EXHIBIT 10.1

 

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STOCK PURCHASE AGREEMENT

 

by and among

 

BPZ Resources, Inc. and
the Investors Named Herein

 

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Dated February 19, 2009

 

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STOCK PURCHASE AGREEMENT

 

This STOCK PURCHASE AGREEMENT (this “Agreement”), dated February 19, 2009, is by
and among BPZ Resources, Inc., a Texas corporation (the “Company”), and the
Investors named on Schedule 1.1 hereto (collectively, the “Investors” and each
the “Investor”).

 

RECITALS

 

WHEREAS, the Company has received from each Investor a Purchaser Suitability
Questionnaire (the “Questionnaire”) relating to the transactions contemplated in
this Agreement, each Investor has executed a Confidentiality Agreement relating
to the Company’s business and each Investor acknowledges that he has been given
full access by the Company to all information concerning the business and
financial condition, properties, operations and prospects of the Company that
Investor has deemed relevant for purposes of making the investment contemplated
by this Agreement.

 

WHEREAS, the Company proposes to issue and sell to Investors, and Investors
desire to purchase from the Company, shares of the Company’s common stock, no
par value (the “Common Stock”), on the terms set forth herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:

 

1.                                      Purchase

 

1.1.                              Purchase and Sale of Stock.  Subject to the
terms and conditions of this Agreement, the Company will issue and sell to each
Investor, and each Investor severally agrees to purchase from the Company, the
number of shares of the Company’s authorized but unissued Common Stock (the
“Shares”) set forth with respect to such Investor on Schedule 1.1 hereto, at a
price per share equal to $3.05.  The closing (the “Closing”) of the sale of the
Shares shall be effected at the offices of the Company on February 19, 2009, or
at such other time and place as may be agreed to by the Investors and the
Company (the “Closing Date”).  At the Closing, subject to the terms and
conditions hereof, the Company shall cause the issuance of the Shares purchased
by such Investor from the Company, against payment of the full amount of such
Investor’s aggregate purchase price by wire transfer of immediately available
funds to the Company’s bank account.

 

1.2.                              Legends.  All certificates representing the
Shares shall bear the following legend (in addition to any legend required by
the blue sky or securities laws of any state or jurisdiction to the extent such
laws are applicable to the shares represented by the certificate so legended):

 

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“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION
TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS, PROVIDED THAT THE
SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL (WHICH OPINION AND COUNSEL
ARE REASONABLY SATISFACTORY TO THE COMPANY) CONFIRMING THE AVAILABILITY OF SUCH
EXEMPTION.”

 

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend or any other restrictive legend to the holder of
the Shares upon which it is stamped or issue to such holder by electronic
delivery at the applicable balance account at the Depository Trust Company
(“DTC”) within three business days following delivery by Investor to the Company
or the Company’s transfer agent of a certificate representing Shares, if
(i) such Shares are registered for resale under the Securities Act of 1933, as
amended (the “Securities Act”), (ii) in connection with a sale, assignment or
other transfer, such holder provides the Company with an opinion of counsel, in
a generally acceptable form, to the effect that such sale, assignment or
transfer of the Shares may be made without registration under the applicable
requirements of the Securities Act, or (iii) such holder provides the Company
with reasonable assurance that the Shares can be sold, assigned or transferred
pursuant to Rule 144 promulgated under the Securities Act (“SEC Rule 144”) or
Rule 144A promulgated under the Securities Act.

 

1.3.                              Stop Transfer Orders.  All certificates
representing the Shares will be subject to a stop transfer order with the
Depository Trust Company or with the Company’s transfer agent that restricts the
transfer of such Shares except in compliance with this Agreement.

 

1.4.                              Buy-In. If the Company shall fail for any
reason or for no reason to issue to an Investor unlegended certificates within
seven (7) business days of receipt of all documents necessary for the removal of
the legend set forth above (the “Deadline Date”), then, in addition to all other
remedies available to such Investor, if on or after the business day immediately
following such seven (7) business day period, such Investor purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the holder of shares of Common Stock that such
Investor anticipated receiving from the Company without any restrictive legend
(or a broker or trading counterparty through which the Investor has agreed to
sell shares makes such purchase) (a “Buy-In”), then the Company shall, within
seven (7) business days after such Investor’s request and in such Investor’s
sole discretion, either (i) pay cash to the Investor in an amount equal to such
Investor’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the “Buy-In Price”), at which point the
Company’s obligation to deliver such certificate (and to issue such shares of
Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver
to such Investor a certificate or certificates representing such shares of

 

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Common Stock and pay cash to the Investor in an amount equal to the excess (if
any) of the Buy-In Price over the product of (a) such number of shares of Common
Stock, times (b) the closing bid price on the Deadline Date.

 

2.                                      Representations and Warranties of the
Company.  The Company hereby makes the following representations and warranties
to the Investors:

 

2.1.                              Organization, etc.  The Company is a
corporation, duly organized and validly existing and in good standing under the
laws of the State of Texas, with full power and authority (corporate and
otherwise) to own its properties and conduct its business as currently
conducted, and is qualified or licensed to do business and is in good standing
as a foreign corporation in each other jurisdiction in which the conduct of its
business or the ownership of property requires such qualification or licensing,
except where failure to be so qualified or licensed would not have a material
adverse effect on the financial condition, operations or prospects of the
Company and its Subsidiaries (as defined below), taken as a whole (for the
Company and its Subsidiaries, a “Material Adverse Effect”).  Each company (each,
a “Subsidiary”) listed on Schedule 2.1 hereof is duly organized and validly
existing and in good standing under the laws of the jurisdiction of its
organization, with full power and authority (corporate and otherwise) to own its
properties and conduct its business as currently conducted and is qualified or
licensed to do business and is in good standing as a foreign corporation in each
other jurisdiction in which the conduct of its business or the ownership of
property requires such qualification or licensing, except where failure to be so
qualified or licensed would not have a Material Adverse Effect.  Except for the
Subsidiaries, the Company does not own, of record or beneficially, the
securities of any other entity.

 

2.2.                              Authority.  The Company has the corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder, and such action has been duly authorized by all necessary
corporate action on the part of the Company, and no further action is required
by the Company, its Board of Directors or its stockholders in connection
therewith (including, without limitation, under the rules and regulations of the
NYSE Alternext US exchange). The issuance and sale of the Shares has been duly
authorized and if, as and when issued in accordance with the terms of this
Agreement and delivered to the Investors, the Shares will be duly and validly
issued and outstanding, fully paid and non-assessable and will be free of any
Encumbrance (as defined below) created by the Company, in the Company’s control,
or of which the Company has actual knowledge following reasonable inquiry, other
than those imposed pursuant to this Agreement and securities laws of general
application.  As used in this Agreement, “Encumbrance” shall mean any claim,
lien, pledge, option, charge, easement, security interest, deed of trust,
mortgage, right of way, encroachment, private building or use restriction,
conditional sales agreement or other right of third parties, whether voluntarily
incurred or arising by operation of law, and includes, without limitation, any
agreement to give any of the foregoing in the future, and any contingent sale or
other title.  Except as set forth in Schedule 2.2, the issuance and sale of the
Shares will not be subject to preemptive or other similar rights of any holder
of the Company’s securities.

 

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2.3.                              Enforceability.  This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
agreement and obligation of the Company enforceable against it in accordance
with its terms subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect generally relating to or affecting
creditors’ rights.

 

2.4.                              No Violation.  The execution and the delivery
by the Company of this Agreement and the performance by the Company of its
obligations hereunder, including the issuance and sale of the Shares, do not and
will not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under (or an event that with notice or
lapse of time would become a default), (iii) result in a violation of, or
(iv) require any authorization, consent, filing or approval not heretofore
obtained pursuant to, (a) any binding written or oral agreement or instrument
including, without limitation, any charter, bylaw, trust instrument, indenture
or evidence of indebtedness, lease, contract or other obligation or commitment
(each, a “Contractual Obligation”) binding upon the Company or any Subsidiary or
any of their respective properties or assets, or (b) any law, rule, regulation,
restriction, order, writ, judgment, award, determination, injunction or decree
of any court or government, or any decision or ruling of any arbitrator (each, a
“Requirement of Law”) binding upon or applicable to the Company or any
Subsidiary or any of their respective properties or assets (including the
rules and regulations of any self-regulatory organization to which the Company
or its securities are subject) and which would have or reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.

 

2.5.                              Litigation.  Except as set forth in Schedule
2.5 or the SEC Reports (as defined in Section 2.7 below), there are no pending
or, to the best of the Company’s knowledge, threatened actions, claims, orders,
decrees, investigations, suits or proceedings (each, an “Action”) by or before
any governmental authority, arbitrator, court or administrative agency which
would have or reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty.  There has not been, and to the Company’s
knowledge there is not pending or contemplated, any investigation by the
Securities and Exchange Commission (the “SEC”) involving the Company or any
current or former director or officer of the Company except as publicly
disclosed.  The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any of its
Subsidiaries under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or the Securities Act.

 

2.6.                              Capitalization.  The authorized capital stock
of the Company consists of 250,000,000 shares of Common Stock, no par value,
78,748,390 shares issued and outstanding as of the date hereof, and 25,000,000
shares of preferred stock, no par value, none of which are issued or outstanding
as of the date hereof.  All of the outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and non-assessable, have
been issued in compliance in all material respects with all applicable federal
and state securities laws, and none of such outstanding shares was

 

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issued in violation of any preemptive rights or similar rights to subscribe for
or purchase any capital stock of the Company.  Except as set forth on Schedule
2.6, the Company owns 100% of the capital stock or other equity interest of each
of the Subsidiaries free and clear of any lien, pledge, security interest or
other encumbrance .  Except as set forth on Schedule 2.6 hereto, (i) there do
not exist any other authorized or outstanding securities, options, warrants,
calls, commitments, rights to subscribe or other instruments, agreements or
rights of any character, or any preemptive rights, convertible into or
exchangeable for, or requiring or relating to the issuance, transfer or sale of,
any shares of capital stock or other securities of the Company or any Subsidiary
and (ii) there are no outstanding securities or instruments of the Company which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to redeem a security of the Company.  The Common Stock is listed on
the NYSE Alternext US exchange and no order ceasing or suspending trading in the
Common Stock has been issued and no proceeding for such purpose is pending or,
to the knowledge of the Company, threatened.

 

2.7.                              Annual Report; Financial Statements.  Except
as qualified by Schedule 2.7, the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007, as amended; Quarterly Reports on Form 10-Q for the
periods respectively ended March 31, 2008, as amended; June 30, 2008 and
September 30, 2008; and Reports on Form 8-K on January 4, 2008; March 5, 2008;
March 24, 2008; May 20, 2008; July 8, 2008; August 20, 2008; October 2, 2008;
October 21, 2008; November 24, 2008; January 14, 2009; January 29, 2009 and
February 5, 2009 (including all exhibits and schedules thereto, the “SEC
Reports”) have been filed with the SEC and the SEC Reports complied in all
material respects with the rules of the SEC applicable to such SEC Reports on
the dates filed with the SEC, and the SEC Reports did not contain, on the date
of filing with the SEC, and do not contain as of the date hereof, and the SEC
Reports will not contain as of the Closing Date, any untrue statement of a
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.   As of the date hereof, except as set forth in Schedule 2.7, the
SEC Reports have not been amended.  Except as qualified by Schedule 2.7, all of
the consolidated financial statements included in the SEC Reports (the “Company
Financial Statements”):  (i) have been prepared from and on the basis of, and
are in accordance with, the books and records of the Company and with generally
accepted accounting principles in the United States (“GAAP”) applied on a basis
consistent with prior accounting periods; (ii) fairly and accurately present in
all material respects the consolidated financial condition of the Company as of
the date of each such Company Financial Statement and the results of its
operations for the periods therein specified; and (iii) in the case of the
Company Financial Statements contained in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2007, as amended, are accompanied by
the audit opinion of the Company’s independent public accountants.  Except as
set forth in Schedule 2.7 or in the Company Financial Statements, as of the date
hereof and as of the Closing Date, the Company has no liabilities other than
(i) liabilities which are reflected or reserved against in the Company Financial
Statements and which remain outstanding and undischarged as of the date hereof,
(ii) liabilities arising in the ordinary course of business of the Company since
September 30, 2008, or (iii) liabilities which were not required by GAAP to be
reflected or reserved on the Company Financial

 

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Statements.  Since September 30, 2008, except as set forth on Schedule 2.7
hereto and in the SEC Reports, there has not been any event or change which has
had or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect and the Company has no knowledge after reasonable
inquiry of any event or circumstance that would result in such a Material
Adverse Effect.

 

2.8.                              Absence of Certain Changes.  Since
September 30, 2008 (the “Balance Sheet Date”), except as set forth on Schedule
2.8 hereto, and in the SEC Reports, neither the Company nor any of the
Subsidiaries has:

 

(a)                      redeemed, purchased or otherwise acquired directly or
indirectly any shares of any class or series of its capital stock, or any
instrument or security which consists of or includes a right to acquire such
shares;

 

(b)                     paid, discharged or satisfied any claim, liability or
obligation (whether absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities and obligations reflected or
reserved against in the Company Financial Statements or incurred in the ordinary
course of business and consistent with past practice since the Balance Sheet
Date;

 

(c)                      incurred any obligation for money borrowed (including
any obligations under letter of credit, banker’s acceptance or related
reimbursement agreement, to the extent drawn) or assumed, guaranteed or endorsed
such obligations, or permitted or allowed any of its material properties or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, claim, lien, security interest, encumbrance, restriction or
charge of any kind outside of the ordinary course of business;

 

(d)                     cancelled any debt or waived any claim or right of
substantial value;

 

(e)                      sold, transferred, licensed, leased, pledged, mortgaged
or otherwise disposed of any of its material properties or assets (real,
personal or mixed, tangible or intangible) or any material amount of property or
assets, except in the ordinary course of business;

 

(f)                        disposed of or permitted to lapse any right to the
use of any Proprietary Rights (as defined in Section 2.14 hereof), or disposed
of or disclosed to any person or entity, other than representatives of the
Investors and persons subject to a nondisclosure agreement, any trade secret,
formula, process, know-how or other Proprietary Right not yet a matter of public
knowledge;

 

(g)                     granted any material increase or accrual in or
accelerated, any benefit or compensation payable or to become payable to any
officer, director, employee or consultant, including any such increase, accrual
or acceleration pursuant to any benefit plan except in connection with a
promotion or job change or any general increase in the compensation payable or
to become payable to officers, employees or

 

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directors in the ordinary course of business, or entered into or amended in any
material way any employment, material consulting, severance, termination or
material benefit plan agreement or arrangement other than in the ordinary course
of business;

 

(h)                     declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock or redeemed, purchased or
otherwise acquired, directly or indirectly, any shares of capital stock or other
securities of the Company or any of the Subsidiaries;

 

(i)                         made any change in any method of tax or financial
statement accounting or accounting practice that would or would reasonably be
expected to result in any material change in the Company Financial Statements;

 

(j)                         paid, loaned or advanced any amount to, or sold,
transferred or leased any material properties or assets (real, personal or
mixed, tangible or intangible) to, or entered into any agreement or arrangement
with, any of its officers or directors or employees or any affiliate of any of
its officers or directors or employees, except for directors’ fees and
compensation to officers in the ordinary course of business;

 

(k)                      amended its certificate of incorporation or by-laws or
similar organizational documents;

 

(l)                         issued, sold, transferred, pledged, disposed of or
encumbered any shares of any class or series of its capital stock, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of any class or series of its
capital stock, other than shares of Common Stock reserved for issuance on the
date of this Agreement pursuant to the Company’s 2005 Long-Term Incentive
Compensation Plan, Company’s 2007 Long-Term Incentive Compensation Plan, or the
Company’s 2007 Directors’ Compensation Incentive Plan, the exercise of any
warrants or options to purchase Common Stock described on Schedule 2.6 or
existing agreements that require the Company to issue shares of Common Stock;

 

(m)                   terminated or materially modified or amended any of its
material contracts or waived, released or assigned any material rights under any
material contract or claims, except in the ordinary course of business and
consistent with past practice;

 

(n)                     revalued in any material respect any of its assets,
including writing down the value of inventory or writing-off notes or accounts
receivable, other than in the ordinary course of business consistent with past
practice or as required by GAAP;

 

(o)                     adopted a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of the Subsidiaries; or

 

(p)                     agreed, whether in writing or otherwise, to take any
action described in this section.

 

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2.9.                              Income Tax Returns.  The Company and the
Subsidiaries have filed all federal and state income tax returns which are
required to be filed, and have paid, or made provision for the payment of, all
taxes which have become due pursuant to said returns or pursuant to any
assessment received by the Company or any Subsidiary, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided.  The Company has no knowledge of any pending assessments or
adjustments of the income tax payable of the Company or the Subsidiaries with
respect to any year.

 

2.10.                        Permits; Compliance With Law.  The Company and each
Subsidiary possesses, and will hereafter possess, all permits, consents,
approvals, franchises and licenses required and rights to all trademarks, trade
names, patents, and fictitious names, if any, necessary to enable them to own,
lease or operate their respective properties and to conduct the business in
which they are now engaged in compliance with applicable law, except where
failure to do so would not have or reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.  The Company and each Subsidiary
are in compliance with all Requirements of Law in the conduct of their business
and corporate affairs, except where failure to comply, singly or in the
aggregate, would not have or reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such permits,
consents, approvals, franchises, licenses, trademarks, trade names, patents, or
fictitious names.

 

2.11.                        ERISA.  The Company, each Subsidiary and any
“employee benefit plan” (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, “ERISA”)) established or maintained by
the Company or any Subsidiary or their ERISA Affiliates (as defined below)
(“Plan”) are in compliance in all material respects with ERISA.  “ERISA
Affiliate” means, with respect to any of the Company or any Subsidiary, any
member of any group of organizations described in Sections 414(b),(c),(m) or
(o) of the Internal Revenue Code of 1986, as amended, and the regulations and
published interpretations thereunder (the “Code”) of which the Company or any
Subsidiary is a member.  No “reportable event” (as defined under ERISA) has
occurred or is reasonably expected to occur with respect to Plan.  No Plan, if
such Plan were terminated, would have any “amount of unfunded benefit
liabilities” (as defined under ERISA).  Neither the Company, any Subsidiary nor
any of their ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any Plan or (ii) Sections 412, 4971, 4975 or 4980B of the
Code.  Each Plan that is intended to be qualified under Section 401(a) of the
Code is so qualified and nothing has occurred, whether by action or failure to
act, which would cause the loss of such qualification.  Each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under GAAP.

 

2.12.                        Contracts.  Schedule 2.12 sets forth a description
of each Contractual Obligation not filed as an exhibit to the SEC Reports that
provides for payments to or by the Company or any Subsidiary in excess of
$500,000, or is otherwise material to the operations of the Company or any
Subsidiary.  Except as set forth on Schedule 2.4,

 

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neither the Company nor any Subsidiary is in default on any Contractual
Obligation, except for such defaults which would not have or reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

 

2.13.                        Environmental Matters.  Since September 10, 2004,
the Company and the Subsidiaries have at all times been in compliance with any
and all applicable foreign, federal, state and local laws, regulations, permits,
licenses or approvals relating to the protection of human health and safety,
including, without limitation, those relating to occupational safety and health,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants, including, without limitation, those relating to the storage,
handling or transportation of hazardous or toxic materials except where the
failure to so comply would not cause or reasonably be expected to cause,
individually or in the aggregate, a Material Adverse Effect.  Except as
described in the SEC Reports, to the Company’s knowledge none of the operations
of the Company or any Subsidiary is the subject of any foreign, federal, state
or local investigation evaluating whether any remedial action involving a
material expenditure is needed to respond to a release of any toxic or hazardous
waste or substance into the environment.  There is no actual or, to the
Company’s best knowledge, threatened claim, investigation, proceeding, order or
decree in connection with any release of any toxic or hazardous waste or
substance into the environment.

 

2.14.                        Trademarks, etc.  The Company and the Subsidiaries
own, have sufficient title to, or have the right to use (or can obtain the right
to use on reasonable commercial terms), all patents, trademarks, service marks,
trade names, copyrights, licenses, trade secrets or other proprietary rights
(collectively, the “Proprietary Rights”) necessary to their business as now
conducted without infringing upon the right of any person.  Except for employee
confidentiality agreements with employees and consultants, there are no
outstanding material options, licenses or agreements relating to intellectual
property rights of the Company or any Subsidiary necessary to their business as
now conducted, nor is the Company or any Subsidiary bound by or a party to any
material options, licenses or agreements with respect to the Proprietary Rights
of any other person or entity.  To the Company’s knowledge, neither the Company
nor any Subsidiary has violated or is in current violation of, and neither the
Company nor any Subsidiary has received any communications alleging that the
Company or any Subsidiary has violated or, by conducting its business as
proposed, would violate, any of the Proprietary Rights of any other person or
entity.  The Company and the Subsidiaries are not aware of any material
violation by a third party of any of their Proprietary Rights necessary to their
business as now conducted.

 

2.15.                        Employees.  All employees of the Company and each
Subsidiary are employed “at will” and, except as set forth on Schedule 2.15, may
be terminated without payment of severance or incurrence of any other liability
of the Company or the Subsidiaries; no employee of the Company is in violation
of any material term of any employment contract, confidentiality agreement or
any other material Contractual Obligation relating to the right of any such
employee to be employed by the Company or any Subsidiary; and neither the
Company nor any Subsidiary has any employee severance agreement covering any of
its employees.  There are no labor disputes or union

 

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organization activities pending or threatened between the Company or the
Subsidiaries and their employees.

 

2.16.                        Title to Properties.  The assets owned or leased by
the Company and the Subsidiaries are all of the assets necessary to conduct the
business of the Company and the Subsidiaries as currently being conducted or as
proposed to be conducted.  The Company and the Subsidiaries have good and
marketable title to all of the assets they own, real and personal, movable and
immovable, tangible and intangible, free and clear of any charge, claim, lien,
pledge, security interest or other encumbrance, except for: (a) liens for taxes
not yet due and payable, (b) Encumbrances described on Schedule 2.16 hereto, or
(c) minor imperfections of title and Encumbrances, if any, which (i) are not
substantial in amount, (ii) do not detract from the value of the property
subject thereto, impair the operations of the business of the Company, or the
use or license of certain of the assets of the Company, and (iii) have arisen in
the ordinary course of business consistent with past practice.

 

2.17.                        Related Party Transactions.  Except for this
Agreement and those contracts described in the SEC Reports or on Schedule 2.17
hereto, no existing Contractual Obligation of the Company or the Subsidiaries is
with or for the direct benefit of (i) any party owning, or formerly owning,
beneficially or of record, directly or indirectly, in excess of five percent
(5%) of the outstanding capital stock of the Company, (ii) any director, officer
or similar representative of the Company or any Subsidiary, (iii) any natural
person related by blood, adoption or marriage to any party described in (i) or
(ii), or (iii) any entity in which any of the foregoing parties has, directly or
indirectly, at least a five percent (5%) beneficial interest (a “Related
Party”).  Without limiting the generality of the foregoing, no Related Party,
directly or indirectly, owns or controls any material assets or material
properties which are used in the Company’s or the Subsidiaries’ business and, to
the actual knowledge of the Company after reasonable inquiry, no Related Party,
directly or indirectly, engages in or has any significant interest in or
connection with any business which is, or has been within the last two years, a
competitor, customer or supplier of the Company or any Subsidiary or has done
business with the Company or any Subsidiary or which currently sells or provides
products or services which are similar or related to the products or services
sold or provided in connection with the business of the Company or any
Subsidiary.

 

2.18.                        Brokers.  The Company will pay Morgan Keegan &
Company, Inc. (the “Financial Advisor”), contingent upon the successful closing
of a strategic transaction (including the private placement covered by this
Agreement), an advisory fee, in cash at closing equal to 1.5% of the gross
proceeds delivered to the Company at such closing.  The Company will also pay
Pritchard Capital Partners, LLC (the “Placement Agent”), contingent upon the
successful closing of a strategic transaction (including the private placement
covered by this Agreement), a placement fee, in cash at closing equal to 5% of
the gross proceeds delivered to the Company at such closing.  No other person or
entity will have, as a result of the transactions contemplated by this
Agreement, any valid right, interest or claim against or upon the Company or an
Investor for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Company. The Company shall indemnify, pay, and hold each

 

10

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Investor harmless against, any liability, loss or expense (including, without
limitation, attorneys’ fees and out-of-pocket expenses) arising in connection
with any such right, interest or claim.

 

2.19.                        Securities Law Matters.  Except as set forth on
Schedule 2.7, since January 1, 2008, the Company has timely filed all reports,
registration statements, proxy statements and other materials (including any
exhibits and schedules), together with any amendments required to be made with
respect thereto, that were required to be filed with (i) the SEC under the
Securities Act, or the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), (ii) any applicable state securities authorities and (iii) the
NYSE Alternext US exchange.  Subject to the accuracy of the representations and
warranties of the Investors set forth in Section 3, the offer, sale and issuance
of the Shares to the Investors will be exempt from registration under the
Securities Act.  The issuance and sale of the Shares hereunder does not
contravene the rules and regulations of the NYSE Alternext US exchange.  As of
their respective dates, or, if applicable, the dates they were amended prior to
the date hereof, such reports, registration statements, proxy statements and
other materials complied in all material respects with all applicable
requirements (including but not limited to the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”) to the extent then in effect and applicable) of the
Securities Act or the Exchange Act, as applicable, and other federal securities
laws as of the date thereof.  The Company’s Common Stock is registered pursuant
to Section 12(b) of the Exchange Act, and the Company has taken no action
designed to terminate the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the SEC is contemplating
terminating such registration.

 

2.20.                        No Anti-Dilution Rights.  Except as set forth on
Schedule 2.20, the transactions contemplated hereby will not trigger any
anti-dilution provisions contained in any existing agreements.

 

2.21.                        Full Disclosure.  No preliminary summary offering
memorandum, final summary offering memorandum, representation, warranty,
schedule or certificate of the Company made or delivered pursuant to this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact the absence of which makes such
representation, warranty or other statement misleading.  Without limiting the
foregoing, the Company further represents that the unaudited financial
statements as of and for the year ended December 31, 2008 included in the final
summary offering memorandum have been prepared in accordance with GAAP applied
on a consistent basis with prior accounting periods, and fairly present in all
material respects the consolidated financial condition of the Company as of the
date of such financial statements and the results of operations and cash flows
for the period then ended, subject to normal, year-end audit adjustments which
would not be material, individually or in the aggregate.

 

2.22.                        Internal Accounting and Disclosure Controls.  The
Company maintains a system of internal control over financial reporting (as such
term is defined in Rule 13a-15(f) under the Exchange Act) that complies with the
requirements of the Exchange Act and has been designed by the Company’s
principal executive officer or officers (or their

 

11

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equivalent) and principal financial officer or officers (or their equivalent),
or under their supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP.  Except as disclosed in the SEC
Reports, the Company’s internal control over financial reporting is effective
and the Company is not aware of any material weaknesses in its internal control
over financial reporting.  Since December 31, 2007, the Company has not made any
change in its internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.  The Company has established and maintains and
evaluates “disclosure controls and procedures” (as such term is defined in
Rule 13a-15(e) under the Exchange Act); such disclosure controls and procedures
are designed 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
rules and forms of the SEC, including, without limitation, controls and
procedures designed 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 or officers (or their equivalent) and its principal
financial officer or officers (or their equivalent), as appropriate, to allow
timely decisions regarding required disclosure.  Such disclosure controls and
procedures are effective to perform the functions for which they were
established.  Except as disclosed in the SEC Reports, since December 31, 2007,
neither the Company nor any of the Subsidiaries has received any notice or
correspondence from any accountant relating to any material weakness in any part
of the system of internal accounting controls of the Company or any of the
Subsidiaries.

 

2.23.                        Compliance with Sarbanes-Oxley Act and Listing
Requirements.  The Company is in compliance in all material respects with all
applicable provisions of the Sarbanes-Oxley Act and all rules and regulations
promulgated thereunder.  The principal executive officer or officers (or their
equivalents) and principal financial officer or officers (or their equivalents)
of the Company have duly made all certifications required by the Sarbanes-Oxley
Act and any related rules and regulations promulgated by the SEC, and the
statements contained in any such certification are complete and correct as of
the respective dates thereof.  The Company is, and has no reason to believe that
it will not in the foreseeable future continue to be, in compliance in all
material respects with the applicable listing and maintenance requirements and
corporate governance rules of the NYSE Alternext US exchange.

 

2.24.                        Auditor.  Johnson Miller & Co., CPA’s PC, who have
audited the Company Financial Statements contained in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2007, are independent public
accountants as required by the Securities Act and the rules and regulations of
the SEC thereunder, and have been appointed by an Audit Committee comprised
entirely of independent directors of the Board of Directors of the Company, as
independence is defined under the rules of the NYSE Alternext US exchange.

 

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2.25.                        No Integrated Offering.  None of the Company, the
Subsidiaries, any of their affiliates, and any person acting on their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would require
registration of the issuance of any of the Shares under the Securities Act,
whether through integration with prior offerings or otherwise.  None of the
Company, the Subsidiaries, their affiliates and any person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of the issuance of any of the Shares under the
Securities Act or cause the offering of the Shares to be integrated with other
offerings for purposes of any such applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of any stock
exchange on which the Common Stock is listed.  Neither the Company nor any
person acting on its behalf has engaged or will engage in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with any offer or sale of the Shares.

 

2.26.                        Manipulation of Price.  The Company has not, and to
its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of any of the Shares, (ii) other than the Financial Advisor or the
Placement Agent, sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Shares, or (iii) other than the Financial
Advisor or the Placement Agent, paid or agreed to pay to any person any
compensation for soliciting another person to purchase any other securities of
the Company.

 

2.27.                        Insurance.  Each of the Company and the
Subsidiaries maintains insurance of the types and in the amounts which it deems
adequate for its business, including, but not limited to, insurance covering
real and personal property owned or leased by the Company and the Subsidiaries
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and
effect.  Neither the Company nor any of its Subsidiaries has received any notice
of cancellation of any such insurance, nor, to the Company’s knowledge, will it
or any Subsidiary be unable to renew their respective existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.

 

2.28.                        Improper and Other Payments.  Neither the Company,
any Subsidiary, any joint venture, any director, officer, employee, agent or
representative of the Company or any Subsidiary nor any person acting on behalf
of any of them during the last five years (i) has made any unlawful contribution
to any domestic or foreign political party or candidate, or failed to disclose
fully any contribution in violation of law, (ii) has made any payment to any
foreign, federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments required
or permitted by the laws of the United States, any foreign government or any
respective jurisdiction thereof, or (iii) has made, paid or received any bribes,
kickbacks or other similar payments to or from any person, whether lawful or
unlawful.  The internal accounting controls of the Company and the Subsidiaries
are adequate to detect any of the foregoing.

 

13

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2.29.                        Directors and Officers.  To the best of the
Company’s knowledge, information and belief, none of the current directors or
officers of the Company or the Subsidiaries is or has ever been subject to prior
regulatory, criminal or bankruptcy proceedings in the United States or
elsewhere.

 

2.30.                        Reserve Report.  The information underlying the
estimates of the reserves of the Company and the Subsidiaries, which was
supplied by the Company to Netherland, Sewell & Associates, Inc. (“NSAI”),
independent petroleum engineers, for purposes of preparing the reserve
information in the Company’s Annual Report on Form 10-K for the years ended
December 31, 2007 and 2008 (the “Reserve Reports”), including, without
limitation, production, volumes, sales prices for production, contractual
pricing provisions under oil or gas sales or marketing contracts under hedging
arrangements, costs of operations and development, and working interest and net
revenue interest information relating to the Company’s ownership interests in
properties, was true and correct in all material respects on the dates of such
Reserve Reports; the estimates of future capital expenditures and other future
exploration and development costs supplied to NSAI were prepared in good faith
and with a reasonable basis; the information provided to NSAI by the Company for
purposes of preparing the Reserve Reports was prepared in accordance with
customary industry practices; NSAI was, as of the dates of the Reserve Reports,
and is, as of the date hereof, independent petroleum engineers with respect to
the Company; to the knowledge of the Company, there are not any facts or
circumstances that would adversely effect the reserves in the aggregate, or the
aggregate present value of future net cash flows therefrom, as disclosed in the
SEC Reports and reflected in the Reserve Reports such as to cause a Material
Adverse Effect; estimates of such reserves and the present value of the future
net cash flows therefrom as disclosed in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2007, as amended, and reflected in the
Reserve Reports comply in all material respects to the applicable requirements
of Regulation S-X and Industry Guide 2 under the Securities Act.

 

2.31.                        Disclosure.  Neither the Company nor any other
person acting on its behalf has provided any of the Investors or their
respective agents or counsel with any information that constitutes material
non-public information other than concerning the transactions contemplated by
this Agreement or disclosed pursuant to a non-disclosure agreement.  The Company
acknowledges that the Investor will rely on the foregoing representations in
effecting transactions in securities of the Company.  No event or circumstance
has occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties operations or financial
conditions, which under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed, except for the announcement of this Agreement and
related transactions and as may be disclosed on the 10-K Filing (as defined in
Section 9.12 below) or the 8-K Filing (as defined in Section 9.12 below), as
applicable.

 

2.32.                        Investment Company. Neither the Company nor any of
its Subsidiaries is required to be registered as, and is not an affiliate of,
and immediately following the

 

14

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Closing will not be required to register as, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.

 

2.33.                        Application of Takeover Protections; Rights
Agreements. The Company has not adopted any stockholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock or
a change in control of the Company.  The Company and its board of directors have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company’s certificate of incorporation or other organizational documents or the
laws of the jurisdiction of its incorporation or otherwise which is or could
become applicable to any Investor solely as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Shares and any Investor’s ownership of the Shares.

 

2.34.                        Acknowledgment Regarding Investors’ Purchase of
Shares.  The Company acknowledges and agrees that each of the Investors is
acting solely in the capacity of an arm’s length purchaser with respect to this
Agreement and the transactions contemplated hereby.  The Company further
acknowledges that no Investor is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Investor or any of
their respective representatives or agents in connection with this Agreement and
the transactions contemplated thereby is merely incidental to the Investors’
purchase of the Shares.

 

2.35.                        Shell Company Status. The Company is not, and has
not been within the three years preceding the date hereof, an issuer identified
in Rule 144(i)(1).

 

2.36.                        Registration Eligibility. The Company is eligible
to register the resale of the Shares by the Investors using Form S-3 promulgated
under the Securities Act.

 

3.                                      Representations and Warranties of
Investors.  Each Investor, severally and not jointly, hereby makes the following
representations and warranties as to such Investor:

 

3.1.                              Organization.  Investor, if not a natural
person, is duly organized and validly existing and in good standing under the
laws of the state of its organization.

 

3.2.                              Authority.   Investor has the corporate or
other authority to execute and deliver this Agreement and the Questionnaire to
which such Investor is a party and to perform its obligations hereunder.

 

3.3.                              No Violation.  The execution and the delivery
by Investor of this Agreement and the performance by Investor of its obligations
hereunder do not and will not (a) conflict with or result in a breach of the
terms, conditions or provisions of, (b) constitute a default under, (c) result
in a violation of, or (d) require any authorization, consent or approval not
heretofore obtained pursuant to, any Contractual Obligation or Requirement of
Law binding upon or applicable to Investor or any of its properties or

 

15

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assets and which would have a material adverse effect on the financial condition
or operations of Investor.

 

3.4.                              Enforceability.  This Agreement constitutes
the legal, valid and binding obligation of Investor and is enforceable against
Investor in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
generally relating to or affecting creditors’ rights.

 

3.5.                              Investment Intent.  Investor is acquiring the
Shares for its own account for investment and not with a view to, or for resale
in connection with, any “distribution” thereof for purposes of the Securities
Act.  Investor is an “accredited investor” as such term is defined in Regulation
D under the Securities Act.  Investor acknowledges that the Shares shall be
“restricted securities” within the meaning of SEC Rule 144, will contain a
transfer restriction legend and may only be resold pursuant to an effective
registration statement filed with the SEC under the Securities Act, or pursuant
to SEC Rule 144 or another valid exemption from the registration requirements of
the Act as established by an opinion of counsel reasonably acceptable to the
Company.  Notwithstanding the foregoing, such Investor does not agree to hold
any of the Shares for any minimum period of time and reserves the right, subject
to the provisions of this Agreement, at all times to sell or otherwise dispose
of all or any part of such Shares pursuant to an effective registration
statement under the Securities Act or under an exemption from such registration
and in compliance with applicable federal and state securities laws.

 

3.6.                              Investigation.  Investor acknowledges that he
has been given full access by the Company to all information concerning the
business and financial condition, properties, operations and prospects of the
Company that Investor has deemed relevant for purposes of making the investment
contemplated by this Agreement and has received and reviewed the Company’s
(i) preliminary summary offering memorandum dated February 9, 2009 and all
exhibits thereto and (ii) final summary offering memorandum dated February 19,
2009 and all exhibits thereto.  By reason of Investor’s knowledge and experience
in financial and business matters in general, the business of the Company and
investments of the type contemplated by this Agreement in particular, Investor
is capable of evaluating the merits and risks of making the investment in the
Shares and is able to bear the economic risk of the investment (including a
complete loss of its investment in the Shares).  Subject to the truth and
accuracy of the representations and warranties made by the Company hereunder,
Investor has conducted such investigation as it deems relevant in connection
with its consummation of the transactions contemplated by this Agreement.

 

3.7.                              Brokers.  Investor has not agreed to pay or
incurred any obligation in respect of any finder’s fee, brokerage fee or other
commission in connection with the sale of Shares contemplated by this Agreement.

 

3.8.                              Trading Activities.  Neither the Investor nor
any person acting on its behalf or at its direction has engaged in any purchase
or sale of Common Stock (including without limitation any short sale, pledge,
transfer, or establishment of an open

 

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“put equivalent position” within the meaning of Rule 16a-1(h) under the Exchange
Act) after learning about the transaction contemplated hereby.

 

4.                                      Conditions to the Obligations of the
Company.  The obligations of the Company to consummate the transactions
contemplated by this Agreement on the Closing Date shall be subject to the
satisfaction of each of the conditions set forth in this Section 4, unless
waived by the Company, on or prior to the Closing Date.

 

4.1.                              Representations and Warranties.  If this
Agreement is not signed on the Closing Date, the representations and warranties
of the Investors set forth in Section 3 shall be true and correct in all
material respects as of the Closing Date as though made on and as of such date.

 

4.2.                              No Proceedings.  No order, injunction, decree
or other action or legal, administrative, arbitration or other proceeding by any
person other than the Company or investigation by any governmental agency or
authority shall be pending or, to the knowledge of the Company, threatened,
challenging or imposing a material limitation on the execution, delivery or
performance of this Agreement, or the consummation of any of the transactions
contemplated hereby.

 

4.3.                              Approval of Documents.  All proceedings taken
in connection with the transactions contemplated hereby and all documents
incident to such transactions shall be reasonably satisfactory in form and
substance to the Company and its counsel.

 

4.4.                              Compliance with Laws.  The purchase of the
Shares by each Investor hereunder shall be legally permitted by all laws and
regulations to which each Investor or the Company is subject.

 

4.5.                              Questionnaire.  Each investor shall have
completed and executed and delivered to the Company a Questionnaire in a manner
reasonably acceptable to the Company.

 

5.                                      Conditions to the Obligations of
Investors.  The obligations of each Investor to consummate the transactions
contemplated by this Agreement on the Closing Date shall be subject to the
satisfaction of each of the conditions set forth in this Section 5, unless
waived by each Investor, on or prior to the Closing Date.

 

5.1.                              Representations and Warranties; Performance.  
If this Agreement is not signed on the Closing Date, (i) the representations and
warranties of the Company set forth in Section 2 shall be true and correct in
all material respects (except for those representations and warranties which are
qualified as to materiality, in which case such representations and warranties
shall be true and correct in all respects) as of the date when made and as of
the Closing Date as though made on and as of such date; (ii) the Company shall
have performed all obligations and complied with all covenants required to be
performed or complied with by the Company under this Agreement on or prior to
the Closing Date; and (iii) each Investor shall have received on the Closing
Date from the Company a certificate or certificates, dated the Closing Date, to
such effect, which certificate or certificates shall be signed by an authorized
officer of the Company.

 

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5.2.                              No Proceedings.  No order, injunction, decree
or other action or legal, administrative, arbitration or other proceeding by any
person or investigation by any governmental agency or authority shall be pending
or, to the knowledge of the Company, threatened, challenging or imposing a
material limitation on the execution, delivery or performance of this Agreement,
the consummation of any of the transactions contemplated thereby or the
operation by the Company of its businesses as now conducted.

 

5.3.                              Approval of Documents.  All proceedings taken
in connection with the transactions contemplated hereby and all documents
incident to such transactions shall be reasonably satisfactory in form and
substance to each Investor and its counsel.

 

5.4.                              Compliance with Laws; Consents.  The purchase
of the Shares by each Investor hereunder shall be legally permitted by all laws
and regulations to which each Investor or the Company is subject.  The Company
shall have obtained any and all consents, permits, approvals, registrations and
waivers necessary for consummation of the purchase and sale of the Shares at the
Closing, all of which shall be and remain so long as necessary in full force and
effect.

 

5.5.                              No Material Adverse Change.  Except as
described in the SEC Reports or in Schedule 2.8, there shall have been no event
that has had or could reasonably be expected to result in a Material Adverse
Effect since September 30, 2008.

 

5.6.                              Opinion of Counsel.  Investor shall have
received an opinion of counsel to the Company in substantially the form attached
as Schedule 5.6 hereto.

 

5.7.                              Lock-up Agreements.  The Company shall have
obtained and delivered to each Investor executed copies of lock-up agreements
satisfactory to the Placement Agent from the directors and executive officers of
the Company.

 

5.8.                              No Suspensions of Trading in Common Stock;
Listing. The Common Stock (i) shall be listed on the NYSE Alternext US and
(ii) shall not have been suspended, as of the Closing Date, by the SEC or the
NYSE Alternext US from trading on the NYSE Alternext US nor shall suspension by
the SEC or the NYSE Alternext US have been threatened, as of the Closing Date,
either (A) in writing by the SEC or the NYSE Alternext US or (B) by falling
below the minimum listing maintenance requirements of the NYSE Alternext US.

 

5.9.                              Compliance Certificate. If this Agreement is
not signed on the Closing Date, the Company shall have delivered to each
Purchaser a certificate, dated as of the Closing Date and signed by its Chief
Executive Officer or its Chief Financial Officer, certifying to the fulfillment
of the conditions specified in Sections 5.1(i) and (ii).

 

6.                                      Certain Covenants of the Company.

 

6.1.                              Listing of Common Stock.  The Company shall
use its reasonable best efforts to cause the Common Stock to remain listed on
the NYSE Alternext US exchange.  The Company shall cause the Shares to be listed
or included on each securities

 

18

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exchange or automated quotation system on which similar securities issued by the
Company are then listed or included.

 

6.2.                              Shelf Registration.  The Company shall prepare
and file or cause to be prepared and filed with the SEC, as soon as practicable
but in any event no later than forty-five (45) days after the Closing Date (the
“Filing Deadline”), a Registration Statement on Form S-3 (or such other form as
the Company is then eligible to use) for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act registering the
resale from time to time by the Investors of the Shares pursuant to plans of
distribution reasonably acceptable to the Investors (the “Registration
Statement”).  Each Investor agrees to promptly provide to the Company, in
writing, such information as the Company may reasonably request for inclusion in
the Registration Statement.  The Company shall use its reasonable best efforts
to cause the Registration Statement to be declared effective under the
Securities Act no later than the earlier of (i) ninety (90) days after the
Closing Date or in the event of SEC review, one hundred and twenty (120) days
after the Closing Date and (ii) the third business day following the date on
which the Company is notified (orally or in writing, whichever is earlier) by
the SEC that the Registration Statement will not be reviewed or is no longer
subject to further review and comments (the “Effectiveness Deadline”), unless
upon the advice of counsel it is advisable not to accelerate the effectiveness
of such Registration Statement, for such reasons including but not limited to,
the Company issues an earnings release or material news or a material event
relating to the Company occurs in which case such third business day shall be
the third business day following the fifteen (15) calendar day period after such
event occurs, and to keep such Registration Statement continuously effective
under the Securities Act until the earlier of (i) the date on which all Shares
covered by the Registration Statement may be sold pursuant to SEC Rule 144
without the requirement for the Company to be in compliance with the current
public information required under SEC Rule 144 and without volume or manner of
sale restriction by persons who are not affiliates of the Company, or (ii) such
date as all Shares registered on such Registration Statement have been resold
either pursuant to such Registration Statement or under SEC Rule 144 (the
earlier to occur of (i) or (ii) is the “Registration Termination Date”).

 

(a)                      Notwithstanding the registration obligations set forth
in this Section 6.2, in the event the SEC informs the Company that all of the
Shares cannot, as a result of the application of Rule 415, be registered for
resale as a secondary offering on a single registration statement, the Company
agrees to promptly (i) inform each of the Investors thereof and use its
commercially reasonable efforts to file amendments to the initial Registration
Statement as required by the SEC and/or (ii) withdraw the initial Registration
Statement and file a new Registration Statement, in either case covering the
maximum number of Shares permitted to be registered by the SEC, on Form S-3 or
such other form available to register for resale the Shares as a secondary
offering; provided, however, that prior to filing such amendment or new
Registration Statement, the Company shall be obligated to use its commercially
reasonable efforts to advocate with the SEC for the registration of all of the
Shares in accordance with SEC guidance.  Notwithstanding any other provision of
this Agreement and subject to the payment of liquidated damages in Sections
6.2(k), (l) and (m), if any SEC guidance sets forth a limitation of the number
of Shares or other shares of Common Stock permitted to be

 

19

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registered on a particular Registration Statement as a secondary offering (and
notwithstanding that the Company used diligent efforts to advocate with the SEC
for the registration of all or a greater number of Shares), the number of Shares
or other shares of Common Stock to be registered on such Registration Statement
will be reduced as follows: first, the Company shall reduce or eliminate the
shares of Common Stock to be included by any person other than an Investor;
second, the Company shall reduce or eliminate any shares of Common Stock to be
included by any affiliate of the Company; and third, the Company shall reduce
the number of Shares to be included by all other Investors on a pro rata basis
based on the total number of unregistered Shares held by such Investors, subject
to a determination by the SEC that certain Investors must be reduced before
other Investors based on the number of Shares held by such Investors.  In the
event the Company amends the initial Registration Statement or files a new
Registration Statement, as the case may be, under clauses (i) or (ii) above, the
Company will use its commercially reasonable efforts to file with the SEC, as
promptly as allowed by SEC guidance provided to the Company or to registrants of
securities in general, one or more Registration Statements on Form S-3 or such
other form available to register for resale those Shares that were not
registered for resale on the initial Registration Statement, as amended, or the
new Registration Statement.  Any Registration Statements filed hereunder shall
be kept effective until the Registration Termination Date.  No Investor shall be
named as an “underwriter” in any Registration Statement without such Investor’s
prior written consent.

 

(b)                     If a Registration Statement ceases to be effective for
any reason at any time prior to the applicable Registration Termination Date,
the Company shall use its reasonable best efforts to reinstate the effectiveness
thereof.

 

(c)                      The Company shall supplement and amend the Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Registration Statement, if
required by the Securities Act or, to the extent to which the Company does not
reasonably object, as requested by the Investors.

 

(d)                     All Registration Expenses incurred in connection with
the registrations pursuant to this Section 6.2 shall be borne by the Company.
“Registration Expenses” shall mean all expenses incurred by the Company in
complying with this Section 6.2 hereof including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company and Selling Expenses, as defined hereinafter).   All
Selling Expenses incurred in connection with any registrations hereunder, shall
be borne by the Investors. “Selling Expenses” shall mean all brokerage and
selling commissions applicable to a sale of the Shares pursuant to the
Registration Statement.

 

(e)                      The Company may suspend sales of Shares pursuant to the
Registration Statement for a period of not more than fifteen (15) days during
any six (6) 

 

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month period (an “Allowable Grace Period”) in the event it determines in good
faith that such Registration Statement contains an untrue statement of material
fact or omits to state a material fact required to be stated therein or
necessary to make the statement therein not misleading; provided that (i) the
Company shall immediately notify the Investors of such suspension and (ii) the
Company shall promptly amend such Registration Statement in order to correct any
untrue statement and/or ensure that such Registration Statement is not
misleading; provided further that subject to the time limitations set forth
above, the Company may delay such amendment if the Company determines that such
delay is in the best interest of the Company in order to avoid premature public
announcements of potential acquisitions or other extraordinary transactions.  At
the time the Registration Statement is declared effective, each Investor shall
be named as a selling securityholder in the Registration Statement and the
related prospectus in such a manner as to permit such Investor to deliver such
prospectus to purchasers of Shares in accordance with applicable law.

 

(f)                        The Company shall promptly furnish to the Investors,
upon request and without charge, (i) any correspondence from the SEC or the
staff of the SEC to the Company or its representatives relating to any
Registration Statement (but shall redact any material non-public information
therefrom), and (ii) after the same is prepared and filed with the SEC, one copy
of any Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits.  The Company shall respond as promptly as reasonably practicable
to any comments received from the SEC with respect to any Registration Statement
or any amendment thereto.

 

(g)                     The Company shall furnish to the Investors such numbers
of copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents as they
may reasonably request in order to facilitate the disposition of the Shares
owned by them.

 

(h)                     The Company shall use its reasonable best efforts to
register and qualify the securities covered by a Registration Statement under
such other securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Investors, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.

 

(i)                         The Company shall notify immediately each Investor
holding Shares covered by a Registration Statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing; provided, however, that, subject to
Section 6.2(d) the Company shall promptly amend such Registration Statement in
order to correct any untrue statement and/or ensure that such Registration
Statement is not misleading.  The Company shall immediately notify each Investor

 

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holding Shares covered by such Registration Statement (i) when such registration
statement or any post-effective amendment thereto has become effective; (ii) of
any request by the SEC or any other federal or state governmental authority for
amendments or supplements to a Registration Statement or prospectus or for
additional information that pertains to the Investors as selling stockholders or
their respective plans of distribution; (iii) of the issuance by the SEC of any
stop order suspending the effectiveness of a Registration Statement covering any
or all of the Shares or the initiation of any proceedings for that purpose,
including pursuant to Section 8A of the Securities Act; (iv) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Shares for sale in
any jurisdiction, or the initiation or threatening of any proceeding for such
purpose; and (v) of the occurrence of any other event that results in the
Investors being unable to sell Shares pursuant to the Registration Statement or
related prospectus.  The Company shall use commercially reasonable efforts to
avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order
suspending the effectiveness of a Registration Statement, or (ii) any suspension
of the qualification (or exemption from qualification) of any of the Shares for
sale in any jurisdiction, as soon as practicable.  The Company shall, by
9:30 a.m. New York City time on the first business day after the effective date
of a Registration Statement, file a final prospectus with the SEC under
Rule 424(b).

 

(j)                         The Company shall not less than three (3) business
days prior to the filing of the Registration Statement covering the Shares and
not less than one (1) business day prior to the filing of any related
prospectus, or any amendment or supplement thereto containing information about
an Investor or the plan of distribution of the Shares, furnish to the Investor
copies of such Registration Statement, prospectus or amendment or supplement
thereto, as proposed to be filed, which documents will be subject to the review
of such Investor (it being acknowledged and agreed that if an Investor does not
object to or comment on the aforementioned documents within such three
(3) business day or one (1) business day period, as the case may be, then the
Investor shall be deemed to have consented to and approved the use of such
documents).  The Company shall not file any such Registration Statement covering
the Shares or amendment or supplement thereto in a form to which an Investor
reasonably objects in good faith, provide that, the Company is notified of such
objection in writing within the three (3) business day or one (1) business day
period described above , as applicable.

 

(k)                      If the Registration Statement covering the Shares
required to be filed by the Company pursuant to this Section 6.2 is not filed
with the SEC by the date that is the Filing Deadline, then the Company shall
make the payments to the Investors as provided in the next sentence as
liquidated damages and not as a penalty.  If the Registration Statement covering
the Shares required to be filed by the Company pursuant to this Section 6.2 is
not filed with the SEC by the date that is the Filing Deadline, a one-time
amount equal to three percent (3%) of the purchase price for the Shares shall be
paid by the Company to the Investors.

 

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(l)                         If the Registration Statement covering the Shares
required to be filed by the Company pursuant to this Section 6.2 is not declared
effective by the SEC by the date that is the Effectiveness Deadline, then the
Company shall make the payments to the Investors as provided in the next
sentence as liquidated damages and not as a penalty.  If the Registration
Statement covering the Shares required to be filed by the Company pursuant to
this Section 6.2 is not declared effective by the date that is the Effectiveness
Deadline, an amount equal to two percent (2%) of the purchase price for the
Shares shall be paid by the Company to the Investors, and an additional amount
equal to two percent (2%) of the purchase price for the Shares shall be paid by
the Company to the Investors in respect of any Computation Date (as defined
below) thereafter.  Except for the first payment under this Section 6.2(l),
which shall be paid within five (5) business days of the Effectiveness Deadline,
the amount to be paid by the Company to the Investors pursuant to this
Section 6.2(l) shall begin accruing as of the Effectiveness Deadline and shall
be determined and paid as of each Computation Date (as defined below) and for
each thirty (30)-day period of any subsequent Computation Dates thereafter,
calculated on a pro rata basis to the date on which the Registration Statement
is declared effective by the SEC (the “Periodic Amount”).  However, payments
pursuant to this Section 6.2(l) are subject to a cap of ten percent (10%) of the
purchase price or five (5) thirty (30)-day periods.

 

(m)                   After the effective date of the Registration Statement,
(i) if the Company suspends sales of Shares pursuant to the Registration
Statement for a period exceeding the Allowable Grace Period or (ii) the
Registration Statement ceases for any reason to remain continuously effective or
available as to all Shares included in the Registration Statement for a period
exceeding the Allowable Grace Period, an amount equal to one percent (1%) of the
purchase price for the Shares shall be paid by the Company to the Investors
within five (5) business days of the date of such event, and an additional
amount equal to one percent (1%) of the purchase price for the Shares shall be
paid by the Company to the Investors if such suspension or unavailability lasts
an additional 30 days, or in respect of any subsequent suspension or
unavailability period in excess of the Allowable Grace Period.

 

(n)                     The amounts payable under sections 6.2 (k),(l) or
(m) above shall be paid by the Company to the Investors, pro rata, at the option
and sole discretion of the Company, by (i) wire transfer of immediately
available funds within five (5) business days after the Filing Deadline and each
Computation Date or each date triggering payment pursuant to Section 6.2(m), as
the case may be (each a “Measurement Date”), or (ii) by the issuance of
additional shares of Common Stock; the number of shares to be issued shall be
calculated as the Periodic Amount to which each Investor is entitled for each
thirty (30)-day computation period, divided by the lesser of (a) 90% of the
average closing price of the Common Stock for the thirty (30)-day period prior
to the Measurement Date, or (b) 90% of the closing price of the Common Stock on
the Measurement Date.  Any such Shares shall be entitled to the same
registration right under this Section 6.2.

 

(o)                     As used in this Section 6.2, “Computation Date” means
the date that is thirty (30) days after the Effectiveness Deadline and, if the
Registration

 

23

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Statement to be filed by the Company pursuant to this Section 6.2 has not
theretofore been filed with the SEC or declared effective by the SEC, as the
case may be, each date which is thirty (30) days after the previous Computation
Date until such Registration Statement is so filed or declared effective, or
until the liquidated damages limit has been reached, as the case may be.

 

(p)                     The liquidated damages payable under Sections 6.2 (k),
(l) or (m) above shall cease to apply (except to the extent already accrued) on
the date that is six months from the Closing Date and thereafter as long as the
Investors are able to sell the Shares pursuant to SEC Rule 144 and the Company
is in compliance with the current public information requirement under SEC
Rule 144;  provided, however, that the liquidated damages contemplated hereunder
shall apply in full force and effect, after the date that is six months from the
Closing Date, until the date that is one year from the Closing Date, to the
extent and from the date that the Company fails to file with the SEC any
required reports as a result of which the Investors are unable to sell the
Shares without restriction under SEC Rule 144. Such liquidated damages shall
cease to apply (except to the extent already accrued), and shall be pro-rated
accordingly, once the required filings are made by the Company and the Investors
are otherwise able to sell the Shares pursuant to SEC Rule 144. No liquidated
damages shall accrue under this Section 6.2 once the Investors are able to sell
the Shares pursuant to SEC Rule 144 without the requirement for the Company to
be in compliance with the current public information required under SEC Rule 144
and without restriction.

 

6.3.                              Termination of Registration Rights. All rights
and obligations provided for in Section 6.2 (other than any liquidated damages
due) shall terminate on the date on which the Company has no obligation to
maintain the effectiveness of the Registration Statement; provided that the
rights of any Investor under Section 6.2 shall terminate (other than the right
to any liquidated damages due from the Company) on the Registration Termination
Date.

 

6.4.                              Reports Under Securities Exchange Act of 1934.
With a view to making available to the Investors the benefits of SEC Rule 144
and any other rule or regulation of the SEC that may at any time permit
Investors to sell securities of the Company to the public without registration
or pursuant to a Registration Statement, the Company agrees to:

 

(a)                      use its reasonable best efforts to make and keep public
information available, as those terms are understood and defined in SEC
Rule 144, at all times so long as the Company remains subject to the periodic
reporting requirements under Sections 13 or 15(d) of the Exchange Act;

 

(b)                     use its reasonable best efforts to take such action as
is necessary to enable the Investors to utilize Form S-3 or such other
registration statement form as may be applicable for the sale of their Shares;

 

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(c)                      use its reasonable best efforts to file with the SEC in
a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and

 

(d)                     furnish to any Investor, so long as the Investor owns
any Shares, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of the Securities Act and the
Exchange Act, or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (or such other form as the Company is then eligible
to use), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested in availing any
Investor of any rule or regulation of the SEC which permits the selling of any
such securities without registration or pursuant to such form.

 

6.5.                              Integration.  The Company shall not, and shall
use its best efforts to ensure that no Subsidiary or affiliate of the Company
shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in Section 2 of the Securities Act) that
will be integrated with the offer or sale of the Shares in a manner that would
require the registration under the Securities Act of the sale of the Shares to
the Investors, or that will be integrated with the offer or sale of the Shares
for purposes of the rules and regulations of the NYSE Alternext US exchange,
including, without limitation, the rules and regulations relating to stockholder
approval.

 

6.6.                              Form D and Blue Sky.  The Company agrees to
timely file a Form D with respect to the Shares as required under Regulation D. 
The Company, on or before the Closing Date, shall take such action as the
Company shall reasonably determine is necessary in order to obtain an exemption
for or to qualify the Shares for sale to the Investors at the Closing pursuant
to this Agreement under applicable securities or “Blue Sky” laws of the states
of the United States (or to obtain an exemption from such qualification).  The
Company shall make all filings and reports relating to the offer and sale of the
Shares required under applicable securities or “Blue Sky” laws of the states of
the United States following the Closing Date.

 

6.7.                              No Piggyback on the Registration Statement;
Certain Preemptive Rights.

 

(a)                      Neither the Company nor any of its security holders
(other than the Investors in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the Shares
and the Company shall not prior to the effective date of the Registration
Statement enter into any agreement providing any such right to any of its
security holders.

 

(b)                     In addition, if the Company, from the date hereof until
the date that is 30 days after the effective date of the initial Registration
Statement, proposes to prepare and file with the SEC a registration statement
relating to an offering for its own account (a “Primary Offering”) under the
Securities Act of any of its equity securities (other than on Form S-8, or, in
connection with an acquisition on Form S-4), then the Company will

 

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(I)                                    PROMPTLY GIVE TO EACH INVESTOR THAT HOLDS
AT LEAST 20% OF THE SHARES SOLD IN THE TRANSACTION CONTEMPLATED BY THIS
AGREEMENT AS SET FORTH ON SCHEDULE 1.1 HERETO (EACH, A “LEAD INVESTOR”) WRITTEN
NOTICE THEREOF; AND

 

(II)                                 THE LEAD INVESTORS SHALL HAVE FIVE
(5) BUSINESS DAYS TO CONSENT TO THE PRIMARY OFFERING, WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD; IF THE LEAD INVESTORS DO NOT OBJECT TO SUCH PRIMARY
OFFERING WITHIN FIVE (5) BUSINESS DAYS, THEN SUCH LEAD INVESTORS SHALL BE DEEMED
TO HAVE CONSENTED TO THE PRIMARY OFFERING.

 

IN ADDITION, FROM THE DATE HEREOF UNTIL THE DATE THAT IS 90 DAYS AFTER THE
EFFECTIVE DATE OF THE INITIAL REGISTRATION STATEMENT, EACH INVESTOR SHALL HAVE
THE RIGHT TO PURCHASE ITS PRO RATA SHARE OF EQUITY OR EQUITY-LINKED SECURITIES
IN ANY PRIMARY OFFERING ON THE SAME TERMS AND CONDITIONS AND AT THE SAME TIME AS
THE MOST FAVORABLE OFFER TO A THIRD PARTY.  EACH INVESTOR’S PRO RATA SHARE, FOR
PURPOSES OF THIS RIGHT, IS THE RATIO OF THE SHARES OF COMMON STOCK OWNED BY IT
IMMEDIATELY PRIOR TO THE ISSUANCE OF EQUITY OR EQUITY-LINKED SECURITIES IN THE
PRIMARY OFFERING TO ALL SHARES OF COMMON STOCK OF THE COMPANY OUTSTANDING
IMMEDIATELY PRIOR TO THE ISSUANCE OF EQUITY OR EQUITY-LINKED SECURITIES IN THE
PRIMARY OFFERING.  IN THE EVENT THE COMPANY PROPOSES TO UNDERTAKE A PRIMARY
OFFERING PURSUANT TO THIS SECTION 6.7(B) AND THE LEAD INVESTORS HAVE NOT
OBJECTED, THE COMPANY SHALL GIVE EACH INVESTOR AT LEAST FOUR BUSINESS DAYS’
WRITTEN NOTICE OF ITS INTENTION, DESCRIBING THE TYPE OF EQUITY OR EQUITY-LINKED
SECURITIES, AND THE GENERAL TERMS UPON WHICH THE COMPANY PROPOSES TO ISSUE THE
SAME.  THE COMPANY SHALL HAVE THE RIGHT TO TERMINATE OR WITHDRAW ANY SUCH
REGISTRATION INITIATED BY IT UNDER THIS SECTION 6.7(B) PRIOR TO THE
EFFECTIVENESS OF SUCH REGISTRATION WHETHER OR NOT ANY INVESTOR HAS ELECTED TO
EXERCISE ITS PREEMPTIVE RIGHT IN SUCH REGISTRATION.

 

7.                                      Indemnification.

 

7.1.                              Indemnification by the Company.  The Company
will indemnify, defend and hold harmless each Investor, its officers, directors,
employees, partners, affiliates, agents, representatives and legal counsel, and
each person controlling (or deemed controlling) such Investor within the meaning
of the Securities Act, (collectively, the “Investors’ Agents”) against all
claims, losses, damages, liabilities, costs and expenses (or actions in respect
thereof) (“Liabilities”), joint or several, arising out of or based on
(A) (i) any untrue statement (or alleged untrue statement) of a material fact
contained in the Registration Statement, any prospectus, offering circular or
other similar document or any amendments or supplements thereto (including any
related registration statement and amendments or supplements thereto,
notification or the like), or 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 in the light of the circumstances under which
they were made, and will reimburse the Investors and the Investors’ Agents for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any Liabilities, as such expenses are incurred, or
(ii) any violation by the Company of any federal, state or common law rule or
regulation applicable to the Company in

 

26

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connection with any registration, qualification or compliance relating to the
Shares, and will reimburse each Investor, and each Investors’ Agents, for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any Liabilities; or (B) any breach of any covenant,
agreement, representation or warranty of the Company in this Agreement. 
Notwithstanding the foregoing, the Company shall not be liable under this
Section 7.1: (a) in any such case to the extent that any Liabilities or expense
arises out of or are based on any untrue statement or omission in reliance upon
and in conformity with written information furnished to the Company by an
instrument duly executed by such Investor and stated to be specifically for use
therein, (b) for any amount paid in settlement of claims without the Company’s
written consent (which consent shall not be unreasonably withheld), or (c) to an
indemnified party to the extent that it is finally judicially determined that
such Liabilities resulted primarily from the fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) of such indemnified
party; provided, further, that if and to the extent that such indemnification
against any Liabilities is held, by final judicial determination to be
unenforceable, in whole or in part, for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of such indemnified
Liabilities.  In connection with the obligation of the Company to indemnify for
expenses as set forth above, if an indemnified party is reimbursed hereunder for
any expenses, such reimbursement of expenses shall be refunded without any
interest thereon to the extent it is finally judicially determined that the
Liabilities in question resulted primarily from the fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) of such indemnified
party.

 

7.2.                              Indemnification by Investors.  In connection
with any Registration Statement in which an Investor is participating, such
Investor will severally and not jointly indemnify the Company, each of its
directors and officers, each legal counsel and independent accountant of the
Company, each person who controls the Company within the meaning of the
Securities Act, any underwriter (the “Company’s Agents”), and each other
Investor, against all Liabilities arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in the
Registration Statement, any prospectus, offering circular or other similar
document, or 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 in the light of the circumstances under which they were made, and
will reimburse the Company, the Company’s Agents and each other Investor for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any Liabilities, as such expenses are incurred, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in the Registration
Statement, any prospectus, offering circular or other similar document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Investor and stated to be
specifically for use therein.  Notwithstanding the foregoing, the indemnity
agreement provided in this Section 7.2 shall not apply to amounts paid in
settlement of any Liabilities if such settlement is effected without the written
consent of the Investor, which consent shall not be unreasonably withheld. In no
event shall an Investor’s indemnification obligation exceed the net proceeds
received from its sale of the Shares.

 

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7.3.                              Notification; Procedure.

 

(a)                      Each party entitled to indemnification under this
Section 7 (the “Indemnified Party”) shall give notice to the party required to
provide indemnification (the “Indemnifying Party”) promptly after such
Indemnified Party has received written notice of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld). The Indemnified Party may participate in such defense
at such party’s expense; provided, however, that the Indemnifying Party shall
bear the expense of such defense of the Indemnified Party if (i) representation
of both parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest or (ii) the Indemnifying Party shall have failed
promptly to assume the defense of such proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party. The failure of any
Indemnified Party to give notice within a reasonable period of time as provided
herein shall relieve the Indemnifying Party of its obligations under this
Section 7, but only to the extent that such failure to give notice shall
materially adversely prejudice the Indemnifying Party in the defense of any such
claim or any such litigation. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.

 

(b)                     If the indemnification provided for in this Section 7 is
held to be unavailable to an Indemnified Party with respect to any Liabilities
or expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Liabilities or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the other
in connection with the statements or omissions that resulted in such Liabilities
or expense as well as any other relevant equitable considerations; provided,
that in no event shall any contribution by an Investor under this
Section 7.3(b) exceed the net proceeds received by such Investor from its sale
of the Shares. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties’
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.  The parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section 7.3(b) were
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in the
immediately preceding sentence.

 

(c)                      The obligations of the Company and each Investor under
this Section 7 shall survive the Closing and the completion of any offering of
the Shares in

 

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a Registration Statement, any investigation made by or on behalf of the
Indemnified Party or any officer, director or controlling Person of such
Indemnified Party and will survive the transfer of securities.

 

(d)                     Each Investor shall furnish in writing to the Company
such information regarding such Investor and the distribution proposed by such
Investor as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 7.

 

7.4.                              Registration Rights.  Each Investor agrees
that if such Investor wishes to sell securities pursuant to the Registration
Statement, it will do so in accordance with this Agreement.

 

8.                                      Survival of Representations and
Warranties.  All representations, warranties and agreements made by the Company
and Investors in this Agreement or in any certificate or other instrument
delivered pursuant hereto shall survive the Closing and any investigation and
discovery by the Company or by Investors, as the case may be, made at any time
with respect thereto.

 

9.                                      Miscellaneous Provisions.

 

9.1.                              Deliveries.  The Company and Investors hereby
covenant and agree to use their respective reasonable best efforts to perform
each of their obligations hereunder, to deliver all certificates and to satisfy
all other conditions set forth in this Agreement and to close the transactions
contemplated by this Agreement on the Closing Date.

 

9.2.                              Successors and Assigns.  This Agreement is
executed by, and shall be binding upon and inure to the benefit of, the parties
hereto and each of their respective successors and assigns; provided, however,
that neither this Agreement nor any right pursuant hereto nor interest herein
shall be assignable except (a) by the Company with the consent of the Investors,
(b) by the Company in connection with a merger, consolidation or sale of all or
substantially all of its assets, (c) by an Investor with the prior written
consent of the Company or (d) by an Investor in connection with a sale or other
transfer of the Shares.  None of the provisions of this Agreement shall be for
the benefit of or enforceable by any other person.

 

9.3.                              Notices.  All notices, demands and other
communications provided for or permitted hereunder shall be made in writing and
shall be by registered or certified first-class mail, return receipt requested,
telecopier, courier service or personal delivery:

 

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if to the Investors at the address set forth on the signature page hereof:

 

if to the Company at the following address:

with a copy to:

 

 

BPZ Resources, Inc.

Seyfarth Shaw LLP

580 Westlake Park Blvd., Suite 525

3700 Bank of America Building

Houston, Texas 77079

700 Louisiana

Attn: Chief Executive Officer and President

Houston, Texas 77002

Attn: Chief Financial Officer

Attn: Mark W. Coffin

Fax: (281) 556-6377

Fax: (713) 225-2300

 

All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; when delivered by courier, if
delivered by commercial overnight courier service; five business days after
being deposited in the mail, postage prepaid, if mailed; and when receipt is
acknowledged, if telecopied.

 

9.4.                              Counterparts.  This Agreement may be executed
in any number of counterparts, and each such counterpart will for all purposes
be deemed an original, and all such counterparts shall constitute one and the
same instrument.

 

9.5.                              Governing Law; Forum.  This Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware applicable to contracts entered into and to be wholly
performed therein.  Each party to this Agreement hereby irrevocably agrees that
any legal action or proceeding arising out of or relating to this Agreement or
any agreements or transactions contemplated hereby shall be brought in the
courts of the State of Delaware or of the United States of America for the
District of Delaware and hereby expressly submits to the personal jurisdiction
and venue of such courts for the purposes thereof and expressly waives any claim
of improper venue and any claim that such courts are an inconvenient forum. 
Each party hereby irrevocably consents to the service of process of any of the
aforementioned courts in any such suit, action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the address
set forth in Section 9.3, such service to become effective 10 days after such
mailing.

 

9.6.                              Attorneys’ Fees.  If any party should
institute any action to enforce or interpret any term or provision of this
Agreement, the party prevailing in such action, after all appeals have been
exhausted, shall be entitled to its attorneys’ fees, out-of-pocket disbursements
and all other expenses from the non-prevailing party in such action.

 

9.7.                              Entire Agreement.  This Agreement (together
with all Exhibits and Schedules hereto) constitutes the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous written and oral negotiations,
discussions, agreements and understandings with respect to such subject matter.

 

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9.8.                              Section Headings.  The section and subsection
headings contained in this Agreement are included for convenience only and form
no part of the agreement between the parties.

 

9.9.                              Amendments; Waivers; No Additional
Consideration. No provision of this Agreement may be waived or amended except in
a written instrument signed, in the case of an amendment, by the Company and
each of the Investors or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right. No consideration shall be offered or paid
to any Investor to amend or consent to a waiver or modification of any provision
of this Agreement unless the same consideration is also offered to all Investors
who then hold Shares.

 

9.10.                        Interpretation.  Each of the Investors and the
Company have participated in the negotiation and drafting of this Agreement. 
Accordingly, each of the parties hereby waives any statutory provision, judicial
precedent or other rule of law to the effect that contractual ambiguities are to
be construed against the party who shall have drafted the same.

 

9.11.                        Severability.  Whenever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be or
become prohibited or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Agreement
except to the extent that any provision would clearly be contemplated by the
parties to be conditioned upon the validity and enforceability of such invalid
or prohibited provision.

 

9.12.                        Public Announcements.   On or before 8:30 a.m., New
York City time, on the first business day following the date of this Agreement,
the Company shall issue a one or more press releases (each, a “Press Release”)
describing the terms of the transactions contemplated by this Agreement, but not
disclosing in such press release(s) the names of any Investor or any of its
affiliates or investment advisers or the amount of Shares purchased by each
Investor.  In addition, on or before 8:30 a.m., New York City time, on the
second business day following the date of this Agreement, the Company shall file
a Current Report on Form 8-K describing the terms of the transactions
contemplated by this Agreement in the form required by the Exchange Act and
attaching this Agreement as an exhibit to such filing.  From and after the
filing of the Company’s Form 10-K (the “10-K Filing”) for the year ended
December 31, 2008 with the SEC, the Investors as a consequence of participating
in the transactions contemplated by this Agreement shall not be in possession of
any material, nonpublic information received from the Company, any of the
Subsidiaries or any of their respective officers, directors, employees or agents
authorized to disclose such information, that is not disclosed in such
Form 10-K; provided, however, that if such Form 10-K is not filed by March 2,
2009, the

 

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Company will file by 8:30 a.m., New York City time, on March 3, 2009 a Current
Report on Form 8-K disclosing any material non-public information that the
Company may have provided any Investor prior to the issuance of such Form 8-K
(the “8-K Filing”) that has not been publicly disclosed.  The Company shall not,
and shall cause each of the Subsidiaries and its and each of their respective
officers, directors, employees and agents, not to, provide the Investors with
any material, nonpublic information regarding the Company or any of the
Subsidiaries from and after the issuance of the Press Release(s) without the
consent of the Investors.  Except for such disclosure as the Company is advised
by counsel is required to be included in documents filed with the SEC or
otherwise required by law or by any stock exchange on which the Company is
listed, in which case the Company shall provide the Investors with prior written
notice of such disclosure, the Company shall not use the name of, or make
reference to, any Investor or any of its affiliates or investment advisers in
any press release or in any public manner (including any reports or filings made
by the Company under the Exchange Act) without such Investor’s prior written
consent.

 

9.13.                        Short Sales.  Each Investor agrees that it will not
directly or indirectly make or participate in any “short sales,” as defined in
Rule 200 under Regulation SHO, of the Company’s Common Stock, whether or not
exempt, until the earlier of (i) the effective date of the Registration
Statement covering the Shares purchased by such Investor hereunder, (ii) the
date that the Shares may be sold pursuant to SEC Rule 144  or (iii) one year
after the Closing Date.  Notwithstanding the foregoing, in the event that an
Investor is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Investor’s assets and the portfolio
managers have no direct knowledge of the investment decision made by the
portfolio managers managing other portions of such Investor’s assets, the
representation set forth above shall apply only with respect to the portion of
assets managed by the portfolio manager that has knowledge about the financing
transaction contemplated by this agreement. Each Investor will not use any of
the restricted Shares acquired pursuant to this Agreement to cover any short
position in the Common Stock if doing so would be in violation of applicable
securities laws and otherwise will comply with federal securities laws in the
holding and sale of the Shares.

 

9.14.                        Replacement of Shares.  If any certificate or
instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for and
upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company and its transfer agent of such loss, theft or
destruction and the execution by the holder thereof of a customary lost
certificate affidavit of that fact and an agreement to indemnify and hold
harmless the Company and the transfer agent for any losses in connection
therewith or, if required by the transfer agent, a bond in such form and amount
as is required by the transfer agent.

 

9.15.                        Remedies. In addition to being entitled to exercise
all rights provided herein or granted by law, including recovery of damages,
each of the Investors and the Company will be entitled to specific performance
under this Agreement. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by

 

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reason of any breach of obligations described in the foregoing sentence and
hereby agree to waive in any action for specific performance of any such
obligation (other than in connection with any action for a temporary restraining
order) the defense that a remedy at law would be adequate.

 

9.16.                        Independent Nature of Investors’ Obligations and
Rights. The obligations of each Investor under this Agreement are several and
not joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under this Agreement.  The decision of each Investor to purchase Shares
pursuant to this Agreement has been made by such Investor independently of any
other Investor and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or any Subsidiary which may have been made or given by
any other Investor or by any agent or employee of any other Investor, and no
Investor and any of its agents or employees shall have any liability to any
other Investor (or any other person) relating to or arising from any such
information, materials, statement or opinions.  Nothing contained herein, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement.  Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its
investment hereunder and that no Investor will be acting as agent of such
Investor in connection with monitoring its investment in the Shares or enforcing
its rights under this Agreement.  Each Investor shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Investor to be joined as an additional party in any proceeding for such
purpose.  Each Investor has been represented by its own separate legal counsel
in its review and negotiation of this Agreement.  The Company has elected to
provide all Investors with the same terms and Agreement for the convenience of
the Company and not because it was required or requested to do so by any
Investor.

 

9.17.                        Fees and Expenses.  The Company shall reimburse the
Investors listed on Schedule 9.17 for all legal fees incurred in connection with
this Agreement, which amount shall be paid directly by the Company at the
Closing. Except as set forth in this Section 9.17, each party hereto shall bear
its own expenses in connection with the preparation and negotiation of the
Agreement.

 

9.18.                        Rescission and Withdrawal Right. Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) this Agreement, whenever any Investor exercises a right,
election, demand or option hereunder and the Company does not timely perform its
related obligations within the periods herein provided, then such Investor may
rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.

 

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9.19.                        Payment Set Aside. To the extent that the Company
makes a payment or payments to any Investor pursuant to this Agreement to which
Investor was entitled or an Investor enforces or exercises its rights hereunder,
and such payment or payments or the proceeds of such enforcement or exercise or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.

 

[Signature pages follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective representatives hereunto duly authorized as of
the date first above written.

 

BPZ RESOURCES, INC.,

 

a Texas corporation

 

 

 

 

 

Manuel Pablo Zúñiga-Pflücker

 

President and Chief Executive Officer

 

580 Westlake Park Blvd., Suite 525

 

Houston, Texas 77079

 

 

 

 

 

INVESTOR

 

 

 

 

 

Signature

 

 

 

 

 

Name

 

 

 

 

 

Title

 

 

 

Address:

 

 

 

 

 

 

 

 

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