
correct when made and on and as of each Closing Date as if made
on such date. The Company and the Selling Stockholders shall have
performed in all material respects all covenants and agreements
and satisfied all the conditions contained in this Agreement
required to be performed or satisfied by them at or before such
Closing Date.
(d) The Representatives shall have received on each Closing
Date a certificate, addressed to the Representatives and dated
such Closing Date, of the chief executive or chief operating
officer and the chief financial officer or chief accounting
officer of the Company to the effect that: (i) the
representations, warranties and agreements of the Company in this
Agreement were true and correct when made and are true and
correct as of such Closing Date; (ii) the Company has performed
in all material respects all covenants and agreements and
satisfied all conditions contained herein; (iii) they have
carefully examined the Registration Statement and the Prospectus
and, in their opinion (A) as of the Effective Date and as of the
Closing Date, the Registration Statement and Prospectus did not
include any untrue statement of a material fact and did not omit
to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (B)
since the Effective Date no event has occurred which should have
been set forth in a supplement or otherwise required an amendment
to the Registration Statement or the Prospectus; and (iv) no stop
order suspending the effectiveness of the Registration Statement
has been issued and, to their knowledge, no proceedings for that
purpose have been instituted or are pending under the Securities
Act.
17
(e) The Representatives shall have received on each Closing
Date a certificate, addressed to the Representatives and dated
such Closing Date, of each Selling Stockholder, to the effect
that: (i) the representations and warranties of such Selling
Stockholder in this Agreement were true and correct when made and
are true and correct as of such Closing Date and (ii) such
Selling Stockholder has performed in all material respects all of
its covenants and agreements and satisfied all conditions
pertaining to it contained herein.
(f) The Representatives shall have received, at the time
this Agreement is executed and on each Closing Date a signed
letter from Ernst & Young LLP addressed to the Representatives
and dated, respectively, the date of this Agreement and each such
Closing Date, in form and substance reasonably satisfactory to
the Representatives containing statements and information of the
type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain
financial information contained in the Registration Statement and
the Prospectus.
(g) The Representatives shall have received on each Closing
Date a letter from each of the Independent Petroleum Engineers in
form and substance satisfactory to the Underwriters confirming
certain matters concerning their engagement and the use of their
reserve reports and information derived from their reserve
reports in the Prospectus.
(h) The Representatives shall have received on each Closing
Date from Baker Botts L.L.P., counsel for the Company, an
opinion, addressed to the Representatives and dated such Closing
Date, and stating in effect that:
(i) Each of the Company and CCBM, Inc. has been duly
organized and is validly existing as a corporation in good
standing under the laws of the state of its incorporation.
CCBM, Inc. is duly qualified to transact business and is in
good standing as a foreign corporation in the State of
Texas.
(ii) Each of the Company and CCBM, Inc. has all
requisite corporate power and authority to own, lease and
operate its properties and to conduct its business as now
being conducted and as described in the Registration
Statement and the Prospectus and with respect to the Company
to enter into and perform its obligations under this
Agreement and to issue and sell the Shares.
(iii) The authorized capital stock of the Company is as
set forth in the Registration Statement and the Prospectus
under the caption "Capitalization" as of the dates stated
therein and, since such dates, there has been no change in
the authorized capital stock of the Company. The Shares to
be sold by the Selling Stockholders have been duly and
validly authorized and issued and are fully paid and
nonassessable. The Shares to be issued and sold by the
Company pursuant to this Agreement have been duly authorized
by all necessary corporate action for issuance and sale to
the Underwriters pursuant to this Agreement and, when issued
and delivered by the Company pursuant to this Agreement
against payment of the consideration set forth herein, will
be validly issued, fully paid and nonassessable. The
issuance and sale of the Shares by the Company and the sale
18
of the shares by the Selling Stockholders is not subject to
any preemptive or other similar rights of any securityholder
of the Company under the Company's Articles of Incorporation
or By-laws or, to the best of such counsel's knowledge, any
agreement. To the best of such counsel's knowledge, except
as disclosed in the Registration Statement and the
Prospectus, there are no preemptive or other rights to
subscribe for or to purchase or any restriction upon the
voting or transfer of any securities of the Company pursuant
to the Company's Articles of Incorporation or By-laws or any
agreements known to such counsel. The Common Stock and the
Shares conform in all material respects to the descriptions
thereof contained in the Registration Statement and the
Prospectus. The form of certificate used to evidence the
Common Stock complies in all material respects with all
applicable statutory requirements, with any applicable
requirements of the Articles of Incorporation or By-laws of
the Company and the requirements of the Nasdaq National
Market. To the best of such counsel's knowledge, there are
no persons with registration rights or other similar rights
to have any securities registered pursuant to the
Registration Statement or otherwise registered by the
Company under the Securities Act, other than as described or
as have been waived or satisfied.
(iv) All necessary corporate action has been duly and
validly taken by the Company to authorize the execution,
delivery and performance of this Agreement and the issuance
and sale of the Shares. This Agreement has been duly and
validly authorized, executed and delivered by the Company,
and this Agreement constitutes the legal, valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms except as such enforceability may
be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and
by general principles of equity or public policy (regardless
of whether enforcement is sought in a proceeding at law or
in equity).
(v) Neither the execution, delivery and performance of
this Agreement by the Company nor the consummation of any of
the transactions contemplated hereby (including, without
limitation, the issuance and sale by the Company of the
Shares) will, to the best of such counsel's knowledge, (a)
give rise to a right to terminate or accelerate the due date
of any payment due under, or conflict with or result in the
breach of any term or provision of, or constitute a default
(or any event which with notice or lapse of time, or both,
would constitute a default) under, or require consent or
waiver under, or result in the execution or imposition of
any lien, charge, claim, security interest or encumbrance
upon any properties or assets of the Company or any of its
subsidiaries pursuant to the terms of, any indenture,
mortgage, deed trust, note or other agreement or instrument
filed as an exhibit to the Registration Statement and to
which the Company or any of its subsidiaries is a party or
by which either the Company or any of its subsidiaries or
any of its assets or properties or businesses is bound, or
any franchise, license, permit, judgment, decree, order,
statute, rule or regulation binding on the Company or any of
its subsidiaries or properties, known to such
19
counsel of the United States or the State of Texas
(provided, however, that such counsel need express no
opinion with respect to compliance with any Federal or State
securities or anti-fraud law, rule or regulation except as
otherwise expressly stated in the opinion of such counsel)
or (b) violate any provision of the charter or by-laws of
the Company or any of its subsidiaries, except in the case
of clause (a) as would not reasonably be expected to have a
Material Adverse effect.
(vi) No consent, approval, authorization, license,
registration, qualification or order of any court or
governmental agency or regulatory body of the United States
or the State of Texas is required for the due authorization,
execution, delivery or performance of this Agreement by the
Company or the consummation of the transactions contemplated
hereby or thereby, except such as have been obtained under
the Securities Act and such as may be required under state
securities or Blue Sky laws or under the rules of the
National Association of Securities Dealers (the "NASD") in
connection with the purchase and distribution of the Shares
by the several Underwriters, except as would not reasonably
be expected to have a Material Adverse Effect.
(vii) To the best of such counsel's knowledge, there is
no action, suit, proceeding or other investigation, before
any court or before or by any public body or board pending
or threatened against, or involving the assets, properties
or businesses of, the Company which is required to be
disclosed in the Registration Statement and the Prospectus
and is not so disclosed or which could reasonably be
expected to have a Material Adverse Effect.
(viii) The statements in the Prospectus under the
captions "Description of Capital Stock," insofar as such
statements constitute a summary of documents referred to
therein or matters of law, are accurate in all material
respects and accurately present the information with respect
to such documents and matters.
(ix) To such counsel's knowledge, all contracts and
other documents required to be filed as exhibits to, or
described in, the Registration Statement have been so filed
with the Commission or are fairly described in the
Registration Statement, as the case may be.
(x) The Registration Statement and the Prospectus and
each amendment or supplement thereto (except for (i) the
financial statements and schedules contained therein or
omitted therefrom (including the notes thereto and the
auditor's report thereon), (ii) the summary reserve reports
of each of the Independent Petroleum Engineers included
therein, (iii) the other accounting, financial or reserve
engineering data contained therein or omitted therefrom or
(iv) the exhibits thereto, as to which such counsel has not
been asked to comment) appear on their face to comply as to
form in all material respects with the requirements of the
Securities Act and the Rules and the documents incorporated
by reference in the Registration Statement and the
Prospectuses and any further amendment or supplement to any
such incorporated document made by the
20
Company (except for (i) the financial statements and
schedules contained therein or omitted therefrom (including
the notes thereto and the auditor's report thereon), (ii)
the summary reserve reports of each of the Independent
Petroleum Engineers included therein, (iii) the other
accounting, financial or reserve engineering data contained
therein or omitted therefrom or (iv) the exhibits thereto,
as to which such counsel has not been asked to comment) when
they became effective or were filed with the Commission, as
the case may be, appeared on their face to comply as to form
in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder
(excluding those portions of filings which have been amended
in subsequent filings made prior to the date hereof).
(xi) The Registration Statement is effective under the
Securities Act, and to such counsel's knowledge no stop
order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that
purpose have been instituted or are threatened or pending.
Any required filing of the Prospectus and any supplement
thereto pursuant to Rule 424(b) under the Securities Act has
been made in the manner and within the time period required
by such Rule 424(b).
(xii) The Company has filed all applications and other
documents necessary for the Shares to be quoted on the
Nasdaq National Market, subject only to official notice of
issuance.
(xiii) The capital stock of the Company conforms in all
material respects to the description thereof contained in
the Prospectus under the caption "Description of Capital
Stock."
(xiv) The Company is not an "investment company" or an
entity controlled by an "investment company" as such terms
are defined in the Investment Company Act of 1940, as
amended.
To the extent deemed advisable by such counsel, such counsel
may (a) state that their opinion is limited to matters governed
by the Federal laws of the United States, the laws of the State
of Texas, the State of Delaware and the contract laws of the
State of New York, (b) rely as to matters of fact on certificates
of responsible officers of the Company and public officials and
other sources believed by them to be responsible, (c) assume that
the signatures on all documents examined by them are genuine, all
documents submitted to them are authentic, and all documents
submitted as certified or photographic copies or translations
conform with the originals, (d) state that their letter is
furnished as counsel for the Company to the Underwriters and is
solely for the benefit of the several Underwriters and (e) state
that in the foregoing opinions, phrases such as "to the knowledge
of such counsel," "known to such counsel" and those with
equivalent wording refer to the conscious awareness of
information by the lawyers of such firm who have prepared such
opinion, signed such opinion or been actively involved in
assisting and advising the Company in connection with the
preparation of the Registration
21
Statement, the execution and delivery of this Agreement and any
transactions contemplated herein.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other
representatives of the Company, representatives of the
Representatives, counsel for the representatives and
representatives of the independent certified public accountants
of the Company at which conferences the contents of the
Registration Statement and the Prospectus and related matters
were discussed and, although such counsel did not independently
verify such information and is not passing upon and does not
assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement and the Prospectus (except as specified in clauses
(viii) and (xiii) of the foregoing opinion), such counsel advises
you that on the basis of the foregoing, (relying as to
materiality to the extent such counsel deems appropriate upon
factual statements of officers and other representatives of the
Company and representatives of the Representatives), in the
course of acting as counsel to the Company in this transaction,
no facts have come to the attention of such counsel which lead
such counsel to believe that the Registration Statement (except
for (i) the financial statements and schedules contained therein
or omitted therefrom (including the notes thereto and the
auditor's report thereon), (ii) the summary reserve reports of
each of the Independent Petroleum Engineers included therein,
(iii) the other accounting, financial, statistical or reserve
engineering data contained therein or omitted therefrom or (iv)
the exhibits thereto, as to which such counsel has not been asked
to comment) at the time it became effective contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus as amended or
supplemented (except for (i) the financial statements and
schedules contained therein or omitted therefrom (including the
notes thereto and the auditor's report thereon), (ii) the summary
reserve reports of each of the Independent Petroleum Engineers
included therein, (iii) the other accounting, financial,
statistical or reserve engineering data contained therein or
omitted therefrom or (iv) the exhibits thereto, as to which such
counsel has not been asked to comment) on the date thereof
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.
(i) The Representatives shall have received on the Firm
Shares Closing Date from one or more counsel for each of the
Selling Stockholders reasonably acceptable to the
Representatives, an opinion, addressed to the Representatives and
dated such Closing Date, and stating substantially to the effect
that:
(i) With respect to any Selling Stockholder that is an
entity, this Agreement and the transactions contemplated
herein have been duly authorized by the Selling Stockholder,
and upon execution and delivery by one of the Attorneys (as
defined in the Power of Attorney) on behalf of such Selling
Stockholder in accordance with the Power of Attorney, will
have been duly executed and delivered by such Selling
Stockholder.
22
(ii) With respect to any Selling Stockholder that is an
entity, each of the Custody Agreement, the Power of Attorney
and the Lock-Up Agreement, and the transactions contemplated
therein, have been duly authorized by all necessary
corporate or partnership action on the part of such Selling
Stockholder and has been duly executed and delivered by or
on behalf of the Selling Stockholder.
(iii) Each of the Custody Agreement, the Power of
Attorney and the Lock-Up Agreement constitutes the legally
valid and binding obligation of such Selling Stockholder
enforceable against such Selling Stockholder in accordance
with its respective terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other
similar laws relating to or affecting the enforcement of
creditors' rights generally and by general principles of
equity and public policy, including, without limitation,
concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific
performance or injunctive relief (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(iv) The execution, delivery and performance of this
Agreement, the Power of Attorney, the Custody Agreement and
the Lock-Up Agreement and the sale and delivery by such
Selling Stockholder of the Shares to be sold by such Selling
Stockholder as contemplated by this Agreement and the
consummation of the transactions contemplated in this
Agreement and in the Registration Statement and the
Prospectus and compliance by such the Selling Stockholder
with its obligations hereunder do not and will not (i)
violate or contravene (A) with respect to any Selling
Stockholder that is an entity, any provision of the limited
partnership agreement, limited liability company agreement,
trust agreement or declaration, charter or by-laws or other
organizational instrument of the Selling Stockholder, if
applicable, or (B) any applicable law, statute, regulation,
or any agreement or other instrument binding upon the
Selling Stockholder or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over
the Selling Stockholder known to such counsel of the United
States or the laws of the state of residence or principal
place of business of such Selling Stockholder or the state
laws governing the formation or organization of any Selling
Stockholder that is an entity (provided, however, that such
counsel need express no opinion with respect to compliance
with any Federal or State securities or anti-fraud law, rule
or regulation except as otherwise expressly stated in the
opinion of such counsel), or (ii) require any consent,
approval, authorization or order of or registration or
filing with any court or governmental agency or body having
jurisdiction over it that such counsel has, in the exercise
of customary professional diligence, recognized as
applicable to such Selling Stockholder or to transactions of
the type contemplated by this Agreement is required in
connection with the performance of this Agreement, except
such as may be required by the federal securities laws or
the Blue Sky laws of the various states or under the rules
of the NASD in connection with the offer and sale of the
Shares which have been or will be effected in accordance
with this Agreement,
23
and, with respect to each of (i) and (ii) above, except
where such violations or contravention or failure to obtain
such consent, approval, authorization or order, individually
or in the aggregate, would not have a material adverse
effect on the consummation by the Selling Stockholder of the
transactions contemplated by this Agreement.
(v) If the certificates for the Shares to be sold by
the Selling Stockholder were delivered to the Underwriters
in the State of New York and assuming the Underwriters
purchase the Shares to be sold by such Selling Stockholder
in good faith and without "notice of adverse claim" (as such
phrase is used in Section 8-105 of the NY UCC, upon (i)
delivery (as defined in Section 8-301(a) of the NY UCC) to
the Underwriters of the certificates representing such
Shares endorsed in blank by an effective endorsement (within
the meaning of Section 8-107 of the NY UCC), and (ii)
payment therefore in accordance with the terms of this
Agreement and the Custody Agreement, the Underwriters would
become "protected purchasers" (as defined in Section
8-303(a) of the NY UCC) of such Shares, and will acquire
such Shares free and clear of "adverse claims" (as defined
in Section 8-102 of the NY UCC) except for any such adverse
claims created by or at the request of the Underwriters.
To the extent deemed advisable by such counsel, such counsel
may (a) state that their opinion is limited to matters governed
by the Federal laws of the United States, the laws of the States
of Texas or New York, as applicable, (b) rely as to matters of
fact on certificates of responsible officers of the Selling
Stockholder and public officials and other sources believed by
them to be responsible, (c) assume that the signatures on all
documents examined by them are genuine, all documents submitted
to them are authentic, and all documents submitted as certified
or photostatic copies or translations conform with the originals,
(d) state that their letter is furnished as counsel for the
Selling Stockholder to the Underwriters and is solely for the
benefit of the several Underwriters and (e) state that in the
foregoing opinions, phrases such as "to the knowledge of such
counsel," "known to such counsel" and those with equivalent
wording refer to the conscious awareness of information by the
lawyers of such firm who have prepared such opinion, signed such
opinion or been actively involved in assisting and advising such
Selling Stockholder in connection with the preparation of the
Registration Statement, the execution and delivery of this
Agreement and any transactions contemplated herein.
(j) All proceedings taken in connection with the sale of the
Firm Shares and the Option Shares as herein contemplated shall be
reasonably satisfactory in form and substance to the
Representatives, and their counsel and the Underwriters shall
have received from Vinson & Elkins L.L.P. a favorable opinion,
addressed to the Representatives and dated such Closing Date,
with respect to the Shares, the Registration Statement and the
Prospectus, and such other related matters, as the
Representatives may reasonably request, and the Company shall
have furnished to Vinson & Elkins L.L.P. such documents as they
may reasonably request for the purpose of enabling them to pass
upon such matters.
24
(k) The Representatives shall have received copies of the
Lock-up Agreements executed by each entity or person listed on
Schedule III hereto.
(l) The Company shall have filed all applications and other
documents necessary for the Shares to be quoted on the Nasdaq
National Market, subject only to official notice of issuance.
(m) The Company and each of the Selling Stockholders shall
have furnished or caused to be furnished to the Representatives
such further certificates or documents as the Representatives
shall have reasonably requested.
5. Covenants of the Company.
(a) The Company covenants and agrees as follows:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of
execution of this Agreement, and any amendments thereto, to
become effective as promptly as possible. The Company shall
prepare the Prospectus in a form approved by the
Representatives and file such Prospectus pursuant to Rule
424(b) under the Securities Act not later than the
Commission's close of business on the second business day
following the execution and delivery of this Agreement, or,
if applicable, such earlier time as may be required by the
Rules.
(ii) The Company shall promptly advise the
Representatives in writing (A) when any post-effective
amendment to the Registration Statement shall have become
effective or any supplement to the Prospectus shall have
been filed, (B) of any request by the Commission for any
amendment of the Registration Statement or the Prospectus or
for any additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the
institution or threatening of any proceeding for that
purpose and (D) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or
the initiation or threatening of any proceeding for such
purpose. The Company shall not file any amendment of the
Registration Statement or supplement to the Prospectus
unless the Company has furnished the Representatives a copy
for its review prior to filing and shall not file any such
proposed amendment or supplement to which the
Representatives reasonably object. The Company shall use its
best efforts to prevent the issuance of any such stop order
and, if issued, to obtain as soon as possible the withdrawal
thereof.
(iii) If, at any time prior to the expiration of nine
months after the effective date of the Registration
Statement, when a prospectus relating to the Shares is
required to be delivered under the Securities Act and the
Rules, any event occurs as a result of which the Prospectus
as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material
25
fact necessary to make the statements therein in the light
of the circumstances under which they were made not
misleading, or if it shall be necessary to amend or
supplement the Prospectus to comply with the Securities Act
or the Rules, the Company promptly shall prepare and file
with the Commission, subject to the second sentence of
paragraph (ii) of this Section 5(a), an amendment or
supplement which shall correct such statement or omission or
an amendment which shall effect such compliance; and in case
any Underwriter is required to deliver the Prospectus nine
months or more after the effective date of the Registration
Statement, the Company, upon your request and at the expense
of such Underwriter will prepare promptly such amendment or
supplement to the Prospectus as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the
Act.
(iv) The Company shall make generally available to its
security holders and to the Representatives as soon as
reasonably practicable, but not later than 45 days after the
end of the 12-month period beginning at the end of the
fiscal quarter of the Company during which the Effective
Date occurs (or 90 days if such 12-month period coincides
with the Company's fiscal year), an earning statement (which
need not be audited) of the Company, covering such 12-month
period, which shall satisfy the provisions of Section 11(a)
of the Securities Act or Rule 158 of the Rules.
(v) The Company shall furnish to the Representatives
and counsel for the Underwriters, without charge, signed
copies of the Registration Statement (including all exhibits
thereto and amendments thereof) and to each other
Underwriter a copy of the Registration Statement (without
exhibits thereto) and all amendments thereof and, so long as
delivery of a prospectus by an Underwriter or dealer may be
required by the Securities Act or the Rules, as many copies
of any preliminary prospectus and the Prospectus and any
amendments thereof and supplements thereto as the
Representatives may reasonably request. If applicable, the
copies of the Registration Statement and Prospectus and each
amendment and supplement thereto furnished to the
Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(vi) The Company shall cooperate with the
Representatives and their counsel in endeavoring to qualify
the Shares for offer and sale in connection with the
offering under the laws of such jurisdictions as the
Representatives may designate and shall maintain such
qualifications in effect so long as required for the
distribution of the Shares; provided, however, that the
Company shall not be required in connection therewith, as a
condition thereof, to qualify as a foreign corporation or to
execute a general consent to service of process in any
jurisdiction or subject itself to taxation as doing business
in any jurisdiction or qualify as a dealer in securities in
any jurisdiction.
(vii) The Company, during the period when the
Prospectus is required to be delivered under the Securities
Act and the Rules or the Exchange
26
Act, will file all reports and other documents required to
be filed with the Commission pursuant to Section 13, 14 or
15 of the Exchange Act within the time periods required by
the Exchange Act and the regulations promulgated thereunder.
(viii) Without the prior written consent of CIBC World
Markets Corp., for a period of 90 days after the date of
this Agreement, the Company shall not issue, sell or
register with the Commission (other than on Form S-8 or on
any successor form), or otherwise dispose of, directly or
indirectly, any equity securities of the Company (or any
securities convertible into, exercisable for or exchangeable
for equity securities of the Company), except for (i) the
issuance of the Shares pursuant to the Registration
Statement, (ii) the issuance of securities pursuant to the
Company's existing stock option plan or bonus plan as
described in the Registration Statement and the Prospectus,
(iii) securities issued pursuant to the Company's
outstanding warrants, preferred stock and options as
described in the Registration Statement and the Prospectus,
(iv) securities issued as dividends on the Company's
outstanding preferred stock and (v) securities issued in
connection with acquisitions and private placements by the
Company; provided, however, that the recipients of such
securities agree in writing to be bound by the restrictions
contained in this paragraph with respect to such securities.
(ix) On or before completion of this offering, the
Company shall make all filings required under applicable
securities laws and by the Nasdaq National Market (including
any required registration under the Exchange Act).
(x) Prior to the Closing Date, the Company will issue
no press release or other communications directly or
indirectly and hold no press conference with respect to the
Company, the condition, financial or otherwise, or the
earnings, business affairs or business prospects of any of
them, or the offering of the Shares without the prior
written consent of the Representatives unless in the
judgment of the Company and its counsel, and after
notification to the Representatives, such press release or
communication is required by law.
(xi) The Company will apply the net proceeds from the
offering of the Shares in the manner set forth under "Use of
Proceeds" in the Prospectus.
(b) The Company agrees to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated
hereby are consummated or this Agreement is terminated, all costs
and expenses incident to the public offering of the Shares and
the performance of the obligations of the Company under this
Agreement including those relating to: (i) the preparation,
printing, filing and distribution of the Registration Statement
including all exhibits thereto, each preliminary prospectus, the
Prospectus, all amendments and supplements to the Registration
Statement and the Prospectus and any document incorporated by
reference therein, and the printing, filing and distribution of
this Agreement; (ii) the preparation and delivery of certificates
for the Shares to the Underwriters; (iii) the registration or
qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the various jurisdictions referred
to in Section 5(a)(vi),
27
including the reasonable fees and disbursements of counsel for
the Underwriters in connection with such registration and
qualification and the preparation, printing, distribution and
shipment of preliminary and supplementary Blue Sky memoranda;
(iv) the furnishing (including costs of shipping and mailing) to
the Representatives and to the Underwriters of copies of each
preliminary prospectus, the Prospectus and all amendments or
supplements to the Prospectus, and of the several documents
required by this Section to be so furnished, as may be reasonably
requested for use in connection with the offering and sale of the
Shares by the Underwriters or by dealers to whom Shares may be
sold; (v) the filing fees of the NASD in connection with its
review of the terms of the public offering; (vi) inclusion of the
Shares for quotation on the Nasdaq National Market; and (vii) all
transfer taxes, if any, with respect to the sale and delivery of
the Shares by the Company to the Underwriters. Subject to the
provisions of Section 8, the Underwriters agree to pay, whether
or not the transactions contemplated hereby are consummated or
this Agreement is terminated, all costs and expenses incident to
the performance of the obligations of the Underwriters under this
Agreement not payable by the Company pursuant to the preceding
sentence, including, without limitation, the fees and
disbursements of counsel for the Underwriters.
(c) The Selling Stockholders, severally and not jointly, or,
pursuant to any agreements with the Selling Stockholders, the
Company, will pay all expenses incident to the performance of the
Selling Stockholders' respective obligations under, and the
consummation of the transactions contemplated by, this Agreement,
including (i) any stamp duties, capital duties and stock transfer
taxes, if any, payable upon the sale of the Shares to the
Underwriters, and (ii) the fees and disbursements of the Selling
Stockholders' respective counsel and accountants.
6. Indemnification.
(a) The Company and each of the Selling Stockholders,
severally and not jointly, agree to indemnify and hold harmless
each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act against any and all losses,
claims, damages and liabilities, joint or several (including any
reasonable investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claim asserted), to which they,
or any of them, may become subject under the Securities Act, the
Exchange Act or other Federal or state law or regulation, at
common law or otherwise, insofar as such losses, claims, damages
or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, the Registration
Statement or the Prospectus or any amendment thereof or
supplement thereto, or arise out of or are based upon any
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that such indemnity
shall not inure to the benefit of any Underwriter (or any person
controlling such Underwriter) on account of any losses, claims,
damages or liabilities arising from the sale of the Shares to any
person by such Underwriter if such untrue statement or omission
or alleged untrue statement or omission was made in such
preliminary prospectus, the Registration Statement or the
Prospectus, or such amendment
28
or supplement thereto in reliance upon and in conformity with
information furnished in writing to the Company by the
Representatives on behalf of any Underwriter specifically for use
therein; provided further, that no Selling Stockholder who is not
an officer of the Company as of the date of this Agreement shall
be responsible, pursuant to this indemnity for losses, claims,
expenses, damages or liability arising out of or based upon
information other than information furnished in writing by such
Selling Stockholder specifically for inclusion in a preliminary
prospectus, the Registration Statement or the Prospectus, or any
amendments or supplements thereto; provided further, that the
foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages or
liabilities purchased Shares, or any person controlling such
Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the
sale of the Shares to such person, and if the Prospectus (as so
amended or supplemented) would have cured the defect giving rise
to such loss, claim, damage or liability. Notwithstanding the
foregoing, the liability of each Selling Stockholder pursuant to
the provisions of this Section 6(a) shall be limited to an amount
equal to the aggregate net proceeds received by such Selling
Stockholder from the sale of the Shares sold by such Selling
Stockholder hereunder. This indemnity agreement will be in
addition to any liability which the Company and Selling
Stockholders may otherwise have, including any liability of a
Selling Stockholder in such Selling Stockholder's capacity as a
director or executive officer of the Company.
(b) Each Underwriter agrees to indemnify and hold harmless
the Company, the Selling Stockholders, the Selling Stockholders'
respective partners or members and each person, if any, who
controls the Company or the Selling Stockholders within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, each director of the Company, and each officer of
the Company who signs the Registration Statement, against any
losses, claims, damages or liabilities to which such party may
become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any preliminary
prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such
Underwriter through the Representative expressly for use therein.
(c) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of
notice of commencement of any action, suit or proceeding against
such party in respect of which a claim is to be made against an
29
indemnifying party or parties under this Section, notify in
writing each such indemnifying party of the commencement of such
action, suit or proceeding, enclosing a copy of all papers
served. No indemnification provided for in Section 6(a) or 6(b)
shall be available to any party who shall fail to give notice as
provided in this Section 6(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would
have related and was prejudiced by the failure to give such
notice but the omission so to notify such indemnifying party of
any such action, suit or proceeding shall not relieve it from any
liability that it may have to any indemnified party for
contribution or otherwise than under this Section. In case any
such action, suit or proceeding shall be brought against any
indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so
to assume the defense thereof and the approval by the indemnified
party of such counsel, the indemnifying party shall not be liable
to such indemnified party for any legal or other expenses, except
as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in
connection with the defense thereof. The indemnified party shall
have the right to employ its counsel in any such action, but the
fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of counsel by such
indemnified party has been authorized in writing by the
indemnifying parties, (ii) the indemnified party shall have been
advised by counsel that there may be one or more legal defenses
available to it which are in conflict with those available to the
indemnifying party (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf
of the indemnified party) or (iii) the indemnifying parties shall
not have employed counsel to assume the defense of such action
within a reasonable time after notice of the commencement
thereof, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying parties; provided
that in no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel separate from their
own counsel for all indemnified parties in connection with any
one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances. An indemnifying party shall not be liable for any
settlement of any action, suit, and proceeding or claim effected
without its written consent, which consent shall not be
unreasonably withheld or delayed.
7. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 6(a) or 6(b) is due in accordance with its terms but for any reason is
unavailable to or insufficient to hold harmless an indemnified party in respect
to any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate losses,
liabilities, claims, damages and expenses (including any investigation, legal
and other expenses reasonably incurred in connection with, and any amount paid
in settlement of, any action, suit or proceeding or any claims asserted, but
after deducting any contribution received by any person entitled hereunder to
contribution from any person who may be liable for contribution) incurred by
such indemnified party, as incurred, in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other
30
hand from the offering of the Shares pursuant to this Agreement or, if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and the Selling Stockholders on the one hand
and the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations. The Company,
the Selling Stockholders and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 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 which does not take account of the
equitable considerations referred to above. The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by an indemnified party and
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue or alleged untrue statement or omission or alleged
omission. Notwithstanding the provisions of this Section 7, (i) no Underwriter
(except as may be provided in the Agreement Among Underwriters) shall be
required to contribute any amount in excess of the amount by which the total
price at which the shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of damages which such underwriter has
otherwise been required to pay by reason of any such untrue or alleged untrue
statement or omission or alleged omission; and (ii) no Selling Stockholder shall
be required to contribute any amount in excess of the aggregate net proceeds of
the sale of Shares received by such Selling Stockholder. 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. For purposes of this Section 7,
each person, if any, who controls an Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as such Underwriter, and each director of the Company,
each officer of the Company who signed the Registration Statement, and each
person, if any, who controls the Company or any of the Selling Stockholders
within the meaning of the Section 15 of the Securities Act or Section 20 of the
Exchange Act, shall have the same rights to contribution as the Company or any
of the Selling Stockholders, as the case may be. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section 7,
notify in writing such party or parties from whom contribution may be sought,
but the omission so to notify such party or parties from whom contribution may
be sought shall not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have hereunder or otherwise than
under this Section 7. No party shall be liable for contribution with respect to
any action, suit, proceeding or claim settled without its written consent. The
Underwriter's obligations to contribute pursuant to this Section 7 are several
in proportion to their respective underwriting commitments and not joint. The
provisions of this Section 7 shall not affect any agreement among the Company
and the Selling Stockholders with respect to contribution.
8. Termination.
(a) This Agreement may be terminated with respect to the
Shares to be purchased on a Closing Date by the Representatives
by notifying the Company and the
31
Selling Stockholders at any time at or before a Closing Date in
the reasonable discretion of the Representatives if: (i) there
has occurred any material adverse change in the securities
markets or any event, act or occurrence that has materially
disrupted, or in the reasonable opinion of the Representatives,
will in the future materially disrupt, the securities markets or
there shall be such a material adverse change in general
financial, political or economic conditions or the effect of
international conditions on the financial markets in the United
States, including, without limitation, as a result of terrorist
activities, is such as to make it, in the judgment of the
Representatives, inadvisable or impracticable to market the
Shares or enforce contracts for the sale of the Shares; (ii)
there has occurred since the time of the execution of this
Agreement any outbreak or material escalation of hostilities,
acts of terrorism or other calamity or crisis the effect of which
on the financial markets of the United States is such as to make
it, in the judgment of the Representatives, inadvisable or
impracticable to market the Shares or enforce contracts for the
sale of the Shares; (iii) trading in the Shares or any securities
of the Company has been suspended or materially limited by the
Commission or trading generally on the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. or the Nasdaq National
Market has been suspended or materially limited, or minimum or
maximum ranges for prices for securities shall have been fixed,
or maximum ranges for prices for securities have been required,
by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc.,
or any other governmental or regulatory authority; or (iv) a
banking moratorium has been declared by any New York, Texas or
Federal authority; or (v) in the judgment of the Representatives,
there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in
the Prospectus, any material adverse change in the assets,
properties, condition, financial or otherwise, or in the results
of operations, business affairs or business prospects of the
Company and its subsidiaries considered as a whole, whether or
not arising in the ordinary course of business.
(b) If this Agreement is terminated pursuant to any of its
provisions, neither the Company nor the Selling Stockholders
shall be under any liability to any Underwriter, and no
Underwriter shall be under any liability to the Company or a
Selling Stockholder, except that (y) if this Agreement is
terminated by the Representatives or the Underwriters because of
any failure, refusal or inability on the part of the Company or
the Selling Stockholders to comply with the terms or to fulfill
any of the conditions of this Agreement, the Company will
reimburse the Underwriters for all reasonable out-of-pocket
expenses (including the reasonable fees and disbursements of
their counsel) incurred by them in connection with the proposed
purchase and sale of the Shares or in contemplation of performing
their obligations hereunder and (z) no Underwriter who shall have
failed or refused to purchase the Shares agreed to be purchased
by it under this Agreement, without some reason sufficient
hereunder to justify cancellation or termination of its
obligations under this Agreement, shall be relieved of liability
to the Company, the Selling Stockholders or to the other
Underwriters for damages occasioned by its failure or refusal.
9. Substitution of Underwriters. If any Underwriter shall
default in its obligation to purchase on any Closing Date the Shares agreed to
be purchased hereunder on such Closing Date, the Representatives shall have the
right, within 36 hours thereafter, to make
32
arrangements for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase such Shares on the terms contained herein. If,
however, the Representatives shall not have completed such arrangements within
such 36-hour period, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to the Underwriters to purchase such Shares on such terms. If,
after giving effect to any arrangements for the purchase of the Shares of a
defaulting Underwriter or Underwriters by the Representatives and the Company as
provided above, the aggregate number of Shares which remains unpurchased on such
Closing Date does not exceed one-eleventh of the aggregate number of all the
Shares that all the Underwriters are obligated to purchase on such date, then
the Company shall have the right to require each non-defaulting Underwriter to
purchase the number of Shares which such Underwriter agreed to purchase
hereunder at such date and, in addition, to require each non-defaulting
Underwriter to purchase its pro rata share (based on the number of Shares which
such Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default. In any such case, either the Representatives or the Company shall have
the right to postpone the applicable Closing Date for a period of not more than
seven days in order to effect any necessary changes and arrangements (including
any necessary amendments or supplements to the Registration Statement or
Prospectus or any other documents), and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in the opinion
of the Company and the Underwriters and their counsel may thereby be made
necessary.
If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by the Representatives
and the Company as provided above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such date, then this Agreement, or, with respect to a
Closing Date which occurs after the First Closing Date, the obligations of the
Underwriters to purchase and of the Company or the Selling Stockholders, as the
case may be, to sell the Option Shares to be purchased and sold on such date,
shall terminate, without liability on the part of any non-defaulting Underwriter
to the Company, and without liability on the part of the Company or any Selling
Stockholder except as provided in Sections 5(b), 6, 7 and 8. The provisions of
this Section 9 shall not in any way affect the liability of any defaulting
Underwriter to the Company or the nondefaulting Underwriters arising out of such
default. The term "Underwriter" as used in this Agreement shall include any
person substituted under this Section 9 with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
10. Miscellaneous. The respective agreements, representations,
warranties, indemnities and other statements of the Company, the several Selling
Stockholders and the several Underwriters, as set forth in this Agreement or
made by or on behalf of them pursuant to this Agreement, shall remain in full
force and effect, regardless of any investigation (or any statement as to the
results thereof) made by or on behalf of any Underwriter or the Company or the
Selling Stockholders or any of their respective officers, directors or
controlling persons referred to in Sections 6 and 7 hereof, and shall survive
delivery of and payment for the Shares. In addition, the provisions of Sections
5(b), 6, 7 and 8 shall survive the termination or cancellation of this
Agreement.
33
This Agreement has been and is made for the benefit of the
Underwriters, the Company and the Selling Stockholders and their respective
successors and assigns, and, to the extent expressed herein, for the benefit of
persons controlling any of the Underwriters, any of the Selling Stockholders or
the Company, and directors and officers of the Company, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" shall
not include any purchaser of Shares from any Underwriter merely because of such
purchase.
All notices and communications hereunder shall be in writing
and mailed or delivered or by telephone or telegraph if subsequently confirmed
in writing, (a) if to the Representatives, c/o CIBC World Markets Corp., 417 5th
Avenue, 2nd Floor, New York, New York 10016 Attention: Ron Ormand, with a copy
to Vinson & Elkins L.L.P., 2300 First City Tower, 1001 Fannin, Houston, Texas
77002, Attention: James M. Prince and (b) if to the Company, to its agent for
service as such agent's address appears on the cover page of the Registration
Statement with a copy to Baker Botts L.L.P., 3000 One Shell Plaza, 910
Louisiana, Houston, Texas 77002, Attention: Gene J. Oshman and (c) if to the
Selling Stockholders to the address of such Selling Stockholder set forth on
Schedule IV hereto with a copy to the address specified with respect to such
Selling Stockholder on Schedule IV.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
Please confirm that the foregoing correctly sets forth the
agreement among us.
Very truly yours,
CARRIZO OIL & GAS, INC.
By: /s/ Paul F. Boling
------------------
Name: Paul F. Boling
Title: Chief Financial Officer
SELLING STOCKHOLDERS
By: /s/ Paul F. Boling, attorney-in-fact
------------------------------------
Name: Paul F. Boling
Title: Chief Financial Officer
34
Confirmed:
CIBC WORLD MARKETS CORP.
Acting severally on behalf of itself
and as representative of the several
Underwriters named in Schedule I annexed
hereto.
By: CIBC WORLD MARKETS CORP.
By /s/ Ronald D. Ormand
--------------------
Name: Ronald D. Ormand
Title: Managing Director
35
SCHEDULE I
Number of Firm Shares to be Number of Firm Shares to be
Purchased from Purchased from the Selling
Name the Company Stockholders
- --------------------------------- --------------------------- ---------------------------
CIBC World Markets Corp. 1,692,900 1,128,600
First Albany Capital Inc. 230,850 153,900
Hibernia Southcoast Capital, Inc. 692,550 461,700
Johnson Rice & Company L.L.C. 461,700 307,800
Harris Nesbitt Corp. 85,500 57,000
Pritchard Capital Partners 85,500 57,000
Sanders Morris Harris 85,500 57,000
Sterne, Agee & Leach, Inc. 85,500 57,000
--------- ---------
Total 3,420,000 2,280,000
SCHEDULE II
Number of Firm Shares Number of Option Shares
Name of Selling Stockholder to be Sold to be Sold*
- ---------------------------------------- --------------------- -----------------------
J.P. Morgan Partners (23A SBIC), L.P. 1,144,144 271,637
Mellon Ventures, L.P. 368,924 87,588
Paul B. Loyd, Jr. 274,285 65,119
Frank A. Wojtek 98,378 23,356
Douglas A.P. Hamilton 249,908 73,577
S.P. Johnson IV 75,000 75,000
The Douglas Hayes Pollock Hamilton Trust 20,000 --
The Carrie Hamilton Trust 20,000 --
The Olivia Jean Hamilton Trust 20,000 --
Paul J. Harder 873 207
Western Harbor Associates 437 104
William Ross 873 207
Anthony B. Martino 1,347 320
Richard E. Turner 559 133
NBLN Limited Partnership 2,620 622
Thomas H. O'Neill, Jr. 947 225
James Wadsworth 947 225
Richard J. Riley 379 90
Kenneth W. Colwell 379 90
--------- -------
Total 2,280,000 598,500
*If the Underwriters exercise their over-allotment option in full.
SCHEDULE III
Lock-up Signatories
J.P. Morgan Partners (23A SBIC), L.P.
Mellon Ventures, L.P.
Paul B. Loyd, Jr.
Frank A. Wojtek
Douglas A.P. Hamilton
S.P. Johnson IV
The Douglas Hayes Pollock Hamilton Trust
The Carrie Hamilton Trust
The Olivia Jean Hamilton Trust
Paul J. Harder
Western Harbor Associates
William Ross
Anthony B. Martino
Richard E. Turner
NBLN Limited Partnership
Thomas H. O'Neill, Jr.
James Wadsworth
Richard J. Riley
Kenneth W. Colwell
Paul F. Boling
Jeremy T. Greene
Kendall A. Trahan
J. Bradley Fisher
Steven A. Webster
Christopher C. Behrens
Bryan R. Martin
F. Gardner Parker
SCHEDULE IV
Selling Stockholders Notice Addresses
J.P. Morgan Partners (23A SBIC), L.P.:
CB Capital Investors LP
1211 Avenue of the Americas
40th Floor
New York, NY 10036
with a copy to:
O'Melveny & Myers LLP
30 Rockefeller Plaza, 27th Floor
New York, NY 10112
Attn: Todd H. Greene
Mellon Ventures, L.P.
c/o Mellon Ventures Inc.
One Mellon Center
Suite 5210
Pittsburgh, PA 15258
with a copy to:
Dechert LLP
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attn: Robert L. Wax
Director Selling Shareholders:
Paul B. Loyd, Jr.
108 Shasta
Houston, TX 77024
Frank A. Wojtek
7010 FM 723 Road
Richmond, TX 77469
Sylvester P. Johnson, IV
6354 Auden
Houston, TX 77005
with a copy to:
Baker Botts L.L.P.
3000 One Shell Plaza
910 Louisiana
Houston, Texas 77002
Attn: Gene J. Oshman
Douglas Hamilton and Trusts:
Douglas A. P. Hamilton
1114 Avenue of the Americas
31st Floor
New York, NY 10036
Dorothy C. Hamilton, Trustee
Douglas Hayes Pollock Hamilton 1997 Trust
1114 Avenue of the Americas
31st Floor
New York, NY 10036
Dorothy C. Hamilton, Trustee
Carrie Elizabeth Hamilton 1997 Trust
1114 Avenue of the Americas
31st Floor
New York, NY 10036
Dorothy C. Hamilton, Trustee
Olivia Jean Hamilton 1997 Trust
1114 Avenue of the Americas
31st Floor
New York, NY 10036
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Attn: Kim E. Baptiste
Berea Investors:
Paul J. Harder
6230 Old Lake Shore Road
LakeView, NY 14085
Western Harbor Associates LLC
c/o Arthur F. Duc Musarra
8 Swallow Lane
Orchard Park, NY 14127
William Ross
20250 Calice Court, #603
Estero, FL 33928
Anthony B. Martino
280 Rivermist Drive
Buffalo, NY 14202
Richard E. Turner, Jr.
105 E. Terrace Avenue
Lakewood, NY 14750
NBLN Limited Partnership
c/o Barry McKenzie
8889 Pelican Bay Blvd, #400
Naples, FL 34108
Thomas H. O'Neill, Jr.
50 Fountain Plaza, Suite 1220
Buffalo, NY 14202
James Wadsworth
c/o Hodgson Russ
One M & T Plaza, Suite 2000
Buffalo, NY 14203
Richard J. Riley
701 First Avenue
Sunnyvale, CA 94089
Kenneth W. Colwell
104 Leichester Road
Kenmore, NY 14217
with a copy to:
Satterlee Stephens Burke & Burke LLP
230 Park Avenue, 11th Floor
New York, New York 10169
Attn: Marybeth Riordan
Exhibit A
FORM OF LOCK-UP AGREEMENT
_____, 2004
CIBC World Markets Corp.
As Representative of the Several Underwriters
c/o CIBC World Markets Corp.
CIBC World Markets Tower
World Financial Center
200 Liberty Street
New York, New York 10281
Re: Public Offering of Common Stock of Carrizo Oil & Gas, Inc.
Gentlemen:
The undersigned, a holder of common stock ("Common Stock") or rights to
acquire Common Stock, of Carrizo Oil & Gas, Inc. (the "Company") understands
that the Company has filed a Registration Statement on Form S-2, File No.
333-111475 (the "Registration Statement"), and amendments thereto, with the
Securities and Exchange Commission (the "Commission") for the registration of
approximately 6,555,000 shares (the "Shares") of Common Stock (including 855,000
shares subject to an over-allotment option on the part of the Underwriters) (the
"Offering"). The undersigned further understands that you are contemplating
entering into an Underwriting Agreement with the Company and the Selling
Stockholders named therein in connection with the Offering (the "Underwriting
Agreement"). Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in the Underwriting Agreement.
In order to induce the Company, you and the other Underwriters to enter
into the Underwriting Agreement and to proceed with the Offering, the
undersigned agrees, for the benefit of the Company, you and the other
Underwriters, that should the Offering be effected the undersigned will not,
without your prior written consent, directly or indirectly, make any offer,
sale, assignment, transfer, encumbrance, contract to sell, grant of an option to
purchase or other disposition of any Common Stock beneficially owned (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, but
excluding any shares so beneficially owned solely as a result of the application
of clause (1) of paragraph (a) of such Rule 13d-3) by the undersigned on the
date hereof or hereafter acquired for a period of 90 days subsequent to the date
of the Underwriting Agreement, other than Common Stock (i) to be sold in the
Offering, (ii) acquired in open market transactions by the undersigned after the
date hereof, (iii) transferred as a gift or gifts or as intra-family transfers
or transfers to trusts or family limited partnerships for
36
estate planning purposes (provided that any donee thereof agrees in writing to
be bound by the terms hereof); provided that the foregoing restriction shall not
apply to (i) bona fide pledges of securities either (A) existing on the date of
this letter or (B) subsequent pledges if the pledgee of such securities agrees
in writing to be bound by the restrictions contained in this letter with respect
to such securities or (iv) transfers pursuant to a sale of 100% of the
outstanding Common Stock of the Company, whether pursuant to a merger or
otherwise, to a third party or group of third parties, provided that the third
party or group of third parties agree to be bound in writing by the restrictions
set forth herein until such time as such third party or group of third parties
have acquired 100% of the outstanding Common Stock of the Company.
In addition, notwithstanding the foregoing, the undersigned may
transfer, distribute or otherwise dispose of shares of Common Stock, in whole or
in part, to any of the undersigned's affiliates (as this term is defined in Rule
144(a)(i) under the Securities Act of 1933, as amended) including, but not
limited to the following: (a) if the undersigned is a corporation, the
corporation may transfer any shares of Common Stock to any wholly-owned
subsidiary of such corporation, (b) if the undersigned is a partnership or
limited liability company (an "LLC"), the partnership or LLC, as the case may
be, may distribute any shares of Common Stock to a partner or partners of such
partnership or to a member or members of such LLC, as applicable, or (c) the
undersigned may grant a participation interest or otherwise transfer, directly
or indirectly, the economic consequences of ownership of shares of Common Stock
to any of the undersigned's affiliates in the ordinary course; provided however,
that in any such case, it shall be a condition to any such transfer or
distribution that the transferee or distributee, as applicable, execute an
agreement stating that the transferee or distributee is receiving and holding
such shares of Common Stock subject to the provisions of this letter and there
shall be no further transfer of such shares of Common Stock except in accordance
with this letter.
It is understood that, if the Company notifies you that it does not
intend to proceed with the Offering, if the Underwriting Agreement does not
become effective, if the Company or any of the Underwriters are in violation or
breach of the Underwriting Agreement, 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 Shares, the undersigned
shall be released from all obligations under this letter.
The undersigned, whether or not participating in the Offering, confirms
that he, she or it understands that the Underwriters and the Company will rely
upon the representations set forth in this agreement in proceeding with the
Offering. This agreement shall be binding on the undersigned and his, her or its
respective successors, heirs, personal representatives and assigns. The
undersigned agrees and consents to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock held by the
undersigned except in compliance with this agreement.
Very truly yours,
Dated: _________________________, 2004
Signature
Printed Name and Title (if applicable)