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SECURITIES PURCHASE AGREEMENT

 

 

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TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS

1

 

ARTICLE 2

PURCHASE AND SALE

2

 

ARTICLE 3

DOCUMENTS

3

 

ARTICLE 4

CLOSING

4

 

ARTICLE 5

ACKNOWLEDGEMENTS

4

 

ARTICLE 6

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR

7

 

ARTICLE 7

RESALE RESTRICTIONS

8

 

ARTICLE 8

LEGENDING OF SUBJECT SECURITIES

9

 

ARTICLE 9

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

9

 

ARTICLE 10

COVENANTS AND AGREEMENTS

14

ARTICLE 11

AGENT

16

ARTICLE 12

ACKNOWLEDGEMENT AND WAIVER

17

ARTICLE 13

MISCELLANEOUS

17

 

Exhibit A – Warrant Certificate

Exhibit B – U.S. Securities Law Questionnaire

Exhibit C – Multilateral Instrument 45-103 – Accredited Investor Questionnaire

Exhibit D – Risk Factors

Exhibit E – Registration Rights Agreement

 

 

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SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this "Agreement") is dated as of
_____________, 2005, by and between Cheetah Oil and Gas Ltd., a Nevada
corporation (the "Company"), and the Investors identified on the signature pages
attached hereto (each an "Investor" and collectively the "Investors").

WHEREAS, the Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act"), subject to the terms and conditions set forth
in this Agreement; and

WHEREAS, the Investors wish to purchase from the Company, and the Company wishes
to sell and issue to the Investors, upon the terms and conditions stated in this
Agreement, in the amounts set forth beneath such Investor's name on the
Investor's signature page, an aggregate of ____________ units (the "Units") at a
price per Unit of $5.00.

WHEREAS, each Unit will consist of one common share in the capital of the
Company (each, a "Share") and one common share purchase warrant (each, a
"Warrant") subject to adjustment. Each Warrant shall be transferable and shall
entitle the holder thereof to purchase one share of common stock in the capital
of the Company (each share being a "Warrant Share"), as presently constituted,
for a period of one year commencing from the effective date of the Registration
Statement (as defined in Exhibit E) pertaining to the Shares and the Warrant
Shares, at a total price per Warrant Share of $7.00. Certificate(s) representing
the Warrants will be in the form attached as Exhibit A. The Shares, Warrants and
the Warrant Shares are referred to as the "Securities".

NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Investor hereby
agrees as follows:

ARTICLE 1

DEFINITIONS

1.1

Definitions. In addition to the terms defined elsewhere in this Agreement, the
following terms have the meanings indicated in this Section 1.1:

 

(a)

"1934 Act" means the Securities Exchange Act of 1934, as amended.

 

 

(b)

"Affiliate" means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Securities Act.

 

(c)

"B.C. Act" means the Securities Act (British Columbia).

 

 

(d)

"BCSC" means the British Columbia Securities Commission.

 

 

(e)

"Closing" means the closing of the purchase and sale of the Securities pursuant
to Section 4.1 hereof.

 

(f)

"Closing Date" shall have the meaning ascribed to such term in Section 4.1
hereof.

 

 

(g)

"Control" means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.

 

 

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(h)

"Holder" or "Holders" means the holder or holders, as the case may be, from time
to time of Shares, Warrant Shares or Bonus Warrant Shares.

(i)

"Material Adverse Effect" means a material adverse effect on:

 

 

(i)

the assets, liabilities, results of operations, condition (financial or
otherwise), business or prospects of the Company and its Subsidiaries taken as a
whole; or

 

(ii)

the ability of the Company to issue and sell the Securities contemplated hereby
and to perform its obligations under this Agreement.

(j)

"OTCBB" means The National Association of Securities Dealers Inc.'s
over-the-counter bulletin board.

(k)

"Person" means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

(l)

"Registration Statement" means the registration statement to be filed by the
Company pursuant to the Registration Rights Agreement.

(m)

"SEC Reports" shall have the meaning ascribed to such term in Section 9.9
hereof.

 

(n)

"Subscription Amount" means, as to each Investor, the amount to be paid for the
Units hereunder, as set forth above such Investor's name on the Investor's
signature page, in United States Dollars and in immediately available funds.

(o)

"Subsidiaries" means collectively Scotia Petroleum Inc., a majority controlled
Subsidiary of the Company and Cheetah Oil and Gas Ltd., a wholly-owned
subsidiary of the Company, as set forth in the Company's SEC Reports.

ARTICLE 2

PURCHASE AND SALE

2.1

Purchase and Sale of the Units.

 

 

(a)

Subject to the terms and conditions of this Agreement, on the Closing Date, each
of the Investors shall severally, and not jointly, purchase, and the Company
shall sell and issue to the Investors, the Shares in the amount set forth
beneath such Investor's name on the Investor's signature page in exchange for
the Subscription Amount (reflecting a per Unit purchase price of $5.00).

 

(b)

Subject to the terms hereof, the Agreement will be effective upon its acceptance
by the Company. The Investor acknowledges that the offering of Units
contemplated hereby is part of a private placement of Units having an aggregate
subscription level of up to $15,000,000 (the "Offering"). The Offering, at the
option of CK Cooper & Company Inc., the placement agent for the Offering (the
"Agent"), may be expanded to $20,000,000.

2.2

Payment.

 

 

(a)

The Subscription Amount must accompany this Agreement and shall be paid by check
drawn on a major bank in the United States, and made payable to "Guaranty Bank –
COGL Escrow Account" and delivered to the Agent. Alternatively, the Subscription
Amount may be wired to Guaranty Bank (the "Escrow Agent") pursuant to wiring
instructions that will be provided to the Investor upon request.

 

 

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(b)

The Investor acknowledges and agrees that this Agreement, the Subscription
Amount and any other documents delivered in connection herewith will be held on
behalf of the Company. In the event that this Agreement is not accepted by the
Company for whatever reason, which the Company expressly reserves the right to
do, within two business days of the delivery of an executed Agreement by the
Investor, this Agreement, the Subscription Amount (without interest thereon) and
any other documents delivered in connection herewith will be returned to the
Investor at the address of the Investor as set forth in this Agreement.

 

(c)

The Subscription Amount shall be held in escrow by the Escrow Agent in
accordance with the terms and conditions of the escrow agreement (the "Escrow
Agreement") dated March 31, 2005 between the Company, the Agent and the Escrow
Agent. Pursuant to the terms of the Escrow Agreement:

 

(i)

the Subscription Amount will be deposited into a non-interest bearing bank
account maintained by the Escrow Agent;

 

(ii)

on or before the Closing Date, upon the Agent and the Company notifying the
Escrow Agent that the Offering has closed and the conditions set forth in the
Escrow Agreement have been satisfied, the Subscription Amount will be released
and disbursed to the Company; and

 

(iii)

in the event the Closing Date does not occur by April 30, 2005, or the
Investor’s Agreement is not accepted by the Company, the Escrow Agent will
release and disburse the Subscription Amount to the Investor, subject to the
extension of the Closing Date to May 31, 2005 upon the mutual agreement of the
Company and the Agent.

2.3

Anti-dilution Provisions.

 

 

(a)

The Investors shall be granted a bonus warrant (the “Bonus Warrant”) to acquire
additional shares of common stock in accordance with the formula below, at a
price of $0.001 per additional share of common stock for a period of one year
following Closing, if at any time the Company shall issue or sell any additional
shares of common stock to a third party other than the Investor in exchange for
consideration in an amount per additional share of common stock which is less
than $5.00 per additional share of common stock.

The number of additional shares of common stock which the Bonus Warrant holder
will be entitled to acquire upon any such issuance shall be determined by
multiplying the Unit price of $5.00 by a fraction:

(i)

the numerator of which shall be equal to the total number of Investor’s Shares
originally acquired by the Investor,

(ii)

the denominator of which shall be equal to the price per share of common stock
for the additional shares of common stock, and

then subtracting the total number of Investor’s Shares originally acquired from
the foregoing.

(b)

No Bonus Warrant shall be granted upon the issuance of any additional shares of
common stock which are issued pursuant to the exercise of any currently
outstanding warrants or other subscription or purchase rights, or pursuant to
the exercise of any conversion or exchange rights or pursuant to the granting or
exercise of any incentive based stock options issued by the Company to any
employees, consultants or strategic partners.

ARTICLE 3

DOCUMENTS

3.1

Documents Required from the Investor.

 

 

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(a)

The Investor must complete, sign and return to the Company:

 

 

(i)

an executed copy of this Securities Purchase Agreement;

 

 

(ii)

a Prospective Investor Suitability Questionnaire in the form attached as
Exhibit B (the "US Questionnaire"); and

 

(iii)

a British Columbia Accredited Investor Questionnaire in the form attached as
Exhibit C (together with the US Questionnaire, the "Questionnaires").

 

(b)

The Investor shall complete, sign and return to the Company as soon as possible,
on request by the Company, any documents, questionnaires, notices and
undertakings as may be required by regulatory authorities and applicable law.

3.2

Documents Required from the Investor and the Company. In connection with the
Closing pursuant to this Agreement, the parties hereto will execute and deliver
a Registration Rights Agreement, in the form attached hereto as Exhibit E (the
“Registration Rights Agreement”), pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.

ARTICLE 4

CLOSING

4.1

Closing. Closing of the Offering (the "Closing") shall occur no later than April
30, 2005 or on such other date as may be mutually agreed to by the Agent and the
Company (the "Closing Date").

4.2

Closing Conditions. The obligations of the Investor and the Company hereunder is
subject to the satisfaction, at or prior to the Closing Date and including but
not limited to, the conditions set forth below:

 

(a)

This Agreement shall be fully executed by all parties.

 

 

(b)

The Investor shall have delivered the Subscription Amount for the Units which it
is purchasing in accordance with Section 2.2 above.

 

(c)

The representations and warranties of the parties herein shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at each such time (except for representations and warranties
specifically made as of a particular date which shall be true and correct in all
material respects as of the date when made).

 

(d)

No litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

 

(e)

The conditions set forth in section 11(b) of the Escrow Agreement have been
satisfied.

 

ARTICLE 5

ACKNOWLEDGEMENTS

5.1

Acknowledgements of Investor. The Investor acknowledges and agrees that:

 

 

(a)

none of the Securities have been registered under the 1933 Act, under any state
securities or "blue sky" laws of any state of the United States and, unless so
registered, may not be offered or sold except pursuant to an exemption from, or
in a transaction not subject to, the registration

 

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requirements of the 1933 Act and in each case only in accordance with any
applicable securities laws;

(b)

except as provided for in the Registration Rights Agreement, the Investor
acknowledges that the Company has not undertaken, and will have no obligation,
to register any of the Securities under the 1933 Act;

(c)

by completing the Questionnaires, the Investor is representing and warranting
that the Investor is an "Accredited Investor", as the term is defined in
Regulation D under the 1933 Act and in Multilateral Instrument 45-103 adopted by
the BCSC;

(d)

the decision to execute this Agreement and purchase the Securities agreed to be
purchased hereunder has not been based upon any oral or written representation
as to fact or otherwise made by or on behalf of the Company or the Agent, and
such decision is based entirely upon a review of a Confidential Private
Placement Memorandum, dated _________, 2005 (the "Memorandum") and information
(the receipt of which is hereby acknowledged) which has been filed by the
Company with the SEC in compliance, or intended compliance, with applicable
securities legislation, including, specifically, a review of the Risk Factors
which are attached as Exhibit D (collectively, the "Public Record");

(e)

although the Agent may have introduced the Investor to the Company, the Investor
and the Company acknowledge and agree with, and for the benefit of, the Agent
and the Company, as applicable (such acknowledgement and agreements to survive
the Closing) that:

 

(i)

the Agent and its directors, officers, employees, agents and representatives
have no responsibility or liability of any nature whatsoever for the accuracy or
adequacy of the information contained in this Agreement, the Public Record or
any other publicly available information concerning the Company or as to whether
all information concerning the Company required to be disclosed by it or them
has generally been disclosed;

 

(ii)

the Agent makes no representations or warranties herein with respect to the
Securities, and neither the Agent nor its directors, officers, employees, agents
or representatives shall have any liability with respect to the sale of the
Securities;

 

(iii)

the Agent has not engaged in any independent investigation or verification with
respect to this Agreement or any such information; and

 

(iv)

the Agent and the Company are entitled to rely on the representations and
warranties and the statements and answers of the Investor contained in this
Agreement and in the Questionnaires and undertakings attached as schedules to
this Agreement, and the Investor will hold harmless each of the Agent and the
Company from any loss or damage it or they may suffer as a result of the
Investor’s failure to correctly complete this Agreement or such questionnaires
and undertakings;

(f)

by execution hereof the Investor has waived the need for the Company or the
Agent to communicate the Company’s acceptance of the purchase of the Securities
pursuant to this Agreement;

(g)

the Investor will indemnify and hold harmless the Company and the Agent and,
where applicable, their respective directors, officers, employees, agents,
advisors and shareholders from and against any and all loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and all fees,
costs and expenses whatsoever reasonably incurred in investigating, preparing or
defending against any claim, lawsuit, administrative proceeding or investigation
whether commenced or threatened) arising out of or based upon any representation
or warranty of the Investor contained herein or in any document furnished by the
Investor to the Company or the Agent in connection herewith being untrue in any
material respect or any breach or failure by the

 

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Investor to comply with any covenant or agreement made by the Investor to the
Company or the Agent in connection therewith; provided that the amount of such
indemnification shall be limited to the amount of the Subscription Amount;

(h)

the issuance and sale of the Securities to the Investor will not be completed if
the Offering is otherwise fully subscribed, if acceptance would be unlawful or
if, in the discretion of the Company, acting reasonably, acceptance is not in
the best interests of the Company;

(i)

the Investor has been advised to consult its own legal, tax and other advisors
with respect to the merits and risks of an investment in the Securities and with
respect to applicable resale restrictions and it is solely responsible for
compliance with applicable resale restrictions;

(j)

the Securities are not listed on any stock exchange or subject to quotation
except that currently certain market makers make market in the Shares of the
Company on the OTCBB, and no representation has been made to the Investor that
the Securities will become listed on any other stock exchange or subject to
quotation on any other quotation system;

(k)

no securities commission or similar regulatory authority has reviewed or passed
on the merits of the Securities;

(l)

there is no government or other insurance covering the Securities;

 

(m)

there are risks associated with an investment in the Securities, as more fully
described in certain information forming part of the Public Record;

(n)

the Company has advised the Investor that the Company is relying on an exemption
from the requirements to provide the Investor with a prospectus and to sell the
Securities through a person registered to sell securities under the B.C. Act
and, as a consequence of acquiring the Securities pursuant to this exemption,
certain protections, rights and remedies provided by the B.C. Act, including
statutory rights of rescission or damages, will not be available to the
Investor;

(o)

the Investor and the Investor’s advisor(s) have had a reasonable opportunity to
ask questions of and receive answers from the Company in connection with the
distribution of the Securities hereunder, and to obtain additional information,
to the extent possessed or obtainable without unreasonable effort or expense,
necessary to verify the accuracy of the information about the Company;

(p)

the books and records of the Company were available upon reasonable notice for
inspection, subject to certain confidentiality restrictions, by the Investor
during reasonable business hours at its principal place of business, and all
documents, records and books in connection with the distribution of the
Securities hereunder have been made available for inspection by the Investor,
the Investor’s lawyer and/or advisor(s);

(q)

in addition to resale restrictions imposed under U.S. securities laws, there are
additional restrictions on the Investor’s ability to resell the Shares and the
Warrant Shares under the B.C. Act and Multilateral Instrument 45-102 adopted by
the BCSC;

(r)

the Company will refuse to register any transfer of the Shares or the Warrant
Shares not made pursuant to an effective registration statement under the 1933
Act or pursuant to an available exemption from the registration requirements of
the 1933 Act;

(s)

the statutory and regulatory basis for the exemption claimed for the offered
Securities, although in technical compliance with Regulation D, would not be
available if the offering is part of a plan or scheme to evade the registration
provisions of the 1933 Act;

(t)

the Investor has been advised to consult the Investor’s own legal, tax and other
advisors with respect to the merits and risks of an investment in the Securities
and with respect to applicable

 

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resale restrictions, and it is solely responsible (and the Company is not in any
way responsible) for compliance with:

 

(i)

any applicable laws of the jurisdiction in which the Investor is resident in
connection with the distribution of the Securities hereunder, and

 

(ii)

applicable resale restrictions; and

 

(u)

this Agreement is not enforceable by the Investor unless it has been accepted by
the Company.

 

ARTICLE 6

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR

6.1

The Investor hereby represents and warrants to and covenants with the Company
and the Agent (which representations, warranties and covenants shall survive the
Closing) that:

 

(a)

if the Investor is an individual or other entity, the Investor has the legal
capacity and competence to enter into and execute this Agreement and to take all
actions required pursuant hereto and, if the Investor is a corporation, it is
duly incorporated and validly subsisting under the laws of its jurisdiction of
incorporation and all necessary approvals by its directors, shareholders and
others have been obtained to authorize execution and performance of this
Agreement on behalf of the Investor;

 

(b)

if the Investor is a corporation or other entity, the entering into of this
Agreement and the transactions contemplated hereby do not result in the
violation of any of the terms and provisions of any law applicable to, or the
constituent documents of, the Investor or of any agreement, written or oral, to
which the Investor may be a party or by which the Investor is or may be bound;

 

(c)

the Investor has duly executed and delivered this Agreement and it constitutes a
valid and binding agreement of the Investor enforceable against the Investor
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting parties rights generally or by
equitable principles;

 

(d)

the Investor has the requisite knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of the
investment in the Securities and the Company, and the Investor is providing
evidence of such knowledge and experience in these matters through the
information requested in the Questionnaires;

 

(e)

all information contained in the Questionnaires is complete and accurate and may
be relied upon by the Company;

 

(f)

the Investor is resident in the jurisdiction set out under the heading "Name and
Address of Investor" on the signature page of this Agreement;

 

(g)

the Investor is acquiring the Securities for investment purposes only and not
with a view to resale or distribution and, in particular, it has no intention to
distribute either directly or indirectly any of the Securities in the United
States or to U.S. Persons, other than pursuant to an effective registration
statement providing for the resale of the Securities;

 

(h)

the Investor is acquiring the Securities as principal for the Investor’s own
account (except for the circumstances outlined in paragraph 6.1(j)), for
investment purposes only, and not with a view to, or for, resale, distribution
or fractionalisation thereof, in whole or in part, and no other person has a
direct or indirect beneficial interest in such Securities;

 

 

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(i)

the Investor is not an underwriter of, or dealer in, the common shares of the
Company, nor is the Investor participating, pursuant to a contractual agreement
or otherwise, in the distribution of the Securities;

 

 

(j)

if the Investor is acquiring the Securities as a fiduciary or agent for one or
more investor accounts:

 

(i)

the Investor has sole investment discretion with respect to each such account
and it has full power to make the foregoing acknowledgements, representations
and agreements on behalf of such account, and

 

 

(ii)

the investor accounts for which the Investor acts as a fiduciary or agent
satisfy the definition of an "Accredited Investor", as the term is defined in
Regulation D under the 1933 Act and in Multilateral Instrument 45-103 adopted by
the BCSC;

 

 

(k)

the Investor is not aware of any advertisement of any of the Securities; and

 

 

(l)

no person has made to the Investor any written or oral representations:

 

 

(i)

that any person will resell or repurchase any of the Securities;

 

 

(ii)

that any person will refund the purchase price of any of the Securities;

 

 

(iii)

as to the future price or value of any of the Securities; or

 

 

(iv)

that any of the Securities will be listed and posted for trading on any stock
exchange or automated dealer quotation system or that application has been made
to list and post any of the Securities of the Company on any stock exchange or
automated dealer quotation system, except that currently certain market makers
make market in the common shares of the Company on the OTCBB.

 

6.2

In this Agreement, the term "U.S. Person" shall have the meaning ascribed
thereto in Regulation S and for the purpose of the Agreement includes any person
in the United States.

 

ARTICLE 7

RESALE RESTRICTIONS

7.1

British Columbia Resale Restrictions.

 

 

(a)

The Investor acknowledges that the Securities are subject to resale restrictions
in British Columbia and may not be traded in British Columbia except as
permitted by the B.C. Act and the rules made thereunder.

 

(b)

Pursuant to Multilateral Instrument 45-102, as adopted by the BCSC, a subsequent
trade in the Shares or the Warrant Shares will be a distribution subject to the
prospectus and registration requirements of applicable Canadian securities
legislation (including the B.C. Act) unless certain conditions are met, which
conditions include a hold period (the "Canadian Hold Period") that shall have
elapsed from the date on which the Securities were issued to the Investor and,
during the currency of the Canadian Hold Period, any certificate representing
the Securities is to be imprinted with a restrictive legend (the "Canadian
Legend").

 

(c)

By executing and delivering this Agreement, the Investor will have directed the
Company not to include the Canadian Legend on any certificates representing the
Shares or the Warrant Shares to be issued to the Investor.

 

(d)

As a consequence, the Investor will not be able to rely on the resale provisions
of Multilateral Instrument 45-102, and any subsequent trade in the Shares or the
Warrant Shares during or after

 

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the Canadian Hold Period will be a distribution subject to the prospectus and
registration requirements of Canadian securities legislation, to the extent that
the trade is at that time subject to any such Canadian securities legislation.

ARTICLE 8

LEGENDING OF SUBJECT SECURITIES

8.1

Legending of Subject Securities. The Investor hereby acknowledges that upon the
issuance thereof, and until such time as the same is no longer required under
the applicable securities laws and regulations, the certificates representing
any of the Securities will bear a legend in substantially the following form:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws:

(a)

such Security is registered for sale under an effective registration statement
filed under the 1933 Act; or

(b)

such holder provides the Company with an opinion of counsel, in form, substance
and scope customary for opinions of counsel in comparable transactions, to the
effect that a public sale or transfer of such Security may be made without
registration under the 1933 Act and such sale or transfer is effected; or

(c)

such holder provides the Company with reasonable assurances that such Security
can be sold pursuant to Rule 144.

The Investor agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable prospectus delivery requirements, if any.

Whenever a certificate may be issued without a legend in accordance with this
Section 8.1, unless otherwise instructed in writing by the Investor, the Company
(through the Transfer Agent or otherwise) shall electronically deliver the
Shares or Warrant Shares to the Investors by causing the Transfer Agent to
credit the account of the Investor’s prime broker, as designated by such
Investor, with the Depository Trust Corporation through its Deposit Withdrawal
Agent Commission system ("DWAC Transfer") (or if DWAC Transfer is not available
or the Investor requests in writing otherwise, causing the Transfer Agent to
deliver duly executed certificates for such Shares or Warrant Shares, which
certificates shall be free of any restrictive legend).

8.2

Transfer Restrictions. The Investor hereby acknowledges and agrees to the
Company making a notation on its records or giving instructions to the registrar
and transfer agent of the Company in order to implement the restrictions on
transfer set forth and described in this Securities Purchase Agreement.

ARTICLE 9

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

 

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The Company and its Subsidiaries hereby make the representations and warranties
set forth below to each Investor:

9.1

The Company acknowledges and agrees that the Investor is entitled to rely upon
the representations and warranties of the Company contained in this Agreement
and the Memorandum and further acknowledges that the Investor will be relying
upon such representations and warranties in purchasing the Securities.

9.2

The Company warrants that the Public Record fairly represents the status of the
Company as at the dates indicated in the Public Record.

9.3

The Company has prepared the Memorandum and, to the Company’s knowledge, the
Memorandum does not contain an untrue statement of any material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.

9.4

The performance of this Agreement and the consummation of the transactions
herein contemplated will not result in a material breach or violation of any of
the terms and provisions of, or constitute an event of default under, the
Company’s articles of incorporation or bylaws, or any statute, indenture,
mortgage or other agreement or instrument to which the Company is a party or by
which it is bound, or any law, order, rule or regulation applicable to the
Company or its affiliates or directed to the Company or its affiliates by any
court, governmental agency or body having jurisdiction over it or its affiliates
or any of its properties; and no other consent, approval, authorization or
action is required for the consummation of the transactions herein contemplated
other than such as have been obtained.

9.5

The Securities to be issued will conform in all material respects to all
statements concerning the same contained in the Memorandum, and the Securities,
when issued upon payment of the consideration therefor, will be duly authorized,
validly and legally issued, fully paid and non-assessable, except as set forth
in the Memorandum.

9.6

The Company and its Subsidiaries have been duly incorporated and are validly
existing as corporations in good standing under their respective jurisdictions
of incorporation with full power and authority to own their properties and
conduct their business as described in the Memorandum, and the Company has all
such power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof.

9.7

This Agreement has been duly and validly authorized, and when executed and
delivered by the Company will be the legal, valid and binding agreement of the
Company enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization, and
other similar laws affecting the rights of creditors, or by general principles
of equity and except as rights to indemnify and contribution may be limited by
applicable law. All actions required to be taken on the part of the Company to
authorize and effect the issuance of the Securities have been or will be taken
prior to each Closing.

9.8

The Company’s authorized capital stock is as set forth in the SEC Reports (as
defined below).

 

9.9

The Company has filed all required forms, reports and other documents with the
SEC, all of which, to the Company’s knowledge, complied when filed, in all
material respects, with all applicable requirements of the 1933 Act and the 1934
Act. The Company has heretofore made available to the Investor complete and
correct copies of its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2004 (the "SEC Reports").

9.10

As of their respective dates, to the Company’s knowledge, the SEC Reports
(including all exhibits and schedules thereto and documents incorporated by
reference therein) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. To the best of the Company’s knowledge, the audited
consolidated financial statements and the unaudited consolidated interim
financial statements of the Company and its subsidiaries included or
incorporated by reference in the SEC Reports were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be otherwise indicated in the notes
thereto), and fairly present in all material respects the financial position of
the Company, consolidated results of its

 

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operations and changes in financial position for the periods then ended
(subject, in the case of any unaudited interim financial statements, for the
absence of all required footnotes and to year-end adjustments).

9.11

Except as set forth in the SEC Reports or the Memorandum, since January 1, 2005:

 

 

(a)

there has not been any material adverse change in the business or assets of the
Company and its Subsidiaries taken as a whole;

 

(b)

neither the Company nor its Subsidiaries has:

 

 

(i)

incurred any liability, except normal trade or business liabilities incurred in
the ordinary course of business in a manner and amount consistent with past
practice;

 

(ii)

mortgaged, pledged or subjected to, or permitted the imposition of, any lien
upon any of the Securities;

 

(iii)

entered into any commitment or transaction (including, without limitation, any
capital expenditure) not in the ordinary course of business in a manner and
amount consistent with past practice;

 

(iv)

disposed of, or permitted to lapse, any rights to use its intellectual property;

 

 

(v)

granted any material increase in the compensation of any officer or employee,
including without limitation, any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment;

 

(vi)

transferred or agreed to transfer any of its assets other than in the ordinary
course of business;

 

(vii)

waived, compromised or cancelled any material right, or cancelled or compromised
any material claim or liability, related to the Company’s business;

 

(viii)

terminated, discontinued, closed or disposed of any plant, facility, or business
operation related to its business except as otherwise publicly disclosed;

 

(ix)

introduced any material change with respect to the operation of its businesses
or changed in any material respect its accounting methods or practices;

 

(x)

amended its certificate of incorporation, bylaws or other applicable
organizational documents, except as required for issuance of the Securities; or

 

(xi)

entered into or agreed (whether in writing or otherwise) to enter into any
agreement or other arrangement to take any action referred to in this paragraph
9.11(b); and

9.12

The Company and its Subsidiaries have conducted their businesses, in all
material respects, in the ordinary course of business in a manner consistent
with past practice.

9.13

Other than those disclosed in the SEC Reports or the Memorandum, there are no
actions, suits or proceedings pending, or to the knowledge of the Company,
threatened against, by or affecting the Company or its Subsidiaries, or any of
its properties, in any court or before any governmental agency, which would
materially and adversely affect the condition or operations, financial or
otherwise, of the Company and its Subsidiaries taken as a whole, and neither the
Company nor its Subsidiaries is subject to any order, write, judgment,
injunction or decree which materially and adversely affects its financial
condition or business.

 

 

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9.14

The Company will make available to the undersigned at a reasonable time prior to
the date of the Closing the opportunity to ask questions and receive answers
concerning the terms and conditions of the Offering and to obtain any additional
information (to the extent the Company possesses or is able to acquire such
information without unreasonable effort or expense) necessary to verify the
accuracy of information included in the Memorandum.

9.15

The representations and warranties of the Company and the Subsidiaries in this
Agreement shall be true and correct on and as of the date of the Closing.

9.16

Except as set forth in the Public Record, none of the officers or directors of
the Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

9.17

The Company and its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that:

 

(a)

transactions are executed in accordance with management’s general or specific
authorizations;

 

 

(b)

transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability;

 

(c)

access to assets is permitted only in accordance with management’s general or
specific authorization; and

 

(d)

the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

9.18

Assuming the accuracy of the Investor’s representations and warranties set forth
in this Agreement and the Questionnaires, no registration under the 1933 Act is
required for the offer and sale of the Securities by the Company to the Investor
as contemplated hereby in reliance upon Rule 506 under the 1933 Act. The
issuance and sale of the Securities hereunder does not contravene the rules and
regulations of any stock exchange or quotation system, and no shareholder
approval is required for the Company to fulfill its obligations under this
Agreement, including issuing and delivering to the Investor the Securities sold
pursuant to this Agreement.

9.19

The Company will indemnify and hold the Investor and its directors, officers,
shareholders, partners, employees and agents (each, a "Purchaser Party")
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation (collectively, "Losses") that any such Purchaser Party may suffer
or incur as a result of or relating to:

 

(a)

any misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other documents; or

 

(b)

any cause of action, suit or claim brought or made against such Purchaser Party
and arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement. The Company will reimburse such Investor for its
reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred, provided that the amount of such
indemnification shall be limited to the amount of the Subscription Amount.

 

 

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9.20

The Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and not for the satisfaction of any portion of the
Company’s debt (other than payment of trade payables in the ordinary course of
the Company’s business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.

9.21

Based on the financial condition of the Company as of the Closing:

 

 

(a)

the Company’s fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature;

 

(b)

the Company’s assets do not constitute unreasonably small capital to carry on
its business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and

 

(c)

the current cash flow of the Company, together with the proceeds of the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid.

The Company does not intend to incur debts beyond its ability to pay such debts
as they mature (taking into account the timing and amounts of cash to be payable
on or in respect of its debt).

9.22

The Company understands and acknowledges the potentially dilutive effect to the
Common Stock upon the issuance of the Securities. The Company's directors and
executive officers have studied and fully understand the nature of the
securities being sold hereunder. The Company further acknowledges that its
obligation to issue the Securities in accordance with this Agreement is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company. Taking the
foregoing into account, the Company's Board of Directors has determined, in its
good faith business judgment, that the issuance of the Securities hereunder and
the consummation of the transactions contemplated hereby and thereby are in the
best interest of the Company and its stockholders.

9.23

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 articles of
incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Investors as a result of
the Investors and the Company fulfilling their obligations or exercising their
rights under this Agreement, including, without limitation, as a result of the
Company’s issuance of the Securities and the Investors’ ownership of the
Securities.

.24

The Company and its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted
(collectively, the "Company Permits") except in such instances where the failure
to possess such Company Permits would not, either individually or in the
aggregate, have a Material Adverse Effect, and there is no action pending or, to
the knowledge of the Company, threatened regarding suspension or cancellation of
any of the Company Permits, the suspension or cancellation of which would not,
either individually or in the aggregate, have a Material Adverse Effect. Neither
the Company nor its Subsidiaries is in conflict with, or in default or violation
of, any of the Company Permits, except for any such conflicts, defaults or
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Since January 1, 2005, neither the
Company nor its Subsidiaries has received any notification with respect to
possible conflicts, defaults or violations of applicable laws, except for
notices relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.

 

 

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9.25

Except as set forth in the SEC Reports, there are, to the Company's knowledge,
with respect to the Company or its Subsidiaries or any predecessor of the
Company, no past or present violations of Environmental Laws (as defined below),
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
or similar federal, state, local or foreign laws and neither the Company nor its
Subsidiaries has received any notice with respect to any of the foregoing, nor
is any action pending or, to the Company's knowledge, threatened in connection
with any of the foregoing. The term "Environmental Laws" means all federal,
state, local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

9.26

The Company and its Subsidiaries have good and marketable title in fee simple to
all real property and good and marketable title to all personal property owned
by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such
as would not have a Material Adverse Effect. Any real property and facilities
held under lease by the Company and its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as would not have
a Material Adverse Effect.

 

.27

Neither the Company, nor its Subsidiaries, nor any director, officer, agent,
employee or other person acting on behalf of the Company or its Subsidiaries
has, in the course of his actions for, or on behalf of, the Company, used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.

ARTICLE 10

COVENANTS AND AGREEMENTS

10.1

The Company agrees to file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof to each Investor promptly after
such filing. The Company shall, on or before the Closing Date, take such action
as the Company shall reasonably determine is necessary to qualify the Securities
for sale to the Investor 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), and shall provide evidence of any such action so taken
to the Investor on or prior to the Closing Date.

10.2

The Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as the Investor beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination.

10.3

Subject to the prior approval of the Agent, the Company shall issue a press
release describing the material terms of the transactions contemplated hereby
(the "Press Release") immediately upon Closing; provided, however, that if
Closing occurs after 4:00 P.M. Eastern Time on any Trading Day, the Company
shall issue the Press Release no later than 9:00 A.M. Eastern Time on the first
Trading Day following the Closing Date. The Company shall also file with the SEC
a Current Report on Form 8-K describing the material terms of the transactions
contemplated hereby (and attaching as exhibits thereto this Agreement and the
Warrants) as soon as practicable following the date of execution of this
Agreement but in no event more

 

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than two (2) Trading Days following the date of execution of this Agreement.
"Trading Day" means any day during which the Company’s shares are listed or
quoted for trading.

 

10.4

The Company shall use commercially reasonable efforts to secure the listing of
the Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and, so long as any of the
Investors owns any of the Securities, shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all Shares issuable
pursuant to this Agreement and Warrant Shares issuable upon exercise of or
otherwise pursuant to the Warrants. The Company will obtain and, so long as the
Investor owns any of the Securities, maintain the listing and trading of its
Common Stock on the over-the-counter bulletin board, the Nasdaq National Market
(“Nasdaq”) Nasdaq SmallCap Market (the “Nasdaq SC”), the New York Stock Exchange
(“NYSE”) or AMEX and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the any exchanges or
automated quotation systems on which the Common Stock is then listed. The
Company shall promptly provide to the Investor copies of any notices it receives
from such exchanges or automated quotation systems on which the Common Stock is
then listed regarding the continued eligibility of the Common Stock for listing
on such exchanges and quotation systems.

10.5

In the event that the Company comes into possession of any material non-public
information, the Company shall make full and complete public disclosure in
accordance with all applicable securities laws (including all common law
formulations thereof). The Company covenants and agrees that neither it nor any
other person acting on its behalf has provided or will provide any Investor or
its agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Investor shall have
executed a written agreement regarding the confidentiality and use of such
information.  The Company understands and confirms that each Investor shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

10.6

The Company agrees to send to the Investor until the Investor transfers,
assigns, or sells all of the Securities contemporaneously with the making
available or giving to the stockholders of the Company, copies of any notices or
other information the Company makes available or gives to such stockholders.

10.7

On and after the Closing Date, the Company shall at all times have authorized,
and reserved for the purpose of issuance (including being free of any preemptive
rights), a sufficient number of shares of Common Stock to provide for the full
exercise of the Warrants (based on the exercise price of the Warrants in effect
from time-to-time). The Company shall not reduce the number of shares reserved
for issuance upon exercise of or otherwise pursuant to the Warrants without the
consent of the Investor. If at any time the number of shares of Common Stock
authorized and reserved for issuance is below the number of Warrant Shares to be
issued upon exercise of or otherwise pursuant to the Warrants (based on the
exercise price of the Warrants in effect from time-to-time), the Company will
promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of stockholders to authorize additional shares to meet the Company's
obligations under this Section 10.7, in the case of an insufficient number of
authorized shares, and using its best efforts to obtain stockholder approval of
an increase in such authorized number of shares.

10.8

The Company shall issue irrevocable instructions to its transfer agent to issue
certificates, registered in the name of each Investor or its nominee, for the
Shares at the Closing and the Warrant Shares upon exercise of or otherwise
pursuant to the Warrants in accordance with the terms thereof, each in such
amounts as specified from time to time by each Investor to the Company (the
"Irrevocable Transfer Agent Instructions"). Prior to registration of the Shares
and Warrant Shares under the 1933 Act or the date on which the Shares or Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of securities as of a particular date that can then be immediately sold, all
such certificates shall bear the restrictive legend specified in Section 8.1 of
this Agreement. The Company warrants that no instruction, other than the
Irrevocable Transfer Agent Instructions referred to in this Section 10.8 and
stop transfer instructions to give effect to Section 8.1 hereof (in the case of
the Shares and Warrant Shares, prior to registration of the Shares and Warrant
Shares under the 1933 Act or the date on which the Shares or Warrant Shares may
be sold pursuant to Rule 144 without any restriction as to the number of
securities as of a particular date that can then be immediately sold), will be
given by the Company to its transfer agent

 

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and that the Shares and Warrant Shares shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement. Nothing in this Section shall affect in any way the Investor's
obligations and agreement set forth in Section 8.1 hereof to comply with all
applicable prospectus delivery requirements, if any, upon resale of the
Securities and to comply with the plan of distribution portion of the prospectus
contained in the Registration Statement. If a Investor provides the Company
with:

(a)

an opinion of counsel, reasonably satisfactory to the Company in form, substance
and scope, to the effect that a public sale or transfer of such Securities may
be made without registration under the 1933 Act and such sale or transfer is
effective; or

(b)

the Investor provides reasonable assurances that the Securities can be sold
pursuant to Rule 144 and that the Securities will be sold pursuant to Rule 144,

the Company shall permit the transfer, and in the case of the Shares and Warrant
Shares, promptly instruct its transfer agent to issue one or more certificates,
free from any restrictive legend, in such name and in such denominations as
specified by such Investor.

10.9

Until the Registration Statement is declared effective pursuant to the
Registration Rights Agreement, the Company shall maintain its corporate
existence and shall not merge, consolidate or sell all or substantially all of
the Company's assets, except in the event of a merger or consolidation or sale
of all or substantially all of the Company's assets, where:

 

(a)

the successor or acquiring entity and, if an entity different from the successor
or acquiring entity, the entity whose securities into which the Common Stock
shall become convertible or exchangeable in such transaction assumes the
Company's obligations hereunder and under the agreements and instruments entered
into in connection herewith (including the Warrants); and

 

(b)

the entity whose securities into which the Common Stock shall become convertible
or exchangeable in such transaction is a publicly traded corporation whose
common stock is listed for trading on Nasdaq, Nasdaq SC, the NYSE or AMEX.

ARTICLE 11

AGENT

11.1

Appointment of Agent. The Investor (and others for whom the Investor is
contracting hereunder) hereby:

 

(a)

irrevocably authorizes the Agent to swear, execute, file and record any
documents necessary to accept delivery of the Securities on the Closing Date;
and

 

 

(b)

appoints the Agent to act as its agent to represent it with respect to all
matters relating to this Securities Purchase Agreement, including representing
the Investor at the Closing for the purpose of all closing matters and
deliveries of documents and payment of funds, and the Investor hereby authorizes
the Agent to extend such time periods and to modify or waive such conditions as
the Agent may deem appropriate, acting reasonably, provided however that the
Agent shall not modify or waive any such condition where to do so would result
in a material change to any of the material attributes or terms of sale of the
Securities, and to correct or rectify any ambiguities, errors or omissions
herein that the Agent, acting reasonably, may deem appropriate.

 

12.2

Commission to the Agent. The Investor understands that upon Closing, the Agent
will receive from the Company a commission of up to 6.5% of the gross proceeds
raised from the Offering, payable to the Agent in cash plus a commission of 2.5%
of the gross proceeds raised from the exercise of the Warrants. The Agent will
also receive share purchase warrants which permit the acquisition of the Warrant
Shares at the exercise price of $7.00 per Warrant Share in such number as equals
2.5% of the gross proceeds from the Offering.

 

 

 

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ARTICLE 12

ACKNOWLEDGEMENT AND WAIVER

12.1

Acknowledgement and Waiver. The Investor has acknowledged that the decision to
purchase the Securities was solely made on the basis of publicly available
information. The Investor hereby waives, to the fullest extent permitted by law,
any rights of withdrawal, rescission or compensation for damages (other than as
expressly described herein) to which the Investor might be entitled in
connection with the distribution of any of the Securities.

ARTICLE 13

MISCELLANEOUS

13.1

Fees and Expenses. The Investor acknowledges and agrees that all costs and
expenses incurred by the Investor (including any fees and disbursements of any
special counsel retained by the Investor) relating to the purchase of the Shares
shall be borne by the Investor.

13.2

Governing Law. This Agreement is governed by the laws of the State of Nevada.
The Investor, in its personal or corporate capacity and, if applicable, on
behalf of each beneficial purchaser for whom it is acting, irrevocably attorns
to the jurisdiction of the courts of the State of Nevada.

13.3

Survival. This Agreement, including without limitation the representations,
warranties and covenants contained herein, shall survive and continue in full
force and effect and be binding upon the parties hereto notwithstanding the
completion of the purchase of the Securities by the Investor pursuant hereto,
the completion of the issue of Securities of the Company and any subsequent
disposition by the Investor of the Shares.

13.4

Assignment. This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. Neither the Company nor any Investor
shall assign this Agreement or any rights or obligations hereunder without the
prior written consent of the other. Notwithstanding the foregoing, a Investor
may assign its rights hereunder to any of its "affiliates," as that term is
defined under the 1934 Act, without the consent of the Company.

13.5

Execution. The Company shall be entitled to rely on delivery by facsimile
machine of an executed copy of this Agreement and acceptance by the Company of
such facsimile copy shall be equally effective to create a valid and binding
agreement between the Investor and the Company in accordance with the terms
hereof.

13.6

Severability. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect or limit the validity or enforceability of the
remaining provisions of this Agreement.

13.7

Termination. If, prior to Closing, the Agent determines for valid cause to
terminate this Agreement, this Agreement and the obligations of the parties
hereto are deemed to have terminated as at the effective date of such
termination.

13.8

Entire Agreement. Except as expressly provided in this Agreement and in the
agreements, instruments and other documents contemplated or provided for herein,
this Agreement contains the entire agreement between the parties with respect to
the sale of the Securities and there are no other terms, conditions,
representations or warranties, whether expressed, implied, oral or written, by
statute or common law, by the Company, the Agent, the Investor or by anyone
else.

13.9

Notices and Counterparts

 

 

(a)

All notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Any notice to be given will be sent by prepaid registered
post and will be deemed to have been received by the recipient on the fourth day
following the mailing thereof or on the date of successful facsimile
transmission or email. Notices to the Investor shall be directed to the address
on page 24, or to such other address as the Investor may advise the Company by
notice in writing; notices to the

 

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Company shall be directed to it at #17 Victoria Road, Nanaimo, British Columbia,
V9C 4N9, attention of Georgina Martin, Director; notices to the Agent shall be
directed to it at 18300 Von Karman Avenue, Suite 700, Irvine, California 92612.

 

(b)

This Agreement may be executed in any number of counterparts, each of which,
when so executed and delivered, shall constitute an original and all of which
together shall constitute one instrument.

13.10

Independent Nature of Investors

 

 

(a)

The Company acknowledges that the obligations of each Investor under this
Agreement, any other document entered into in connection with this Agreement,
and the transactions contemplated hereby and thereby (the "Transaction
Documents") 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 the Transaction Documents. The
decision of each Investor to purchase Securities 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 of the
Subsidiaries which may have made or given by any other Investor or by any agent
or employee of any other Investor, and no Investor or any of its agents or
employees shall have any liability to any Investor (or any other person)
relating to or arising from any such information, materials, statements or
opinions. The Company further acknowledges that nothing contained in the
Transaction Documents, and no action taken by any Investor pursuant hereto or
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 hereby. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.

 

(b)

Each Investor was introduced to the Company by the Agent which has acted solely
as agent for the Company and not for any Investor. Each Investor has been
represented by its own separate legal counsel in their review and negotiation of
the Transaction Documents. The Company has elected to provide all Investors with
the same terms and Transaction Documents for the convenience of the Company and
not because it was required or requested to do so by the Investors. The Company
acknowledges that such procedure with respect to the Transaction Documents in no
way creates a presumption that the Investors are in any way acting in concert or
as a group with respect to the Transaction Documents or the transactions
contemplated hereby or thereby.

IN WITNESS WHEREOF the Investor has duly executed this Agreement as of the date
first above mentioned.

Number of Units to be purchased at $5.00 each:

 

 

Total Subscription Amount:

$

 

DELIVERY INSTRUCTIONS

1.

Delivery – please deliver the Share certificate(s) to:

 

 

 

 

2.

Registration – registration of the Share certificates which are to be delivered
at Closing should be made as follows:

 

 

 

(name)

 

 

 

(address)

 

 

 

D/WLM/695851.4

- 18 -

 

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3.

Delivery – please deliver the Warrant certificate(s) to:

 

 

 

 

 

 

 

4.

Registration – registration of the Warrant certificates which are to be
delivered at Closing should be made as follows:

 

 

 

 

 

(name)

 

 

 

 

 

(address)

 

5.

The undersigned hereby acknowledges that it will deliver to the Company all such
additional completed forms in respect of the Investor’s purchase of Securities
as may be required for filing with the appropriate securities commissions and
regulatory authorities and stock exchanges.

                                          
                                                                      

(Name of Investor – Please type or print)

 

(Signature and, if applicable, Office)

 

(Address of Investor)

 

(City, State, Zip Code of Investor), United States

 

D/WLM/695851.4

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A C C E P T A N C E

The above-mentioned Agreement in respect of the Securities is hereby accepted by
CHEETAH OIL AND GAS LTD.

 

DATED at ________________________, the ______ day of __________________ 2005.

 

CHEETAH OIL AND GAS LTD.

 

 

Per:

 

 

Authorized Signatory

 

 

D/WLM/695851.4

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EXHIBIT A

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.

WARRANT CERTIFICATE

WARRANT FOR PURCHASE OF COMMON SHARES

THIS WARRANT WILL BE VOID AND OF NO VALUE UNLESS EXERCISED WITHIN THE LIMITS
HEREIN PROVIDED

THIS WARRANT IS NOT TRANSFERABLE

CHEETAH OIL AND GAS LTD.

(Incorporated under the laws of the State of Nevada)

WARRANT CERTIFICATE NO. _____

_______________ WARRANTS

Each warrant entitling the holder to purchase one Common Share at the Exercise
Price of $7.00 per full Common Share if exercised at or before 5:00 p.m.
(Vancouver time) on the later of the first anniversary of the effectiveness of
the Registration Statement, or one year from the date of issuance of the
Warrants.

DATE OF ISSUANCE: ____________, 2005

THIS IS TO CERTIFY THAT __________________ (herein called the "Holder") is
entitled to acquire in the manner herein provided, subject to the restrictions
herein contained, during the period commencing on the date hereof and ending at
5:00 p.m. (Vancouver time) on the later of the first anniversary of the
effectiveness of the Registration Statement, or one year from the date of
issuance of the Warrants (the "Expiry Date"), up to __________ fully paid and
non-assessable common shares ("Common Shares") without nominal or par value of
Cheetah Oil and Gas Ltd. ("the Company") as set forth above.

The Warrants are governed by the Terms and Conditions attached.

Any Common Shares issuable on exercise of the Warrants represented by this
Certificate will contain the following legends:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.

 

 

D/WLM/695851.4

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THE FOLLOWING ARE THE TERMS AND CONDITIONS REFERRED TO IN THIS WARRANT:

ARTICLE 1

INTERPRETATION

1.1

Definitions

In these Terms and Conditions, unless there is something in the subject matter
or context inconsistent therewith:

 

(a)

"Common Shares" means the common shares in the capital of the Company as
constituted at the date hereof and any shares resulting from any subdivision or
consolidation of the Common Shares;

 

(b)

"Company" means Cheetah Oil and Gas Ltd. or its successor corporation as a
result of consolidation, amalgamation or merger with or into any other
corporation or corporations, or as a result of the conveyance or transfer of all
or substantially all of the properties and estates of the Company as an entirety
to any other corporation and thereafter "Company" will mean such successor
corporation;

 

(c)

"Company’s Auditors" means an independent firm of accountants duly appointed as
Auditors of the Company;

 

(d)

"herein", "hereby" and similar expressions refer to these Terms and Conditions
as the same may be amended or modified from time to time; and the expression
"Article" and "Section" followed by a number refer to the specified Article or
Section of these Terms and Conditions;

 

(e)

"person" means an individual, corporation, partnership, trustee or any
unincorporated organization and words importing persons have a similar meaning;

 

(f)

"Registration Statement" means the registration statement as is then available
to effect a registration of the Common Shares to be received by the Holder on
the exercise of the Warrants from time to time to enable the resale of the
Common Shares;

 

(g)

"Warrant Holders" or "Holders" means the holders of the Warrants; and

 

 

(h)

"Warrants" mean share purchase warrants issued by the Company.

 

1.2

Gender

 

Words importing the singular number include the plural and vice versa and words
importing the masculine gender include the feminine and neuter genders.

1.3

Interpretation Not Affected by Headings

The division of these Terms and Conditions into Articles and Sections, and the
insertion of headings are for convenience of reference only and will not affect
the construction or interpretation thereof.

1.4

Applicable Law

The Warrants will be construed in accordance with the laws of the Nevada and
will be treated in all respects as Nevada contracts.

 

 

D/WLM/695851.4

A-2

 

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ARTICLE 2

ISSUE OF ADDITIONAL WARRANTS

2.1

Additional Warrants

The Company may at any time and from time to time issue additional warrants or
grant options or similar rights to acquire or purchase Common Shares.

2.2

Issue in Substitution for Lost Warrants

 

 

(a)

In case a Warrant becomes mutilated, lost, destroyed or stolen, the Company, at
its discretion, may issue and deliver a new Warrant of like date and tenor as
the one mutilated, lost, destroyed or stolen, in exchange for and in place of
and upon cancellation of such mutilated Warrant, or in lieu of, and in
substitution for such lost, destroyed or stolen Warrant and the substituted
Warrant will be entitled to the benefit hereof and rank equally in accordance
with its terms with all other Warrants issued or to be issued by the Company.

 

(b)

The applicant for the issue of a new Warrant pursuant hereto will bear the cost
of the issue thereof and in case of loss, destruction or theft furnish to the
Company such evidence of ownership and of loss, destruction, or theft of the
Warrant so lost, destroyed or stolen as will be satisfactory to the Company in
its discretion and such applicant may also be required to furnish indemnity in
amount and form satisfactory to the Company in its discretion, and will pay the
reasonable charges of the Company in connection therewith.

2.3

Warrant Holder Not a Shareholder

 

A Warrant Holder is not a shareholder of the Company, is not entitled to any
rights or interests as a shareholder of the Company and has only the rights and
interests expressly provided herein.

ARTICLE 3

NOTICE

3.1

Notice to Warrant Holders

Any notice to be given to the Holders will be sent by prepaid registered post
and will be deemed to have been received by the Holder on the fourth day
following the mailing thereof or on the date of successful facsimile
transmission or email. Any such notice will be addressed to the Holder at the
address of the Holder appearing on the Holder’s Warrant or to such other address
as the Holder may advise the Company by notice in writing.

3.2

Notice to the Company

Any notice to be given to the Company may be delivered personally, or sent by
facsimile or other means of electronic communication providing a printed copy
("Electronic Communication") or may be forwarded by first class prepaid
registered mail to the addresses set forth below. Any notice delivered or sent
by Electronic Communication shall be deemed to have been given and received at
the time of delivery. Any notice mailed as aforesaid shall be deemed to have
been given and received on expiration of 72 hours after it is posted, addressed
as follows:

Cheetah Oil and Gas Ltd.

#17 Victoria Road

Nanaimo, B.C.

Canada V9C 4N9

Attention:

Georgina Martin, Director

Facsimile No.: 250-714-1186

 

 

D/WLM/695851.4

A-3

 

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ARTICLE 4

EXERCISE OF WARRANTS

4.1

Method of Exercise of Warrants

 

 

(a)

The right to acquire Common Shares conferred by the Warrants may be exercised by
the Holder of such Warrant by surrendering the Warrant Certificate representing
same, together with a duly completed and executed Exercise Form in the form
attached hereto and a bank draft or certified cheque payable to the Company at
its principal office in British Columbia, for the purchase price applicable at
the time of exercise in respect of the number of Warrants exercised.

 

(b)

Notwithstanding anything in this Warrant to the contrary, in no event shall the
Holder of this Warrant be entitled to exercise a number of Warrants (or portions
thereof) in excess of the number of Warrants (or portions thereof) upon exercise
of which the sum of:

 

(i)

the number of Common Shares beneficially owned by the Holder and its affiliates
other than Common Shares which may be deemed beneficially owned through the
ownership of the unexercised Warrants and the unexercised or unconverted portion
of any other securities of the Company (including any other securities subject
to a limitation on conversion or exercise analogous to the limitation contained
herein); and

 

(ii)

the number of Common Shares issuable upon exercise of the Warrants (or portions
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by the Holder and its affiliates of more
than 9.9% of the outstanding Common Shares. For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13D-G thereunder, except as otherwise provided in clause (i) hereof.
Notwithstanding anything in this Warrant to the contrary, the restrictions on
exercise of this Warrant set forth in this paragraph shall not be amended
without:

 

(iii)

the written consent of the Holder and the Company; and

 

 

(iv)

the approval of the holders of a majority of the Common Shares present or
represented by proxy, and voting at any meeting called to vote on the amendment
of such restriction.

4.2

Effect of Exercise of Warrants

 

 

(a)

Upon surrender and payment as aforesaid the Common Shares so subscribed for will
be deemed to have been issued and such person or persons will be deemed to have
become the holder or holders of record of such Common Shares on the date of such
surrender.

 

(b)

Within five business days after surrender as aforesaid, the Company will
forthwith cause to be delivered to the person or persons in whose name or names
the Common Shares so subscribed for are to be issued as specified in such
Agreement or mailed to him or them at his or their respective addresses
specified in such Agreement, a certificate or certificates for the appropriate
number of Common Shares not exceeding those which the Warrant Holder is entitled
to acquire pursuant to the Warrant surrendered.

4.3

Subscription for Less Than Entitlement

 

The holder of any Warrant may subscribe for and acquire a number of Common
Shares, less than the number which he is entitled to acquire pursuant to the
surrendered Warrant. In the event of any acquisition of a number of Common
Shares less than the number which can be acquired pursuant to a Warrant, the
holder thereof upon exercise thereof will in addition be entitled to receive a
new Warrant in respect of the

 

D/WLM/695851.4

A-4

 

--------------------------------------------------------------------------------

 

balance of the Common Shares which he was entitled to acquire pursuant to the
surrendered Warrant and which were not then acquired.

4.4

Warrants for Fractions of Shares

To the extent that the holder of any Warrant is entitled to receive on the
exercise or partial exercise thereof a fraction of a Common Share, such right
may be exercised in respect of such fraction only in combination with another
Warrant or other Warrants which in the aggregate entitle the holder to receive a
whole number of such Common Shares.

4.5

Expiration of Warrants

After the expiration of the period within which a Warrant is exercisable, all
rights thereunder will wholly cease and terminate and such Warrant will no
longer be valid and of no effect.

4.6

Time of Essence

Time will be of the essence hereof.

4.7

Adjustments

The number of Common Shares deliverable upon the exercise of the Warrants will
be subject to adjustment in the event and in the manner following:

(a)

Merger, Sale of Assets, Etc. If at any time while this Warrant, or any portion
thereof, is outstanding and unexpired there shall be:

 

(i)

a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein);

 

(ii)

a merger or consolidation of the Company with or into another corporation in
which the Company is not the surviving entity, or a reverse triangular merger in
which the Company is the surviving entity but the shares of the Company's
capital stock outstanding immediately prior to the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash, or otherwise; or

 

(iii)

a sale or transfer of the Company's properties and assets as, or substantially
as, an entirety to any other person, then, as a part of such reorganization,
merger, consolidation, sale or transfer, lawful provision shall be made so that
the holder of this Warrant shall thereafter be entitled to receive upon exercise
of this Warrant, during the period specified herein and upon payment of the
Exercise Price then in effect, the number of shares of stock or other securities
or property of the successor corporation resulting from such reorganization,
merger, consolidation, sale or transfer that a holder of the shares deliverable
upon exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant had been
exercised immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 4.7.

The foregoing provisions of this Section 4.7 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per share consideration payable to the holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the

 

D/WLM/695851.4

A-5

 

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transaction, to the end that the provisions of this Warrant shall be applicable
after that event, as near as reasonably may be, in relation to any shares or
other property deliverable after that event upon exercise of this Warrant.

(b)

Reclassification, Etc. If the Company, at any time while this Warrant, or any
portion thereof, remains outstanding and unexpired by reclassification of
securities or otherwise, shall change any of the securities as to which purchase
rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 4.7. No adjustment shall be made pursuant to this Section 4.7, upon any
conversion or redemption.

(c)

Split, Subdivision or Combination of Shares. If the Company at any time while
this Warrant, or any portion thereof, remains outstanding and unexpired shall
split, subdivide or combine the securities as to which purchase rights under
this Warrant exist, into a different number of securities of the same class, the
Exercise Price for such securities shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.

(d)

Adjustments for Dividends in Stock or Other Securities or Property. If while
this Warrant, or any portion hereof, remains outstanding and unexpired the
holders of the securities as to which purchase rights under this Warrant exist
at the time shall have received, or, on or after the record date fixed for the
determination of eligible Stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock or other securities or
property (other than cash) of the Company by way of dividend, then and in each
case, this Warrant shall represent the right to acquire, in addition to the
number of shares of the security receivable upon exercise of this Warrant, and
without payment of any additional consideration therefor, the amount of such
other or additional stock or other securities or property (other than cash) of
the Company that such holder would hold on the date of such exercise had it been
the holder of record of the security receivable upon exercise of this Warrant on
the date hereof and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period, giving effect
to all adjustments called for during such period by the provisions of this
Section 4.7.

(e)

Certificate as to Adjustments. Upon the occurrence of each adjustment or
readjustment pursuant to this Section 4.7, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each Holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written
request, at any time, of any such Holder, furnish or cause to be furnished to
such Holder a like certificate setting forth:

 

(i)

such adjustments and readjustments;

 

 

(ii)

the Exercise Price at the time in effect; and

 

 

(iii)

the number of shares and the amount, if any, of other property that at the time
would be received upon the exercise of the Warrant.

(f)

No Impairment. The Company will not, by any voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Section 4.7 and in the taking
of all such action as may be necessary or appropriate in order to protect the
rights of the Holders of this Warrant against impairment.

 

 

D/WLM/695851.4

A-6

 

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4.8

Determination of Adjustments

If any questions will at any time arise with respect to any adjustment provided
for in Section 4.7, such question will be conclusively determined by the
Company’s Auditors, or, if they decline to so act any other firm of chartered
accountants, in Vancouver, British Columbia, that the Company may designate and
who will have access to all appropriate records and such determination will be
binding upon the Company and the holders of the Warrants.

ARTICLE 5

MANDATORY WARRANT EXERCISE

5.1

Exercise at the option of the Company

The Company may require the Holder, at any time following the date (the “Trigger
Date”) that:

(a)

the Registration Statement has been declared effective; and

 

(b)

the volume weighted average daily price of the Common Shares as listed on a
Principal Market (as defined herein), as quoted by Bloomberg L.P. (the “VWAP”)
has been averaged or above US$8.250 for a period of ten consecutive trading
days, to exercise the Warrants and acquire the Common Shares at the Exercise
Price.

The Holder must exercise the Warrants in accordance with Section 4.1 within
fifteen (15) business days of the receipt of notice from the Company. If the
Warrants have not been exercised within thirty (30) days after the Trigger Date,
the Warrants shall be cancelled. As used herein, “Principal Market” shall mean
The National Association of Securities Dealers Inc.'s OTC Bulletin Board, the
Nasdaq SmallCap Market, or the American Stock Exchange. If the Common Shares are
not traded on a Principal Market, the VWAP shall mean the reported VWAP for the
Common Shares, as furnished by the National Association of Securities Dealers,
Inc., for the applicable periods.

ARTICLE 6

COVENANTS BY THE COMPANY

6.1

Reservation of Shares

The Company will reserve and there will remain unissued out of its authorized
capital a sufficient number of Common Shares to satisfy the rights provided for
herein and in the Warrants should the holders of all the Warrants from time to
time outstanding determine to exercise such rights in respect of all Common
Shares which they are or may be entitled to acquire pursuant thereto and hereto.

6.2

Company may Purchase

The Company may from time to time offer to purchase and purchase, for
cancellation only, any Warrants in such manner, from such persons and on such
terms and conditions as it determines.

ARTICLE 7

MODIFICATION OF TERMS, MERGER, SUCCESSORS

7.1

Modification of Terms and Conditions for Certain Purposes

From time to time the Company may, subject to the provisions of these Terms and
Conditions, modify the Terms and Conditions hereof, for the purpose of
correction or rectification of any ambiguities, defective provisions, errors or
omissions herein, provided that such modifications shall not adversely effect
the rights of the Holder without the Holder’s prior written consent.

 

 

D/WLM/695851.4

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7.2

Transferability

The Warrant and all rights attached to it are transferable or assignable, if
transferred or assigned in accordance with all applicable securities laws.

IN WITNESS WHEREOF CHEETAH OIL AND GAS LTD. has caused this Warrant to be signed
by its duly authorized officers under its corporate seal, and this Warrant to be
dated as of the date of issuance first above written.

SIGNED BY:

CHEETAH OIL AND GAS LTD.

 

Per:

 

 

Authorized Signatory

 

Per:

 

 

Authorized Signatory

Date:

 

 

 

D/WLM/695851.4

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EXERCISE FORM

TO:

Cheetah Oil and Gas Ltd.

The undersigned holder of Warrants hereby exercises the right to acquire
__________________ Common Shares without nominal or par value of Cheetah Oil and
Gas Ltd. (the "Company") (or such number of other securities or property to
which such Warrants entitle the undersigned in lieu thereof or in addition
thereto under the provisions set forth in the Warrant Certificate) according to
the terms set forth in the Warrant Certificate.

Such securities or property are to be issued as follows:

Name:

 

Address in Full:

 

 

 

The undersigned acknowledges that the certificates representing the Common
Shares issuable hereunder shall bear such legends as may be required under
applicable securities law.

DATED this _______ day of ____________________, 200__.

 

 

Signature

 

 

(Print full name)

 

 

(Print full address)

Instructions:

The registered holder may exercise his right to acquire Common Shares by
completing the above form, surrendering this Warrant Certificate and providing
payment by bank draft, money order or certified check to the Company at its
principal office in Vancouver, British Columbia. For the protection of the
holder, it would be prudent to register if forwarding by mail. Certificates for
Common Shares will be delivered or mailed as soon as practicable after the
exercise of the Warrants. The rights of the registered holder cease if the
Warrants are not exercised prior to 5:00 p.m. (Vancouver time) on the Expiry
Date.

 

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EXHIBIT B

U.S. SECURITIES LAW QUESTIONNAIRE

All capitalized terms herein, unless otherwise defined, have the meanings
ascribed thereto in the Securities Purchase Agreement.

1.

The Investor covenants, represents and warrants to the Company that:

 

(a)

the Investor is a U.S. Person;

 

(b)           the Investor has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of the
transactions detailed in the Securities Purchase Agreement and it is able to
bear the economic risk of loss arising from such transactions;

(c)           the Investor is acquiring the Securities for investment only and
not with a view to resale or distribution and, in particular, it has no
intention to distribute either directly or indirectly any of the Securities in
the United States or to U.S. Persons; provided, however, that the Investor may
sell or otherwise dispose of any of the Securities pursuant to registration
thereof pursuant to the Securities Act of 1933 (the "1933 Act") and any
applicable State securities laws unless an exemption from such registration
requirements is available or registration is not required pursuant to Regulation
S under the 1933 Act or registration is otherwise not required under the 1933
Act;

(d)           the Investor satisfies one or more of the categories indicated
below (please check the appropriate box):

o

Category 1             An organization described in Section 501(c)(3) of the
United States Internal Revenue Code, a corporation, a Massachusetts or similar
business trust or partnership, not formed for the specific purpose of acquiring
the Securities, with total assets in excess of US $5,000,000;

o

Category 2             A natural person whose individual net worth, or joint net
worth with that person’s spouse, on the date of purchase exceeds US $1,000,000;

o

Category 3             A natural person who had an individual income in excess
of US $200,000 in each of the two most recent years or joint income with that
person’s spouse in excess of US $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;

o

Category 4             A "bank" as defined under Section (3)(a)(2) of the 1933
Act or savings and loan association or other institution as defined in Section
3(a)(5)(A) of the 1933 Act acting in its individual or fiduciary capacity; a
broker dealer registered pursuant to Section 15 of the Securities Exchange Act
of 1934 (United States); an insurance company as defined in Section 2(13) of the
1933 Act; an investment company registered under the Investment Company Act of
1940 (United States) or a business development company as defined in Section
2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958 (United States); a plan with total assets in excess of
$5,000,000 established and maintained by a state, a political

 

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subdivision thereof, or an agency or instrumentality of a state or a political
subdivision thereof, for the benefit of its employees; an employee benefit plan
within the meaning of the Employee Retirement Income Security Act of 1974
(United States) whose investment decisions are made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000, or, if a
self-directed plan, whose investment decisions are made solely by persons that
are accredited investors;

o

Category 5             A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940 (United States);

o

Category 6

A director or executive officer of the Company;

 

o

Category 7             A trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Securities, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the
1933 Act; or

o

Category 8             An entity in which all of the equity owners satisfy the
requirements of one or more of the foregoing categories; and

                 (e)           the Investor is not acquiring the Securities as a
result of any form of general solicitation or general advertising including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media or broadcast over radio, or television, or
any seminar or meeting whose attendees have been invited by general solicitation
or general advertising.

2.

The Investor acknowledges and agrees that:

(a)           if the Investor decides to offer, sell or otherwise transfer any
of the Securities, it will not offer, sell or otherwise transfer any of such
securities directly or indirectly, unless:

(i)

the Securities have been registered,

(ii)

the sale is to the Company;

 

(iii)          the sale is made outside the United States in a transaction
meeting the requirements of Rule 904 of Regulation S under the 1933 Act and in
compliance with applicable local laws and regulations;

(iv)          the sale is made pursuant to the exemption from the registration
requirements under the 1933 Act provided by Rule 144 thereunder if available and
in accordance with any applicable state securities or "Blue Sky" laws; or

(v)           the Securities are sold in a transaction that does not require
registration under the 1933 Act or any applicable U.S. state laws and
regulations governing the offer and sale of securities, and it has prior to such
sale furnished to the Company an opinion of counsel reasonably satisfactory to
the Company;

(b)           any of the Warrants may not be exercised in the United States or
by or on behalf of a U.S. Person unless registered under the 1933 Act and any
applicable state securities laws unless an exemption from such registration
requirements is available;

 

 

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(c)           the Investor has not acquired the Securities as a result of, and
will not itself engage in, any "directed selling efforts" (as defined in
Regulation S under the 1933 Act) in the United States in respect of the
Securities which would include any activities undertaken for the purpose of, or
that could reasonably be expected to have the effect of, conditioning the market
in the United States for the resale of any of the Securities; provided, however,
that the Investor may sell or otherwise dispose of any of the Securities
pursuant to registration of any of the Securities pursuant to the 1933 Act and
any applicable state securities laws or under an exemption from such
registration requirements and as otherwise provided herein; ‘

(d)           upon the issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the 1933 Act or applicable
U.S. State laws and regulations, the certificates representing any of the
Securities will bear a legend in substantially the following form:

"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS."

(e)            the Company may make a notation on its records or instruct the
registrar and transfer agent of the Company in order to implement the
restrictions on transfer set forth and described herein; and

(f)             the Investor, if an individual, is a resident of the state or
other jurisdiction in its address on the Investor’s execution page of the
Securities Purchase Agreement, or if the Investor is not an individual, the
office of the Investor at which the Investor received and accepted the offer to
acquire the Securities is the address listed on the Investor’s execution page of
the Securities Purchase Agreement.

IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of the
_______ day of _______________, 2005.

 

If a Corporation, Partnership or Other Entity:

 

If an Individual:

 

 

 

 

 

Print or Type Name of Entity

 

Signature

 

 

 

 

 

Signature of Authorized Signatory

 

Print or Type Name

 

 

 

 

 

Type of Entity

 

Social Security/Tax I.D. No.

 

 

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EXHIBIT C

MULTILATERAL INSTRUMENT 45-103

ACCREDITED INVESTOR QUESTIONNAIRE

The purpose of this Questionnaire is to assure Cheetah Oil and Gas Ltd. (the
"Company") that the undersigned (the "Investor") will meet certain requirements
for the registration and prospectus exemptions provided for under Multilateral
Instrument 45-103 ("MI 45-103"), as adopted by the British Columbia Securities
Commission, in respect of a proposed private placement of securities by the
Company (the "Transaction"). The Company will rely on the information contained
in this Questionnaire for the purposes of such determination.

The undersigned Investor covenants, represents and warrants to the Company that:

1.             the Investor has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of the
Transaction and the Investor is able to bear the economic risk of loss arising
from such Transaction;

2.             the Investor satisfies one or more of the categories of
"accredited investor" (as that term is defined in MI 45-103) indicated below
(please check the appropriate box):

o

an individual who beneficially owns, or who together with a spouse beneficially
own, financial assets (as defined in MI 45-103) having an aggregate realizable
value that, before taxes but net of any related liabilities, exceeds
CDN.$1,000,000;

o

an individual whose net income before taxes exceeded CDN.$200,000 in each of the
two more recent years or whose net income before taxes combined with that of a
spouse exceeded $300,000 in each of those years and who, in either case, has a
reasonable expectation of exceeding the same net income level in the current
year;

o

an individual registered or formerly registered under the Securities Act
(British Columbia), or under securities legislation in another jurisdiction of
Canada, as a representative of a person or company registered under the
Securities Act (British Columbia), or under securities legislation in another
jurisdiction of Canada, as an adviser or dealer, other than a limited market
dealer registered under the Securities Act (Ontario);

o

a Canadian financial institution as defined in National Instrument 14-101, or an
authorized foreign bank listed in Schedule III of the Bank Act (Canada);

o

the Business Development Bank of Canada incorporated under the Business
Development Bank Act (Canada);

o

an association under the Cooperative Credit Associations Act (Canada) located in
Canada;

o

a Subsidiaries of any company referred to in any of the foregoing categories,
where the company owns all of the voting securities of the Subsidiaries, except
the voting securities required by law to be owned by directors of that
Subsidiaries;

o

a person or company registered under the Securities Act (British Columbia), or
under securities legislation of another jurisdiction of Canada, as an adviser or
dealer, other than a limited market dealer registered under the Securities Act
(Ontario);

o

a pension fund that is regulated by either the Office of the Superintendent of
Financial Institutions (Canada) or a provincial pension commission or similar
regulatory authority;

 

 

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o

an entity organized in a foreign jurisdiction that is analogous to any of the
entities referred to in any of the foregoing categories in form and function;

o

the government of Canada or a province, or any crown corporation or agency of
the government of Canada or a province;

o

a municipality, public board or commission in Canada;

 

o

a national, federal, state, provincial, territorial or municipal government of
or in any foreign jurisdiction, or any agency thereof;

o

a registered charity under the Income Tax Act (Canada);

 

o

a corporation, limited partnership, limited liability partnership, trust or
estate, other than a mutual fund or non-redeemable investment fund, that had net
assets of at least CDN.$5,000,000 as reflected on its most recently prepared
financial statements;

o

a mutual fund or non-redeemable investment fund that, in British Columbia,
distributes it securities only to persons or companies that are accredited
investors;

o

a mutual fund or non-redeemable investment fund that, in British Columbia,
distributes its securities under a prospectus for which a receipt has been
issued by the executive director of the British Columbia Securities Commission;
or

o

a person or company in respect of which all of the owners of interests, direct
or indirect, legal or beneficial, are persons or companies that are accredited
investors.

The Investor acknowledges and agrees that the Investor may be required by the
Company to provide such additional documentation as may be reasonably required
by the Company and its legal counsel in determining the Investor’s eligibility
to acquire the Shares under relevant Legislation.

IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of the
______ day of _______________, 2005.

 

 

Print or Type Name of Entity

Signature

 

 

 

Signature of Authored Signatory

Print or Type Name

 

 

 

Type of Entity

Social Security/Tax I.D. No

 

 

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EXHIBIT D

RISK FACTORS

As used in this Exhibit, the terms "we", "us", "our" and "Cheetah" mean Cheetah
Oil and Gas Ltd., unless otherwise indicated. All dollar amounts refer to US
dollars unless otherwise indicated. The following discussion should be read in
conjunction with our financial statements and the related notes.

Much of the information included in our Public Record includes or is based upon
estimates, projections or other "forward looking statements". Such forward
looking statements include any projections or estimates made by us and our
management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.

Those forward-looking statements also involve certain risks and uncertainties.
Factors, risks and uncertainties that could cause or contribute to such
differences include those specific risks and uncertainties discussed below and
those discussed in our Form 10-KSB Annual Report for the year ended December 31,
2004. The cautionary statements made in this document should be read as being
applicable to all related forward-looking statements wherever they appear in our
Public Record.

Our common shares are considered speculative during the development of our new
business operations. Prospective investors should consider carefully the risk
factors set out below.

We have a limited operating history which raises substantial doubt about our
ability to continue as a going concern.

Our company has a limited operating history and must be considered in the
development stage. The success of the company is significantly dependent on a
successful drilling, completion and production program. Our company’s operations
will be subject to all the risks inherent in the establishment of a developing
enterprise and the uncertainties arising from the absence of a significant
operating history. No assurance can be given that we may be able to operate on a
profitable basis. We are in the development stage and potential investors should
be aware of the difficulties normally encountered by enterprises in the
development stage. There can be no assurance that our business plan will prove
successful, and no assurance that we may be able to operate profitably, if at
all.

Because of the early stage of development and the nature of our business, our
securities are considered highly speculative.

Our securities must be considered highly speculative, generally because of the
nature of our business and the early stage of its development. We are engaged in
the business of exploring and, if warranted, developing commercial reserves of
oil and gas. Our properties are in the exploration stage only and are without
known reserves of oil and gas. Accordingly, we have not generated any revenues
nor have we realized a profit from our operations to date and there is little
likelihood that we will generate any revenues or realize any profits in the
short term. Any profitability in the future from our business will be dependent
upon locating and developing economic reserves of oil and gas, which itself is
subject to numerous risk factors as set forth herein. Since we have not
generated any revenues, we will have to raise additional monies through the sale
of our equity securities or debt in order to continue our business operations.

A portion of our interest in our properties may be lost if we are unable to
obtain significant additional financing.

Our ability to continue exploration and, if warranted, development of our
properties will be dependent upon our ability to raise significant additional
financing. If we are unable to obtain such financing, a portion of our interest
in our properties may be lost to exploration partners or our properties may be
lost entirely. We have limited financial resources and no material cash flow
from operations and we are dependent for funds on our ability to sell our common
shares, primarily on a private placement basis. There can be no assurance that
we will be able to obtain financing on that basis in light of factors such as
the market demand for our securities, the state of financial markets

 

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generally and other relevant factors. The method of financing employed by us to
date results in increased dilution to the existing shareholders each time a
private placement is conducted.

We anticipate that we may need to obtain additional bank financing or sell
additional debt or equity securities in future public or private offerings.
There can be no assurance that additional funding will be available to us for
exploration and development of our projects or to fulfill our obligations under
any applicable agreements. Although historically we have announced additional
financings to proceed with the development of some of our previous properties,
there can be no assurance that we will be able to obtain adequate financing in
the future or that the terms of such financing will be favourable. Failure to
obtain such additional financing could result in delay or indefinite
postponement of further exploration and development of our projects with the
possible loss of such properties.

Due to the losses incurred since inception, our stockholders’ deficiencies and
lack of revenues, there is substantial doubt about our ability to continue as a
going concern.

There is substantial doubt about our ability to continue as a going concern due
to the losses incurred since inception, our stockholders’ deficiency, and lack
of revenues.

There can be no assurance that, if required, any such financing will be
available upon terms and conditions acceptable to us, if at all. Our inability
to obtain additional financing in a sufficient amount when needed and upon terms
and conditions acceptable to us could have a materially adverse effect upon our
company. Although we believe that we have funds sufficient to meet our immediate
needs, we require further funds to finance the development of our company. There
can be no assurance that such funds will be available or available on terms
satisfactory to us. If additional funds are raised by issuing equity securities,
further dilution to existing or future shareholders is likely to result. If
adequate funds are not available on acceptable terms when needed, we may be
required to delay, scale back or eliminate the development of our company.
Inadequate funding could also impair our ability to compete in the marketplace,
which may result in the dissolution of our company.

We will require substantial funds to enable us to decide whether our properties
contain commercial oil and gas deposits and whether they should be brought into
production, and if we cannot raise the necessary funds we may never be able to
realize the potential of our properties.

Our decision as to whether our properties contain commercial oil and gas
deposits and should be brought into production will require substantial funds
and depend upon the results of exploration programs and feasibility studies and
the recommendations of duly qualified engineers, geologists, or both. This
decision will involve consideration and evaluation of several significant
factors including but not limited to: (1) costs of bringing a property into
production, including exploration and development work, preparation of
production feasibility studies, and construction of production facilities; (2)
availability and costs of financing; (3) ongoing costs of production; (4) market
prices for the oil and gas to be produced; (5) environmental compliance
regulations and restraints; and (6) political climate, governmental regulation
and control. If we are unable to raise the funds necessary to properly evaluate
our properties, then we may not be able to realize any potential of our
properties.

We have licenses in respect of our properties, but our properties may be subject
to prior unregistered agreements, or transfers which have not been recorded or
detected through title searches, and are subject to a governmental right of
participation, resulting in a possible claim against any future revenues
generated by such properties.

We have licenses with respect to our oil and gas properties and believe our
interests are valid and enforceable. However, these licenses do not guarantee
title against all possible claims. The properties may be subject to prior
unregistered agreements, or transfers which have not been recorded or detected
through title research. Further, the properties are subject to a 22.5% back-in
participation right in favour of the government, which the government may
exercise upon payment of 22..5% of the expenses incurred in the development of
the property. This back–in interest includes a 2% of revenue royalty payment to
indigenous groups, which is only payable if the government exercises its back-in
right. Additionally, the land upon which we hold oil and gas leases may not have
been surveyed; therefore, the precise area and location of such interests may be
subject to challenge. If the interests in our properties is challenged, we may
have to expend funds defending any such claims and may ultimately lose some or
all of any revenues generated from the properties if we lose our interest in
such properties.

 

 

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Some of our projects our located in Papua, New Guinea where mining exploration
activities may be affected in varying degrees by political and government
regulations which could have a negative impact on our ability to continue our
operations.

Certain projects in which we have interests are located in Papua, New Guinea.
Mineral exploration activities in Papua, New Guinea may be affected in varying
degrees by political instabilities and government regulations relating to the
mining industry. Any changes in regulations or shifts in political conditions
are beyond our control and may adversely affect our business. Operations may be
affected in varying degrees by government regulations with respect to
restrictions on production, price controls, export controls, income taxes,
expropriations of property, environmental legislation and mine safety. The
status of New Guinea as a developing country may make it more difficult for us
to obtain any required financing for our projects. The effect of all these
factors cannot be accurately predicted. Notwithstanding the progress achieved in
restructuring New Guinea political institutions and revitalizing its economy,
the present administration, or any successor government, may not be able to
sustain the progress achieved. While the New Guinea economy has experienced
growth in recent years, such growth may not continue in the future at similar
rates or at all. If the economy of New Guinea fails to continue its growth or
suffers a recession, we may not be able to continue our operations in that
country. We do not carry political risk insurance.

Our accounts are subject to currency fluctuations which may periodically affect
our financial position and results.

We maintain our accounts in US and Canadian currencies and make certain payments
in the currency of Papua, New Guinea and are therefore subject to currency
fluctuations and such fluctuations may periodically affect our financial
position and results. We do not engage in currency hedging activities.

We may not be able to manage the significant strains that future growth may
place on our administration infrastructure, systems and controls.

In the event our properties commence production, we could experience rapid
growth in revenues, personnel, complexity of administration and in other areas.
There can be no assurance that we will be able to manage the significant strains
that future growth may place on our administrative infrastructure, systems, and
controls. If we are unable to manage future growth effectively, our business,
operating results and financial condition may be materially adversely affected.

The loss of Garth Braun would have an adverse impact on future development and
could impair our ability to succeed.

We are dependent on our ability to hire and retain highly skilled and qualified
personnel, including our President, Mr. Garth Braun, also one of our directors.
We face competition for qualified personnel from numerous industry sources, and
there can be no assurance that we will be able to attract and retain qualified
personnel on acceptable terms. We do not have key man insurance on any of our
employees. The loss of service of any of our key personnel could have a material
adverse effect on our operations or financial condition.

Our management currently engages in other oil and gas businesses and, as a
result, conflicts could arise.

In addition to their interest in our company, our management currently engages,
and intends to engage in the future, in the oil and gas business independently
of our company. As a result, conflicts of interest between us and management of
our company might arise.

Trading of our stock may be restricted by the SEC’s penny stock regulations
which may limit a stockholder’s ability to buy and sell our stock.

Our shares of common stock are subject to rules promulgated by the Securities
and Exchange Commission relating to "penny stocks," which apply to companies
whose shares are not traded on a national stock exchange or on the NASDAQ
system, trade at less than $5.00 per share, or who do not meet certain other
financial requirements specified by the Securities and Exchange Commission.
These rules require brokers who sell "penny stocks" to persons other than
established customers and "accredited investors" to complete certain
documentation, make suitability inquiries of investors, and provide investors
with certain information concerning the risks of trading in the

 

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such penny stocks. These rules may discourage or restrict the ability of brokers
to sell our shares of common stock and may affect the secondary market for our
shares of common stock. These rules could also hamper our ability to raise funds
in the primary market for our shares of common stock.

Since our shares are thinly traded, and trading on the OTC Bulletin Board may be
sporadic because it is not an exchange, stockholders may have difficulty
reselling their shares.

Our shares of common stock are currently publicly traded on the OTC Bulletin
Board service of the National Association of Securities Dealers, Inc. The
trading price of our shares of common stock has been subject to wide
fluctuations. Trading prices of our shares of common stock may fluctuate in
response to a number of factors, many of which will be beyond our control. The
stock market has generally experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating performance
of companies with no current business operation. There can be no assurance that
trading prices and price earnings ratios previously experienced by our shares of
common stock will be matched or maintained. These broad market and industry
factors may adversely affect the market price of our shares of common stock,
regardless of our operating performance.

In the past, following periods of volatility in the market price of a company’s
securities, securities class-action litigation has often been instituted. Such
litigation, if instituted, could result in substantial costs for us and a
diversion of management’s attention and resources.

Investors’ interests in our company will be diluted and investors may suffer
dilution in their net book value per share if we issue additional shares or
raise funds through the sale of equity securities.

Our constating documents authorize the issuance of 50,000,000 shares of common
stock, each with a par value of $0.001. In the event that we are required to
issue any additional shares or enter into private placements to raise financing
through the sale of equity securities, investors’ interests in our company will
be diluted and investors may suffer dilution in their net book value per share
depending on the price at which such securities are sold. If we issue any such
additional shares, such issuances also will cause a reduction in the
proportionate ownership and voting power of all other shareholders. Further, any
such issuance may result in a change in our control.

Risks Relating to the Industry

As our properties are in the exploration stage there can be no assurance that we
will establish commercial discoveries on our properties.

Exploration for economic reserves of oil and gas is subject to a number of risk
factors. While the rewards to an investor can be substantial if an economically
viable discovery is made, few of the properties that are explored are ultimately
developed into producing oil and/or gas wells. Our properties are in the
exploration stage only and are without proven reserves of oil and gas. There can
be no assurance that we will establish commercial discoveries on any of our
properties.

The potential profitability of oil and gas ventures depends upon factors beyond
the control of our company

The potential profitability of oil and gas properties is dependent upon many
factors beyond our control. For instance, world prices and markets for oil and
gas are unpredictable, highly volatile, potentially subject to governmental
fixing, pegging, controls, or any combination of these and other factors, and
respond to changes in domestic, international, political, social, and economic
environments. Additionally, due to world-wide economic uncertainty, the
availability and cost of funds for production and other expenses have become
increasingly difficult, if not impossible, to project. These changes and events
may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations. A productive
well may become uneconomic in the event water or other deleterious substances
are encountered which impair or prevent the production of oil and/or gas from
the well. In addition, production from any well may be unmarketable if it is
impregnated with water or other deleterious substances. The marketability of oil
and gas which may be acquired or discovered will be affected by numerous factors
beyond our control. These factors include the proximity and capacity of oil and
gas pipelines and processing equipment, market fluctuations of prices, taxes,
royalties, land tenure, allowable production and

 

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environmental protection. The extent of these factors cannot be accurately
predicted but the combination of these factors may result in our company not
receiving an adequate return on invested capital.

Competition in the oil and gas industry is highly competitive and there is no
assurance that we will be successful in acquiring the leases.

The oil and gas industry is intensely competitive. We compete with numerous
individuals and companies, including many major oil and gas companies, which
have substantially greater technical, financial and operational resources and
staffs. Accordingly, there is a high degree of competition for desirable oil and
gas properties for drilling operations and necessary drilling equipment, as well
as for access to funds. There can be no assurance that the necessary funds can
be raised or that any projected work will be completed. There are other
competitors that have operations in the properties in Papua New Guinea and the
presence of these competitors could adversely affect our ability to acquire
additional property interests.

The marketability of natural resources will be affected by numerous factors
beyond our control which may result in us not receiving an adequate return on
invested capital to be profitable or viable.

The marketability of natural resources which may be acquired or discovered by us
will be affected by numerous factors beyond our control. These factors include
market fluctuations in oil and gas pricing and demand, the proximity and
capacity of natural resource markets and processing equipment, governmental
regulations, land tenure, land use, regulation concerning the importing and
exporting of oil and gas and environmental protection regulations. The exact
effect of these factors cannot be accurately predicted, but the combination of
these factors may result in us not receiving an adequate return on invested
capital to be profitable or viable.

Oil and gas operations are subject to comprehensive regulation which may cause
substantial delays or require capital outlays in excess of those anticipated
causing an adverse effect on our company.

Oil and gas operations are subject to federal and local laws relating to the
protection of the environment, including laws regulating removal of natural
resources from the ground and the discharge of materials into the environment.
Oil and gas operations are also subject to federal and local laws and
regulations which seek to maintain health and safety standards by regulating the
design and use of drilling methods and equipment. Various permits from
government bodies are required for drilling operations to be conducted; no
assurance can be given that such permits will be received. No assurance can be
given that environmental standards imposed by federal or local authorities will
not be changed or that any such changes would not have material adverse effects
on our activities. Moreover, compliance with such laws may cause substantial
delays or require capital outlays in excess of those anticipated, thus causing
an adverse effect on us. Additionally, we may be subject to liability for
pollution or other environmental damages which it may elect not to insure
against due to prohibitive premium costs and other reasons.

Exploration and production activities are subject to certain environmental
regulations which may prevent or delay the commencement or continuance of our
operations.

In general, our exploration and production activities are subject to certain
federal and local laws and regulations relating to environmental quality and
pollution control. Such laws and regulations increase the costs of these
activities and may prevent or delay the commencement or continuance of a given
operation. Compliance with these laws and regulations has not had a material
effect on our operations or financial condition to date. Specifically, we are
subject to legislation regarding emissions into the environment, water
discharges and storage and disposition of hazardous wastes. In addition,
legislation has been enacted which requires well and facility sites to be
abandoned and reclaimed to the satisfaction of state authorities. However, such
laws and regulations are frequently changed and we are unable to predict the
ultimate cost of compliance. Generally, environmental requirements do not appear
to affect us any differently or to any greater or lesser extent than other
companies in the industry.

We believe that our operations comply, in all material respects, with all
applicable environmental regulations.

Risks Associated with Drilling

 

 

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Exploratory drilling involves many risks and we may become liable for pollution
or other liabilities which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk. Hazards such as
unusual or unexpected geological formations, power outages, labor disruptions,
blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate
machinery, equipment or labour, and other risks are involved. We may become
subject to liability for pollution or hazards against which it cannot adequately
insure or which it may elect not to insure. Incurring any such liability may
have a material adverse effect on our financial position and operations.

Any change to government regulation/administrative practices may have a negative
impact on our ability to operate and our profitability.

There is no assurance that the laws, regulations, policies or current
administrative practices of any government body, organization or regulatory
agency in Papua, New Guinea or any other jurisdiction, will not be changed,
applied or interpreted in a manner which will fundamentally alter the ability of
our company to carry on our business.

The actions, policies or regulations, or changes thereto, of any government body
or regulatory agency, or other special interest groups, may have a detrimental
effect on us. Any or all of these situations may have a negative impact on our
ability to operate and/or our profitability.

 

 

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EXHIBIT E

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of
_________________, 2005, is made by and among Cheetah Oil and Gas Ltd., a
corporation organized under the laws of the State of Nevada (the “Company”), and
the undersigned (together with their affiliates, the “Initial Investors”). 

BACKGROUND

A.

In connection with that certain Securities Purchase Agreement of even date
herewith by and among the Company and the Initial Investors (the “Securities
Purchase Agreement”), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors shares
of the Company’s Common Stock, par value $0.001 per share (the “Shares”), share
purchase warrants (the “Warrants”) and bonus warrants in the event the Company
sells additional Common Stock to a third party for less than the price sold to
the Initial Investors (the “Bonus Warrants”). The shares of Common Stock
issuable upon exercise of or otherwise pursuant to the Warrants, or Bonus
Warrants, are referred to herein as the “Warrant Shares” and “Bonus Warrant
Shares” respectively.

B.

To induce the Initial Investors to execute and deliver the Securities Purchase
Agreement, and to consummate the transactions contemplated thereby, the Company
has agreed to provide certain registration rights under the Securities Act of
1933, as amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the “1933 Act”), and applicable state
securities laws.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investors, intending to be legally bound, hereby agree as follows:

1.

Registration Rights

 

1.1

Registration Procedures and Other Matters

The Company shall:

 

a)

as soon as possible but in any event not later than the 45th day after the
Closing Date (or, if such day is a Saturday, Sunday or holiday, then by the next
succeeding business day), file a registration statement on Form SB-2 (the
“Registration Statement”) which Registration Statement shall register for resale
the Shares and Warrant Shares and an additional 25% of common shares which shall
be applied towards any resales of Bonus Warrant Shares, to effect a registration
of the Shares, Warrant Shares and a portion of the Bonus Warrant Shares to
enable the resale of the Shares, the Warrant Shares and a portion of the Bonus
Warrant Shares by the Initial Investors from time to time;

(b)

use commercially reasonable efforts to cause a Registration Statement to be
declared effective by the SEC as soon as possible, but in any event not later
than the earlier of:

 

(i)

the 120th day following the Closing Date; and

 

 

(ii)

the fifth trading day following the date on which the Company is notified by the
SEC that the Registration Statement will not be reviewed or is no longer subject
to further review and comments;

(c)

use commercially reasonable efforts to prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith (the "Prospectus") as may be necessary to keep the
Registration Statement continuously current,

 

D/WLM/695851.4

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effective and free from any material misstatement or omission to state a
material fact for a period not exceeding, with respect to the Initial Investor’s
Shares, Warrant Shares and Bonus Warrant Shares purchased hereunder from the
date it is first declared effective until, the earlier of:

 

(i)

two years from the date of the final exercise of all of the Warrants;

 

 

(ii)

the date on which the Initial Investor may sell all Shares and Warrant Shares
then held by the Initial Investor pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be
immediately sold; or

 

(iii)

the public sale of all of the Shares and the Warrant Shares (such period, the
"Effectiveness Period");

(d)

if:

 

 

(i)

the Registration Statement is not filed on or prior to the date of filing
required pursuant to Section 1.1(a);

 

(ii)

the Registration Statement is not declared effective on or prior to the date
required by Section 1.1(b); or

 

(iii)

notwithstanding Section 1.2, after the date first declared effective by the SEC
and prior to the expiration of the Effectiveness Period, the Registration
Statement ceases to be effective and available to each Initial Investor as to
its Shares and Warrant Shares (whether pursuant to Section 1.2(c), or otherwise)
without being succeeded within 20 trading days by an effective amendment thereto
or by a subsequent registration statement filed with and declared effective by
the SEC, (any such failure being referred to as an "Event" and the date of such
failure being the "Event Date"), then

in addition to any other rights available to the Initial Investor under this
Agreement or applicable law: (w) on the failure by the Company to comply with
the Event required pursuant to Section 1.1(a) the Company shall pay to the
Initial Investor an amount in cash, as liquidated damages and not as a penalty,
equal to one percent of the Subscription Amount paid by the Initial Investor and
on each monthly anniversary of such Event Date (if the Event has not been cured
by such date) until the applicable Event is cured, the Company shall pay to the
Initial Investor a further amount in cash, as liquidated damages and not as a
penalty, equal to one percent of the Subscription Amount paid by the Initial
Investor; (x) on the failure by the Company to comply with the Event required
pursuant to Section 1.1(b) or the occurrence of the Event set forth in Section
1.1(d)(iii) and on each monthly anniversary of such Event Dates (if the Event
has not been cured by such date) until the applicable Event is cured, an amount
shall accrue and be payable by the Company to the Initial Investor, as
liquidated damages and not as a penalty, equal to one percent of the
Subscription Amount paid by the Initial Investor; (y) provided however that if
the foregoing Events set forth in (x) is cured by the Company within 90 days of
the applicable Event Date, all liquidated damages that have accrued and are due
and owing by the Company to the Initial Investor shall be payable in Units (to
be registered in accordance with the terms of this Agreement), as liquidated
damages and not as a penalty; and (z) if an Event is not cured within 90 days of
the applicable Event Date, all liquidated damages that have accrued and are owed
and continue to accrue to the Initial Investor shall be paid in cash, and any
liquidated damages that accrue after one year from the Closing Date shall not
exceed six percent of the Subscription Amount paid by the Initial Investor. The
liquidated damages pursuant to the terms hereof shall apply on a pro rata basis
for any portion of a month prior to the cure of an Event;

(e)

furnish to the Initial Investor with respect to the Shares, Warrant Shares and
Bonus Warrant Shares registered under the Registration Statement such number of
copies of the Registration Statement, Prospectuses and Preliminary Prospectuses
in conformity with the requirements of the 1933 Act and such other documents as
the Initial Investor may reasonably request in writing, in order to facilitate
the public sale or other disposition of all or any of the Shares or Warrant
Shares

 

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or Bonus Warrant Shares by the Initial Investor; provided, however, that the
obligation of the Company to deliver copies of Prospectuses or Preliminary
Prospectuses to the Initial Investor shall be subject to the receipt by the
Company of reasonable assurances from the Initial Investor that the Initial
Investor will comply with the applicable provisions of the 1933 Act and of such
other securities or blue sky laws as may be applicable in connection with any
use of such Prospectuses or Preliminary Prospectuses;

(f)

file documents required of the Company for blue sky clearance in states
specified in writing by the Initial Investor and use its commercially reasonable
efforts to maintain such blue sky qualifications during the period the Company
is required to maintain the effectiveness of the Registration Statement pursuant
to Section 1.1(c); provided, however, that the Company shall not be required to
qualify to do business or consent to service of process in any jurisdiction in
which it is not now so qualified or has not so consented;

(g)

bear all expenses in connection with the procedures in paragraph (a) through (f)
of this Section 1.1 (other than any underwriting discounts or commissions,
brokers’ fees and similar selling expenses, and any other fees or expenses
incurred by the Initial Investor, including attorneys’ fees); and

(h)

advise the Initial Investor in writing promptly after it shall receive notice or
obtain knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its
commercially reasonable efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order should
be issued.

Notwithstanding anything to the contrary herein, the Registration Statement
shall cover only the Shares, the Warrant Shares and a portion of the Bonus
Warrant Shares and such other securities issued by the Company subject to
registration rights. In no event at any time before the Registration Statement
becomes effective with respect to the Shares shall the Company publicly announce
or file any other registration statement, other than registrations on Form S-8
or registrations for other securities issued by the Company subject to
registration rights, without the prior written consent of 66-2/3% in interest of
the Initial Investors.

1.2

Transfer of Shares After Registration; Suspension

 

 

(a)

The Initial Investor agrees that it will not effect any disposition of the
Securities or its right to purchase the Securities that would constitute a
"sale" within the meaning of the 1933 Act, except as contemplated in the
Registration Statement referred to in Section 1.1 and as described below or as
otherwise permitted by law, and that it will promptly notify the Company of any
material changes in the information set forth in the Registration Statement
regarding the Initial Investor or its plan of distribution.

 

(b)

Except in the event that paragraph (c) below applies, the Company shall:

 

 

(i)

if deemed necessary by the Company, prepare and file from time to time with the
SEC a post-effective amendment to the Registration Statement or a supplement to
the related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that such
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and so that, as thereafter delivered
to purchasers of the Shares, Warrant Shares and Bonus Warrant Shares being sold
thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading;

 

(ii)

provide the Initial Investor copies of any documents filed pursuant to Section
1.2(b)(i) as the Initial Investor may reasonably request; and

 

 

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(iii)

inform each Initial Investor that the Company has complied with its obligations
in Section 1.2(b)(i) (or that, if the Company has filed a post-effective
amendment to the Registration Statement which has not yet been declared
effective, the Company will notify the Initial Investor to that effect, will use
its commercially reasonable efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify the
Initial Investor pursuant to Section 1.2(b)(i) hereof when the amendment has
become effective).

(c)

Subject to paragraph (d) below, in the event of:

 

 

(i)

any request by the SEC or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to a Registration Statement or related Prospectus or for
additional information;

 

(ii)

the issuance by the SEC or any other federal or state governmental authority of
any stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose;

 

(iii)

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; or

 

(iv)

any event or circumstance which, upon the advice of its counsel, necessitates
the making of any changes in the Registration Statement or Prospectus, or any
document incorporated or deemed to be incorporated therein by reference, so
that, in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or any omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and that in the case of the Prospectus, it will not contain any untrue statement
of a material fact or any omission to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

then the Company shall deliver a certificate in writing to the Initial Investor
(the "Suspension Notice") to the effect of the foregoing and, upon receipt of
such Suspension Notice, the Initial Investor will refrain from selling any
Shares, Warrant Shares and Bonus Warrant Shares pursuant to the Registration
Statement (a "Suspension") until the Initial Investor's receipt of copies of a
supplemented or amended Prospectus prepared and filed by the Company, or until
it is advised in writing by the Company that the current Prospectus may be used,
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in any such Prospectus. In the
event of any Suspension, the Company will use its commercially reasonable
efforts to cause the use of the Prospectus so suspended to be resumed as soon as
reasonably practicable within 20 trading days after the delivery of a Suspension
Notice to the Initial Investor.

(d)

Notwithstanding the foregoing paragraphs of this Section 1.2, the Initial
Investor shall not be prohibited from selling Shares under the Registration
Statement as a result of Suspensions on more than two occasions of not more than
20 trading days each in any twelve month period.

(e)

Provided that a Suspension is not then in effect, the Initial Investor may sell
the Shares, the Warrant Shares and such portion of the Bonus Warrant shares
under the Registration Statement, provided that it arranges for delivery of a
current Prospectus to the transferee of such Shares or Warrant Shares, as
applicable. The Company shall provide such number of current Prospectuses to the
Initial Investor as the Initial Investor may reasonably request, and shall
supply copies to any other parties reasonably requiring such Prospectuses.

 

 

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1.3

Piggy-Back Registrations.

If, at any time after the issuance of the Bonus Warrants and prior to the first
anniversary of the date of this Agreement, the Company shall file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), the Company shall send to each Investor written
notice of such filing, and if, within 15 days after the date of such notice,
such Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Bonus Warrant Shares such Investor
requests to be registered. Notwithstanding the foregoing, in the event that, in
connection with any underwritten public offering, the managing underwriter(s)
thereof shall impose a limitation on the number of shares of Common Stock which
may be included in the Registration Statement because, in such underwriter(s)’
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Bonus Warrant
Shares with respect to which such Investor has requested inclusion hereunder as
the underwriter shall permit; provided, however, that (i) the Company shall not
exclude any Bonus Warrant Shares unless the Company has first excluded all
outstanding securities, the holders of which are not contractually entitled to
inclusion of such securities in such Registration Statement or are not
contractually entitled to pro rata inclusion with the Bonus Warrant Shares, (ii)
after giving effect to the immediately preceding proviso, any such exclusion of
Bonus Warrant Shares shall be made pro rata among the Investors seeking to
include Bonus Warrant Shares and the holders of other securities having the
contractual right to inclusion of their securities in such Registration
Statement by reason of demand registration rights, in proportion to the number
of Bonus Warrant Shares or other securities, as applicable, sought to be
included by each such Investor or other holder, and (iii) no such reduction
shall reduce the amount of Bonus Warrant Shares included in the registration
below twenty-five (25%) of the total amount of securities included in such
registration. No right to registration of Bonus Warrant Shares under this
Section 2(b) shall be construed to limit any registration required under Section
2(a) hereof. If an offering in connection with which an Investor is entitled to
registration under this Section 2(b) is an underwritten offering, then each
Investor whose Bonus Warrant Shares are included in such Registration Statement
shall, unless otherwise agreed by the Company, offer and sell such Bonus Warrant
Shares in an underwritten offering using the same underwriter or underwriters
and, subject to the provisions of this Agreement, on the same terms and
conditions as other shares of Common Stock included in such underwritten
offering.

1.4

Indemnification

 

 

(a)

The Company agrees to indemnify and hold harmless the Initial Investor and the
officers, directors, agents and employees of the Initial Investor, to the
fullest extent permitted by applicable law from and against any losses, claims,
damages or liabilities to which any such person(s) may become subject (under the
1933 Act or otherwise) insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of, or are based upon:

 

(i)

any Untrue Statement (defined below); or

 

 

(ii)

any failure by the Company to fulfil any undertaking included in the
Registration Statement, as amended or supplemented from time to time, which
indemnification will include reimbursement for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim, or preparing to defend any such action,
proceeding or claim, provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon, an Untrue Statement made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Initial Investor specifically for use in preparation of the Registration
Statement, as amended or supplemented from time to time (including, without
limitation, information set forth in the Questionnaires), or the failure of the
Initial Investor to comply with its covenants and agreements contained in
Section 1.2 hereof respecting sale of the Shares or Warrant Shares or any
statement or omission in any Prospectus that is corrected in any

 

D/WLM/695851.4

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subsequent Prospectus that was delivered to the Initial Investor prior to the
pertinent sale or sales by the Initial Investor.

The Company shall reimburse the Initial Investor for the indemnifiable amounts
provided for herein on demand as such expenses are incurred. Notwithstanding the
foregoing, the Company's aggregate obligation to indemnify the Initial Investor
and such officers, directors and controlling persons shall be limited to the
amount of the Subscription Amount received by the Company from the Initial
Investor.

(b)

The Initial Investor agrees to indemnify and hold harmless the Company (and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act, each officer of the Company who signs the Registration Statement and
each director of the Company) from and against any losses, claims, damages or
liabilities to which the Company (or any such officer, director or controlling
person) may become subject (under the 1933 Act or otherwise), insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon:

 

(i)

any Untrue Statement if such Untrue Statement was made in reliance upon and in
conformity with written information furnished by or on behalf of the Initial
Investor specifically for use in preparation of the Registration Statement, as
amended or supplemented from time to time (including, without limitation,
information set forth in the Questionnaires); or

 

(ii)

the failure of the Initial Investor to comply with its covenants and agreements
contained in Section 1.2 hereof respecting sale of the Shares, Warrant Shares or
Bonus Warrant Shares or any statement or omission in any Prospectus that is
corrected in any subsequent Prospectus that was delivered to the Initial
Investor prior to the pertinent sale or sales by the Initial Investor;

and the Initial Investor will reimburse the Company or such officer, director or
controlling person, as the case may be, for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim. The Initial Investor shall reimburse the
Company or such officer, director or controlling person, as the case may be, for
the indemnifiable amounts provided for herein on demand as such expenses are
incurred. Notwithstanding the foregoing, the Initial Investor's aggregate
obligation to indemnify the Company and such officers, directors and controlling
persons shall be limited to the amount received by the Initial Investor from the
sale of Shares, Warrant Shares or Bonus Warrant Shares that are the subject of
such loss.

(c)

Promptly after receipt by any indemnified person of a notice of a claim or the
beginning of any action in respect of which indemnity is to be sought against an
indemnifying person pursuant to this Section 1.4, such indemnified person shall
notify the indemnifying person in writing of such claim or of the commencement
of such action, but the omission to so notify the indemnifying person will not
relieve it from any liability which it may have to any indemnified person under
this Section 1.4 (except to the extent that such omission materially and
adversely affects the indemnifying person's ability to defend such action) or
from any liability otherwise than under this Section 1.4. Subject to the
provisions hereinafter stated, in case any such action shall be brought against
an indemnified person, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall elect by written notice delivered to
the indemnified person promptly after receiving the aforesaid notice from such
indemnified person, shall be entitled to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified person. After notice from
the indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate

 

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thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel (together with appropriate local counsel) for all indemnified parties.
In no event shall any indemnifying person be liable in respect of any amounts
paid in settlement of any action unless the indemnifying person shall have
approved the terms of such settlement; provided that such consent shall not be
unreasonably withheld or delayed. No indemnifying person shall, without the
prior written consent of the indemnified person, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified person is
or could have been a party and indemnification could have been sought hereunder
by such indemnified person, unless such settlement includes an unconditional
release of such indemnified person from all liability on claims that are the
subject matter of such proceeding.

(d)

If the indemnification provided for in this Section 1.4 is unavailable to or
insufficient to hold harmless an indemnified person under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each indemnifying
person shall contribute to the amount paid or payable by such indemnified person
as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the Initial Investor, as well as any
other Initial Investors under such Registration Statement on the other in
connection with the statements or omissions or other matters which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, in the case of an Untrue
Statement, whether the Untrue Statement relates to information supplied by the
Company on the one hand or the Initial Investor on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such Untrue Statement. The Company and the Initial Investor agree that
it would not be just and equitable if contribution pursuant to this subsection
(d) were determined by pro rata allocation (even if the Initial Investor and
other Initial Investors were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to above in this subsection(d). The amount paid or
payable by an indemnified person as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified person in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this subsection (d), the
Initial Investor shall not be required to contribute any amount in excess of the
amount by which the net amount received by the Initial Investor from any and all
sales of the Securities to which such loss relates exceeds the amount of any
damages which such Initial Investor has otherwise been required to pay by reason
of such Untrue Statement. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Investor's obligations in this subsection to
contribute shall be in proportion to its sale of Securities to which such loss
relates and shall not be joint with any other Initial Investors.

 

(e)

The parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations
regarding the provisions hereof including, without limitation, the provisions of
this Section 1.4, and are fully informed regarding said provisions. They further
acknowledge that the provisions of this Section 1.4 fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement as required by the 1933 Act and the Securities Exchange Act of 1934,
as amended (the “1934 Act”). The parties are advised that federal or state
public policy as interpreted by the courts in certain jurisdictions may be
contrary to certain of the provisions of this Section 1.4, and the parties
hereto hereby expressly waive and relinquish any right or ability to assert such
public policy as a defense to a claim under this Section 1.4 and further agree
not to attempt to assert any such defense.

For the purpose of this Section 1.4:

 

 

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(a)

the term "Registration Statement" shall include the Prospectus in the form first
filed with the SEC pursuant to Rule 424(b) of the 1933 Act or filed as part of
the Registration Statement at the time of effectiveness if no Rule 424(b) filing
is required, and any exhibit, supplement or amendment included in or relating to
the Registration Statement referred to in Section 1.1; and

 

(b)

the term "Untrue Statement" means any untrue statement or alleged untrue
statement, or any omission or alleged omission to state in the Registration
Statement, as amended or supplemented from time to time, a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.

1.5

Information Available

 

So long as the Registration Statement is effective covering the resale of
Shares, Warrant Shares and such registered portion of the Bonus Warrant Shares
owned by the Initial Investor, the Company will, at Initial Investor's written
request, furnish to the Initial Investor:

(a)

as soon as practicable after it is available, one copy of:

 

 

(i)

its Annual Report to Shareholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting principles
by a firm of certified public accountants registered with the Public Company
Accounting Oversight Board);

 

(ii)

its Annual Report on Form 10-KSB; and

 

 

(iii)

its Quarterly Reports on Form 10-QSB

 

(the foregoing, in each case, excluding exhibits);

(b)

any and all exhibits to the reports set forth in Section 1.5(a) as filed with
the SEC and all other information that is made available to shareholders; and

an adequate number of copies of the Prospectuses to supply to any other party
requiring such Prospectuses.

2.

Obligations

 

2.1

Obligations of the Initial Investors

In connection with the registration of the Shares, Warrant Shares and a portion
of the Bonus Warrant Shares, each Initial Investor shall have the following
obligations:

(a)

It shall be a condition precedent to the obligations of the Company to effect
the registration pursuant to this Agreement with respect to the Shares, Warrant
Shares and a portion of the Bonus Warrant Shares of a particular Initial
Investor that such Initial Investor shall furnish to the Company such
information regarding itself, the Shares, Warrant Shares and Bonus Warrant
Shares held by it and the intended method of disposition of the Shares, Warrant
Shares and Bonus Warrant Shares held by it as shall be reasonably required to
effect the registration of such Shares, Warrant Shares and Bonus Warrant Shares
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least five trading days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Initial Investor of the information the Company requires from each such
Initial Investor. 

(b)

Each Initial Investor, by such Initial Investor’s acceptance of the Shares,
Warrant Shares and Bonus Warrant Shares, agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement required to be filed hereunder, unless such
Initial Investor has notified the Company in writing of such Initial

 

D/WLM/695851.4

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Investor’s election to exclude all of such Initial Investor’s Shares, Warrant
Shares and Bonus Warrant Shares from such Registration Statement.

3.

Assignment Of Registration Rights

The rights of the Initial Investors hereunder, including the right to have the
Company register Shares, Warrant Shares and a portion of the Bonus Warrant
Shares pursuant to this Agreement, shall be automatically assignable by each
Initial Investor to any transferee or assignee of all or any portion of the
Warrants or the Shares and Warrant Shares if: (a) the Initial Investor agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company after such assignment, (b) the
Company is furnished with written notice of (i) the name and address of such
transferee or assignee, and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c) following such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (d) the transferee or assignee agrees in writing for the
benefit of the Company to be bound by all of the provisions contained herein,
and (e) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement. In addition, and
notwithstanding anything to the contrary contained in this Agreement or the
Securities Purchase Agreement, the Securities (as defined in the Securities
Purchase Agreement) may be pledged, and all rights of the Initial Investor under
this Agreement or any other agreement or document related to the transactions
contemplated hereby may be assigned, without further consent of the Company, to
a bona fide pledgee in connection with an Initial Investor’s margin or brokerage
account.

4.

Amendment Of Registration Rights

Provisions of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company, each of the Initial
Investors (to the extent such Initial Investor or its affiliates still owns
Warrants or Shares and Warrant Shares) and the Initial Investor(s) who hold a
majority in interest of the Shares and Warrant Shares or, in the case of a
waiver, with the written consent of the party charged with the enforcement of
any such provision; provided, however, that (a) no amendment hereto which
restricts the ability of an Initial Investor to elect not to participate in an
underwritten offering shall be effective against any Initial Investor which does
not consent in writing to such amendment; (b) no consideration shall be paid to
an Initial Investor by the Company in connection with an amendment hereto unless
each Initial Investor similarly affected by such amendment receives a pro rata
amount of consideration from the Company; and (c) unless an Initial Investor
otherwise agrees, each amendment hereto must similarly affect each Initial
Investor. Any amendment or waiver effected in accordance with this Section 11
shall be binding upon each Initial Investor and the Company.

5.

Miscellaneous

 

 

(a)

A person or entity is deemed to be a holder of Shares, Warrant Shares and Bonus
Warrant Shares whenever such person or entity owns of record such Shares,
Warrant Shares and Bonus Warrant Shares. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities with
respect to the same Shares, Warrant Shares and Bonus Warrant Shares, the Company
shall act upon the basis of instructions, notice or election received from the
registered owner of such Shares, Warrant Shares and Bonus Warrant Shares.

 

(b)

Any notices required or permitted to be given under the terms of this Agreement
shall be in writing and sent by certified or registered mail (return receipt
requested) or delivered personally, by nationally recognized overnight carrier
or by confirmed facsimile transmission, and shall be effective five days after
being placed in the mail, if mailed, or upon receipt or refusal of receipt, if
delivered personally or by nationally recognized overnight carrier or confirmed
facsimile transmission, in each case addressed to a party as provided herein.
The initial addresses for such communications shall be as follows, and each
party shall provide notice to the other parties of any change in such party’s
address:

 

 

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(i)

If to the Company:

Cheetah Oil and Gas Ltd.

#17 Victoria Road

Nanaimo, British Columbia

Canada

V9C 4N9

Telephone: 250-714-1191 ext. 223

Facsimile: 250-714-1186

Attention: Georgina Martin, Director

with a copy simultaneously transmitted by like means (which transmittal shall
not constitute notice hereunder) to:

Clark Wilson LLP

Barristers and Solicitors

800 – 885 West Georgia Street

Vancouver, British Columbia

Canada

V6C 3H1

 

Telephone: 604-687-5700

Facsimile: 604-687-6314

Attention: William Macdonald

 

(ii)

If to any Initial Investor, to such address as such Initial Investor shall have
provided in writing to the Company.

(c)

Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

(d)

This Agreement shall be governed by and construed in accordance with the laws of
the State of Nevada applicable to contracts made and to be performed in the
State of Nevada. The Company irrevocably consents to the jurisdiction of the
United States federal courts and the state courts located in the State of Nevada
in any suit or proceeding based on or arising under this Agreement and
irrevocably agrees that all claims in respect of such suit or proceeding may be
determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company, mailed by first class
mail shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding in such forum. Nothing herein shall
affect any Initial Investor’s right to serve process in any other manner
permitted by law. The Company agrees that a final non-appealable judgment in any
such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.

(e)

This Agreement and the Securities Purchase Agreement (including any schedules
and exhibits hereto and thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.

(f)

Subject to the requirements of Section 3 hereof, this Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties hereto.

(g)

The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.

(h)

This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once

 

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executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.

(i)

Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

(j)

Unless other expressly provided herein, all consents, approvals and other
determinations to be made by the Initial Investors pursuant to this Agreement
shall be made by the Initial Investors holding a majority in interest of the
Shares and Warrant Shares (determined as if all Preferred Stock then outstanding
had been converted into or exercised for Shares and Warrant Shares) held by all
Initial Investors.

(k)

Each party to this Agreement has participated in the negotiation and drafting of
this Agreement. As such, the language used herein shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any party to this Agreement.

                                 IN WITNESS WHEREOF, the undersigned Initial
Investor and the Company have caused this Agreement to be duly executed as of
the date first above written.

CHEETAH OIL AND GAS LTD.

 

By:

 

 

Name:

 

Title:

 

INITIAL INVESTOR:

 

 

 

(Print or Type Name of Purchaser)

By:

 

 

Name:

 

 

Title:

 

 

 

 

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