Exhibit 10.1

 
SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”) is dated as of April 3,
2007, among Petro Resources Corporation, a Delaware corporation (the “Company”),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively the “Purchasers”).
 
R E C I T A L S 
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”) and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.
 
A G R E E M E N T 
 
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 Purchaser agree
as follows:
 
ARTICLE I.
DEFINITIONS
 
1.1    Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
 
“Action” shall have the meaning ascribed to such term in Section 3.1(l).
 
“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. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.
 
“Business Day” means any day other than Saturday, Sunday and any day on which
banks are required or authorized by law to be closed in the State of Texas.
 
“Certificate of Designations” means a certificate of designations of the
Series A Preferred Stock, in the form of Exhibit A attached hereto.
 
“Closing” means the consummation of the purchase and sale of the Shares pursuant
to Section 2.1.
 
“Closing Date” shall have the meaning ascribed to such term in Section 2.2.
 
“Commission” means the Securities and Exchange Commission.
 

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“Common Stock” means the common stock of the Company, par value $0.01 per share,
and any other class of securities into which such securities may hereafter be
reclassified or changed into.
 
“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant, other instrument, or other subscription or purchase right with
respect to Common Stock, that is at any time convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
 
“Company Assets” means all assets and properties (including contract rights) of
every kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible and wherever situated), operated, owned, licensed
or leased by the Company or its Subsidiaries.
 
“Company Material Contracts” means all contracts, agreements and instruments
that (i) relate to any joint venture to which the Company or any Subsidiary
thereof is a party or by which any of their respective material assets are
bound, (ii) in any way restrict the ability of the Company or any Affiliate
thereof from transacting any line of business, soliciting any clients or
employees of any person or otherwise competing in any manner with any person,
(iii) are between the Company or any Subsidiary thereof and any Company
stockholder or Affiliate thereof, (iv) evidence indebtedness for borrowed money
of the Company or any Subsidiary thereof in excess of $100,000 individually or
$500,000 in the aggregate, (v) provide for annual payments of $500,000 in any
period of twelve (12) months or $1,000,000 for the life of the contract,
agreement or instrument, or (vi) any other contract, agreement or instrument
that is material to the business, financial condition or operating of the
Company and its Subsidiaries, taken as a whole.
 
“Disclosure Schedules” means the Disclosure Schedules of the Company delivered
by the Company to the Purchasers contemporaneously with the execution of this
Agreement.
 
“Effective Date” means the date that the initial Registration Statement filed by
the Company pursuant to the Registration Rights Agreement is first declared
effective by the Commission.
 
“Environmental Laws” shall have the meaning ascribed to such term in
Section 3.1(n).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
 
“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(r).
 
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“Insurance Policies” shall have the meaning ascribed to such term in
Section 3.1(s).
 
“Laws” shall have the meaning ascribed to such term in Section 3.1(n).
 
“Liens” means a lien, mortgage, deed of trust, charge, pledge, hypothecation,
security interest, claim, option, lease, encumbrance, right of first refusal,
preemptive right or other restriction.
 
“Material Adverse Effect” shall have the meaning ascribed to such term in
Section 3.1(b).
 
“Material Permits” shall have the meaning ascribed to such term in
Section 3.1(p).
 
“Option” shall have the meaning ascribed to such term in Section 3.1(i).
 
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture or other non-corporate business
enterprise, limited liability company, joint stock company, trust, organization,
business, labor union or government (or an agency or subdivision thereof) or
other entity of any kind.
 
“Proceeding” means an action, claim, suit, arbitration, alternate dispute
resolution mechanism, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
 
“Registration Rights Agreement” means the Registration Rights Agreement, dated
the date hereof, among the Company and the Purchasers, in the form of
Exhibit “B” attached hereto.
 
“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale by the
Purchasers of the Underlying Shares.
 
“Remaining Warrants” means common stock purchase warrants purchased by the
Purchasers from the Company that will not be delivered by the Purchasers for
cancellation in accordance with Section 2.1.
 
“Required Approvals” shall have the meaning ascribed to such term in
Section 3.1(e).
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
 
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“Securities” means the Shares and Underlying Shares.
 
“Series A Preferred Stock” means the Series A Convertible Preferred
Stock, $0.01 par value, of the Company, having the rights,
preferences, privileges and restrictions set forth in the Certificate of
Designations.”
 
“Shares” means the 2,240,467 shares of Series A Preferred Stock issued or
issuable in the aggregate to the Purchasers pursuant to this Agreement.
 
“Short Sales” shall include all “short sales” as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common Stock). 
 
“Subscription Amount” means, as to each Purchaser, the sum of the Cash
Consideration, Consideration Shares and Warrants to be delivered by such
Purchaser in consideration of the Shares to be purchased hereunder by such
Purchaser as specified on Schedule A hereto opposite the name of such Purchaser
thereon, in United States Dollars and in immediately available funds.
 
“Subsidiary” means any subsidiary of the Company as set forth on
Schedule 3.1(a).
 
“Trading Market” means the American Stock Exchange or any other market or
exchange in the United States on which the Common Stock is listed or quoted for
trading on the date in question.
 
“Transaction Documents” means this Agreement, the Certificate of Designations
and the Registration Rights Agreement executed in connection with the
transactions contemplated hereunder.
 
“Underlying Shares” means the shares of Common Stock issuable upon conversion of
the Shares and the Remaining Warrants.
 
“Warrants” collectively mean 160,000 common stock purchase warrants purchased by
the Purchasers from the Company in February 2006, each warrant entitling its
holder to purchase one share of Common Stock at an exercise price of $3.00,
expiring in 2009.
 
1.2    Other Definitional Provisions. 
 
(a)    As used herein and in the other Transaction Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
unless the context requires otherwise, (i) the words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without limitation”,
(ii) the word “incur” shall be construed to mean incur, create, issue, assume,
become liable in respect of or suffer to exist (and the words “incurred” and
“incurrence” shall have correlative meanings), (iii) the words “asset” and
“property” shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, revenues, accounts, leasehold interests and contract rights, (iv)
any definition of or reference to any agreement, instrument or other document
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
applicable restrictions hereunder), (v) any reference herein to any Person shall
be construed to include such Person’s successors and assigns (subject to any
restrictions on assignments and transfers set forth herein), and (vi) any
reference to any law shall include all statutory and regulatory provisions
consolidating, amending, replacing or interpreting such law and any reference to
any law or regulation shall refer to such law or regulation as amended, modified
or supplemented from time to time.
 
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(b)    The words “hereof”, “herein” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
 
(c)    The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.
 
ARTICLE II.
PURCHASE AND SALE
 
2.1    Purchase and Sale. Upon the terms and subject to the conditions set forth
herein, the Company agrees to sell, and each Purchaser agrees to purchase,
severally and not jointly, the number of Shares set forth on Schedule A hereto
opposite the name of each such Purchaser, (which in the aggregate shall equal
2,240,467 Shares), for the Subscription Amount set forth thereon opposite the
name of each such Purchaser. On the Closing Date, the Company shall deliver to
each Purchaser its respective Shares to be issued at the Closing, and each
Purchaser shall deliver to the Company its portion of the following aggregate
consideration as specified on Schedule A:
 
(i)    $2,000,000 of immediately available funds via wire transfer (“Cash
Consideration”);
 
(ii)   1,573,800 shares (“Consideration Shares”) of Common Stock presently held
by the Purchasers and which shall be cancelled and returned to the treasury of
the Company; and
 
(iii)   160,000 Warrants presently held by the Purchasers and which shall be
cancelled by the Company.
 
The parties acknowledge and agree that the purchase price per Share shall be
$3.00, and for purposes of this Agreement each Consideration Share has been
valued by the parties at $3.00 per Consideration Share.
 
2.2    Closing. The Closing shall occur at the offices of Greenberg Traurig,
LLP, 650 Town Center Drive, Suite 1700, Costa Mesa, California 92626, or such
other location as the parties shall mutually agree, on the date hereof, after
all conditions set forth in Sections 2.3 and 2.4 are satisfied or waived (the
“Closing Date”) or such other date and at such other time as the Company and the
Purchasers may mutually agree.
 
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2.3    Deliveries.
 
(a)    On or prior to the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser the following:
 
(i)    this Agreement duly executed by the Company;
 
(ii)    the Registration Rights Agreement duly executed by the Company;
 
(iii)   one or more stock certificates evidencing the number of Shares to be
issued to each Purchaser as specified on Schedule A, registered in the name of
such Purchaser;
 
(iv)   evidence that the Certificate of Designations has been filed and has
become effective on or prior to the Closing Date with the Secretary of State of
Delaware;
 
(v)    the certificate described in Section 2.4(b)(iii); and
 
(vi)   certificates of good standing for the Company and its Subsidiaries issued
as of a recent date by the Secretary of State of the State of Delaware, and a
certificate dated as of the Closing Date executed by an officer of the Company
certifying (A) that the attached resolutions of the board of directors of the
Company approving the Transaction Documents and the transactions contemplated
thereby are true, complete and correct and remain unamended and in full force
and effect, (B) that the Company shall have reserved out of its authorized and
unissued Common Stock, solely for the purpose of effecting the conversion of the
Shares and the exercise of the Remaining Warrants, at least 2,500,000 shares of
Common Stock, and (C) as to the incumbency and specimen signature of each
officer of the Company executing each Transaction Document and any other
document delivered in connection herewith.
 
(b)    On or prior to the Closing Date, each Purchaser shall deliver or cause to
be delivered to the Company the following:
 
(i)    this Agreement duly executed by such Purchaser;
 
(ii)   such Purchaser’s portion of the Cash Consideration by wire transfer to
one or more accounts as specified by the Company to the Purchasers at least two
(2) Business Days prior to the Closing;
 
(iii)   original certificates representing the Purchaser’s share of the
Consideration Shares, along with stock powers and Medallion guarantees
effectively transferring the Consideration Shares to the Company for
cancellation in form satisfactory to the Company; 
 
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(iv)   original certificates representing the Purchaser’s share of the Warrants,
along with an assignment effectively transferring the Warrants to the Company
for cancellation in form satisfactory to the Company; and
 
(v)    the Registration Rights Agreement duly executed by such Purchaser.
 
2.4    Closing Conditions. 
 
(a)    The obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being met:
 
(i)    the representations and warranties of each of the Purchasers contained in
Section 3.2 of this Agreement shall be true and correct in all material respects
(except for such representations and warranties which are qualified by their
terms by a reference to materiality, which representations and warranties as so
qualified shall be true and correct in all respects) at and as of the Closing
Date with the same force and effect as if made as of the Closing Date, except to
the extent such representations and warranties are made as of another date, in
which case such representations and warranties shall be true and correct in all
material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true and correct in all respects) as of
such other date;
 
(ii)    all obligations, covenants and agreements of the Purchasers required to
be performed at or prior to the Closing Date shall have been performed;
 
(iii)   the delivery by each Purchaser of a certificate dated as of the Closing
Date executed by an officer of each Purchaser certifying that the conditions set
forth in Sections 2.4(a)(i) and 2.4(a)(ii) have been satisfied; and
 
(iv)   the delivery by the Purchasers of the items set forth in Section 2.3(b)
of this Agreement.
 
(b)    The respective obligations of the Purchasers hereunder in connection with
the Closing are subject to the following conditions being met:
 
(i)    the representations and warranties of the Company contained in
Section 3.1 of this Agreement shall be true and correct in all material respects
(except for such representations and warranties which are qualified by their
terms by a reference to materiality or Material Adverse Effect, which
representations and warranties as so qualified shall be true and correct in all
respects) at and as of the Closing Date with the same force and effect as if
made as of the Closing Date, except to the extent such representations and
warranties are made as of another date, in which case such representations and
warranties shall be true and correct in all material respects (except for such
representations and warranties which are qualified by their terms by a reference
to materiality or Material Adverse Effect, which representations and warranties
as so qualified shall be true and correct in all respects) as of such other
date;
 
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(ii)   all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;
 
(iii)   the delivery by the Company of a certificate dated as of the Closing
Date executed by an officer of the Company certifying that the conditions set
forth in Sections 2.4(b)(i) and 2.4(b)(ii) have been satisfied; and
 
(iv)   the delivery by the Company of the items set forth in Section 2.3(a) of
this Agreement.
 
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
3.1    Representations and Warranties of the Company. Contemporaneously with the
execution and delivery of this Agreement by the Company, the Company is
delivering to the Purchasers the Disclosure Schedules with numbered sections
corresponding to the relevant sections in this Article III. Except as set forth
in the corresponding section of the Disclosure Schedules, the Company represents
and warrants to the Purchasers as follows:
 
(a)    Subsidiaries. All of the direct and indirect subsidiaries of the Company
are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all
of the capital stock or other equity interests of each Subsidiary free and clear
of any Liens, and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase securities. The
Company does not own any capital stock, membership interests or other ownership
or equity interests, whether direct or indirect, in any Person that is not a
Subsidiary of the Company.
 
(b)    Organization and Qualification. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation or default of
any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, has not had and could not reasonably be expected
to result in (i) a material adverse effect on the assets, business, properties,
prospects, results of operation or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole, or (ii) a material impairment or
delay of the Company’s ability to perform its obligations under any Transaction
Document (either of (i) or (ii), a “Material Adverse Effect”) and no Proceeding
has been instituted in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or qualification.
 
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(c)    Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out and perform its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company, the performance by the Company of its obligations
thereunder, and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the Company and
no further action is required by the Company, its board of directors or its
stockholders in connection therewith other than in connection with the Required
Approvals. Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the terms
hereof and thereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.
 
(d)    No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the performance by the Company of its obligations
thereunder (including the issuance and sale of the Shares) and the consummation
by the Company of the other transactions contemplated thereby do not and will
not (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected.
 
(e)    Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required pursuant to Section 4.4 of this Agreement, (ii) the filing
with the Commission of the Registration Statement, (iii) application(s) to each
applicable Trading Market for the listing of the Underlying Shares for trading
thereon in the time and manner required thereby, and (iv) the filing of Form D
with the Commission and such filings as are required to be made under applicable
state securities laws (collectively, the “Required Approvals”).
 
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(f)    Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens (other than Liens imposed by any Purchaser) other than restrictions on
transfer provided for in the Transaction Documents. The Company has reserved
from its duly authorized capital stock the Securities issuable pursuant to this
Agreement.
 
(g)    Capitalization. As of the Closing, the capitalization of the Company is
as set forth on Schedule 3.1(g). No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents. Except for the
Shares or as set forth on Schedule 3.1(g), there are no outstanding options,
warrants, stock appreciation rights, phantom stock, other rights with equity
features, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common Stock
Equivalents. The issuance and sale of the Shares will not obligate the Company
to issue shares of Common Stock or other securities to any Person (other than
the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under any
of such securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Shares. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.
 
(h)    SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the period commencing July 26, 2006 through
the date hereof (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC Reports”) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, except as set
forth on Schedule 3.1(h), the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, as applicable, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material
 
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fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. There are no outstanding or unresolved comments in comment letters
received from the SEC staff with respect to the SEC Reports. Except as set forth
on Schedule 3.1(h), the financial statements of the Company included or
incorporated by reference in the SEC Reports complied in all material respects
with applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Except as
set forth on Schedule 3.1(h), such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and their consolidated results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
 
(i)    Option. Except as set forth on Schedule 3.1(o), each stock option granted
by the Company or any of its Subsidiaries (an “Option”) to any Person (i) has
been granted in accordance with the applicable terms and conditions of the plan
or arrangement pursuant to which it was granted and (ii) was granted at an
exercise price equal to or greater than the last sale price of a share as of the
date of grant. The date of grant of each Option reflected on the books and
records of the Company and used in determining the accounting charge, if any, in
respect of such Option is the actual date on which such Option was granted.
There is no internal or external investigation ongoing or completed, the subject
of which was wholly or partially the determination of the proper grant date of
Options. For purposes of this Section 3.1(i), the term “Option” includes each
stock option which would be an Option but for the fact that it was exercised
prior to the date of this Agreement.
 
(j)    Company Material Contracts. Each Company Material Contract is in full
force and effect, is the valid and binding obligation of the parties thereto and
is enforceable in accordance with its terms. Neither the Company nor any of its
Subsidiaries nor, to the Company’s knowledge, any other party to any Company
Material Contract is in material breach of or in material default under any
Company Material Contract, and, to the Company’s knowledge, no event has
occurred or is continuing that with notice or lapse of time or both would
constitute such a breach or default, nor has such party given notice of any
action to terminate, cancel, rescind or procure a judicial reformation thereof. 
 
(k)    Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in a subsequent SEC Report, (i) there
has been no event, occurrence or development that, individually or in the
aggregate, has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice, (iii) none of the
Company and any Company Subsidiaries maintain any “off-balance sheet
arrangement” within the meaning of Item 303 of Regulation S-K of the Securities
and Exchange Commission, (iv) the Company has not altered its accounting
 
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methods, principles or practices, (v) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock, (vi) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock option
plans, and (vii) the Company has not suffered any material damage, destruction
or loss of or to any of its property or assets. The Company does not have
pending before the Commission any request for confidential treatment of
information.
 
(l)    Litigation. There is no Proceeding against or affecting the Company, any
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which
materially adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Shares. There is no
Action that has not been disclosed in the SEC Reports. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
 
(m)   Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company
which could reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a member of a union that
relates to such employee’s relationship with the Company, and neither the
Company or any of its Subsidiaries is or has been a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. No executive officer, to the
knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters. The
Company and its Subsidiaries are in compliance with all U.S. federal, state,
local and foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except where
the failure to be in compliance has not had and could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
 
(n)    Compliance. Neither the Company nor any Subsidiary (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any local, foreign, state or federal statute, rule or regulation of
any governmental authority (“Laws”), including all Laws applicable to its
business and all such Laws that relate to pollution or protection of the
environment or worker health and safety (“Environmental Laws”).
 
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(o)    Environmental Laws. To the knowledge of the Company, the oil and gas
operations in which the Company or any of the Subsidiaries holds an ownership
interest (i) are in compliance in all material respects with applicable
Environmental Laws, (ii) are not subject to any material liabilities arising
pursuant to Environmental Laws, and (iii) are not subject to any material
Actions arising pursuant to Environmental Laws.
 
(p)    Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits has not had and could not reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect
(“Material Permits”), and neither the Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
Material Permit. All Material Permits are valid and in full force and effect,
and the Company or the respective Subsidiary of the Company that is a party
thereto is in compliance with each such Material Permit.
 
(q)    Assets.
 
(i)  Title to Assets. The Company and/or the Subsidiaries have good and
marketable title in fee simple to all parcels of real property and facilities
owned by the Company and/or the Subsidiaries, or good and valid leasehold title
to all parcels of real property and facilities leased by the Company and/or the
Subsidiaries, and good and marketable title in all personal property owned by
them that is material to the business of the Company and/or the Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and/or the
Subsidiaries, and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Each of the
real property leases (including all modifications, amendments and supplements)
that pertain to parcels of real property or facilities leased by the Company
and/or the Subsidiaries is in full force and effect, is the valid and binding
obligation of the parties thereto and is enforceable in accordance with its
terms. Neither the Company nor any of the Subsidiaries have any knowledge that
there is any condemnation, eminent domain or similar proceeding pending or
threatened with respect to any of the real property.
 
(ii)   Sufficiency of Assets. As of the Closing Date, the Company Assets
constitute all the properties, assets and rights as are necessary and sufficient
for the operation of the business of the Company and its Subsidiaries as it is
conducted as of the Closing Date. 
 
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(r)    Patents and Trademarks.
 
(i)    The Company and the Subsidiaries own all right, title and interest in, or
have a valid right to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets, inventions,
copyrights, licenses, domain names, software and other intellectual property
rights and similar rights necessary or material for use in connection with their
respective businesses as presently conducted and currently contemplated to be
conducted (collectively, the “Intellectual Property Rights”), free and clear of
all Liens. Schedule 3.1(r) sets forth a complete and accurate list of all such
Intellectual Property Rights that have been registered, have issued or are
subject to pending applications, in any jurisdiction throughout the world.
 
(ii)   Schedule 3.1(r) sets forth a complete and accurate list of all
intellectual property licenses under which the Company or any of its
Subsidiaries is a licensor, licensee, distributor or reseller, excluding
licenses granted to the Company or its Subsidiaries for mass-marketed software.
The Company and its Subsidiaries have substantially performed all of their
respective obligations under such intellectual property licenses.
 
(iii)   The conduct of the Company and its Subsidiaries as currently conducted
and as conducted in the past has not and does not infringe, misappropriate or
violate any intellectual property rights of any Person and there are no claims
pending or, to the Company’s knowledge, threatened against the Company or its
Subsidiaries claiming that the conduct of the Company or its Subsidiaries
infringes or may infringe the intellectual property rights of any third party.
To the knowledge of the Company, all Intellectual Property Rights are valid and
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.
 
(iv)    The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their Intellectual
Property Rights. Each present or past employee, officer, consultant or any other
Person who developed any part of any of the Intellectual Property Rights owned
by the Company or its Subsidiaries has executed a valid and enforceable
agreement with the Company or its Subsidiaries obligating the employee or
contractor to keep any Company or Subsidiary confidential information
confidential both during and after the term of employment or contract and
conveying any and all right, title and interest in and to all intellectual
property developed by such Person in connection with such Person’s employment or
contract to the Company or its Subsidiaries.
 
(s)    Insurance. Each of the Company and its Subsidiaries maintains insurance
policies (the “Insurance Policies”) with insurance carriers believed by the
Company to be reputable against all risks of a character and in such amounts, in
all material respects, as are usually insured against by similarly situated
companies in the same or similar businesses. Each material Insurance Policy is
in full force and effect and is valid, outstanding and enforceable, and all
premiums due thereon have been paid in full. None of the Company or any of its
Subsidiaries is in default with respect to any material provision of any such
Insurance Policy, and there has not been any cancellation, non-renewal or
termination, or threatened cancellation, non-renewal or termination of insurance
coverage under any Insurance Policy. As of the date hereof, the Company has
sufficient access to replacement insurance coverage such that, in the event of
the cancellation or non-renewal of any given Insurance Policy, the Company would
reasonably be expected to be able to maintain insurance coverage on terms and in
amounts comparable in all material respects to its current insurance coverage
under the Insurance Policies in effect as of the date hereof. As of the date
hereof, neither the Company nor any of its Subsidiaries has suffered any loss
that is not covered by any given Insurance Policy.
 
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(t)    Transactions With Affiliates and Employees. Except as set forth in the
SEC Reports, 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 any Subsidiary (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, in each case in excess of $60,000 other than (i) for payment of salary
or consulting fees for services rendered, entered into on an arm’s length basis,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii) for
other employee benefits, including stock option agreements under any stock
option plan of the Company.
 
(u)    Internal Controls and Procedures. The Company and its Subsidiaries have
established and maintain disclosure controls and procedures and internal control
over financial reporting (as such terms are defined in paragraphs (e) and (f),
respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15
under the Exchange Act. The Company’s and its Subsidiaries’ disclosure controls
and procedures are reasonably designed to ensure that all material information
required to be disclosed by the Company and its Subsidiaries in the SEC Reports
are recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC, and that all such material
information is accumulated and communicated to the management of the Company and
its Subsidiaries as appropriate to allow timely decisions regarding required
disclosure and to make the certifications required pursuant to Sections 302 and
906 of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations
promulgated thereunder. The Company and its applicable Subsidiaries have
disclosed, based on their most recent evaluations, to the Company’s and such
Subsidiaries’ outside auditors and the audit committee of the board of directors
of the Company and such Subsidiaries (A) all significant deficiencies and
material weaknesses in the design or operation of internal controls over
financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are
reasonably likely to adversely affect in any material respect the Company’s and
such Subsidiaries’ ability to record, process, summarize and report financial
data and (B) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company’s or such
Subsidiaries’ internal controls over financial reporting.
 
(v)    Certain Fees. No brokerage or finder’s fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents. The Purchasers shall
have no obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by the
Transaction Documents as a result of any action taken by the Company or its
Affiliates.
 
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(w)    Private Placement. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Shares by the
Company to the Purchasers as contemplated hereby. The issuance, sale and
conversion of the Shares hereunder does not contravene the rules and regulations
of the Trading Market.
 
(x)    Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Shares, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
 
(y)    Registration Rights. Other than each of the Purchasers, no Person has any
right to cause the Company to effect the registration under the Securities Act
of any securities of the Company, except as set forth on Schedule 3.1(y). No
impediment or condition exists to the Company's obligations to register the
Underlying Shares as contemplated by the Registration Rights Agreement.
 
(z)    Listing and Maintenance Requirements. The Company’s Common Stock is
registered pursuant to Section 12(b) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. The Company has not, in the 12
months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
 
(aa)   No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Shares to be integrated with prior offerings by the Company for
purposes of the Securities Act or any applicable shareholder approval provisions
of any Trading Market on which any of the securities of the Company are listed
or designated. 
 
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(bb)    Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary. There are
no tax returns of the Company or its Subsidiaries that are currently being
audited by state, local or federal taxing authorities or agencies (and with
respect to which the Company or its Subsidiaries has received notice), where the
findings of such audit could reasonably be expected to have a Material Adverse
Effect.
 
(cc)    ERISA. Each employee benefit plan, within the meaning of Section 3(3) of
ERISA, that is maintained, administered or contributed to by the Company or any
of its Subsidiaries, that together with the Company would be deemed an ERISA
Affiliate, for employees or former employees of the Company and its ERISA
Affiliates has been maintained in compliance in all material respects with its
terms and the requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code; no prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of the
Code, for which the Company or any of its ERISA Affiliates would have any
material liability has occurred with respect to any such plan excluding
transactions effected pursuant to a statutory or administrative exemption; for
each such plan that is subject to the funding rules of Section 412 of the Code
or Section 302 of ERISA, no "accumulated funding deficiency" as defined in
Section 412 of the Code has been incurred, whether or not waived, and the fair
market value of the assets of each such plan (excluding for these purposes
accrued but unpaid contributions) exceeds the present value of all benefits
accrued under such plan determined using reasonable actuarial assumptions; no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company or any of its ERISA
Affiliates would have any material liability; and neither the Company nor any of
its ERISA Affiliates has incurred or reasonably expects to incur any material
liability under Title IV of ERISA with respect to termination of, or withdrawal
from, any "pension plan".
 
(dd)    No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Shares by any form of
general solicitation or general advertising. The Company has offered the Shares
for sale only to the Purchasers and certain other “accredited investors” within
the meaning of Rule 501 under the Securities Act.
 
(ee)    Williston Basin Acquisition. The Company has entered into a definitive
agreement with an unaffiliated party relating to the acquisition of an interest
in 15 oil fields located in the Williston Basin in North Dakota, and the
transactions contemplated thereby have been consummated. Such agreement is in
full force and effect, is the valid and binding obligation of the parties
thereto and is enforceable in accordance with its terms. Neither the Company nor
any of its Subsidiaries nor, to the Company’s knowledge, any other party to the
agreement is in material breach of or in material default thereunder and, to the
Company’s knowledge, no event has occurred or is continuing that with notice or
lapse of time or both would constitute such a breach or default, nor has such
party given notice of any action to terminate, cancel, rescind or procure a
judicial reformation thereof, nor has any claim for indemnification arisen
thereunder.
 
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3.2    Representations and Warranties of the Purchasers. Each Purchaser hereby,
for itself and for no other Purchaser, represents and warrants as of the Closing
Date to the Company as follows:
 
(a)    Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution, delivery and performance by such Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
 
(b)    Valid Transfer. The Purchaser is the sole and complete owner of the
Consideration Shares and Warrants being transferred by such Purchaser to the
Company hereunder, when paid for by the Company pursuant to this Agreement, the
Purchaser shall transfer complete right, title and ownership to the
Consideration Shares and Warrants being transferred by Purchaser to the Company
hereunder free and clear of any encumbrances or restrictions except as provide
for under U.S. federal securities laws.
 
(c)    Own Account. Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
(this representation and warranty not limiting such Purchaser’s right to sell
the Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws) in violation of the
Securities Act or any applicable state securities law. Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business.
 
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(d)    Purchaser Status. At the time such Purchaser was offered the Shares, it
was, and at the date hereof it is, an “accredited investor” as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act.
 
(e)    Experience of Such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Shares, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Shares and, at the present time, is able to afford
a complete loss of such investment.
 
(f)    General Solicitation. Such Purchaser is not purchasing the Shares as a
result of any advertisement, article, notice or other communication regarding
the Shares published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement.
 
(g)    Short Sales and Confidentiality Prior To The Date Hereof. Other than the
transaction contemplated hereunder, such Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Purchaser, engaged in any transaction, including Short
Sales, in the securities of the Company since January 1, 2007 (the “Discussion
Date”) to the date hereof. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser's assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Shares covered by this Agreement.
 
(h)    Access to Information. Such Purchaser acknowledges that it has received
and had the opportunity to review copies of the SEC Reports. Such Purchaser
further acknowledges that it or its representatives have been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Shares and the merits and risks of investing in the
Shares; (ii) access to information about the Company and the Company's financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment in the Shares; provided,
however, that nothing in this Section 3.2(h) shall limit the representations and
warranties of the Company in Section 3.1 or the rights of any Indemnified Party
pursuant to Article V.
 
(i)    Restrictions on Shares. Without limiting the Company’s obligations
pursuant to the Registration Rights Agreement, such Purchaser understands that
the Securities have not been registered under the Securities Act and may not be
offered, resold, pledged or otherwise transferred except (a) pursuant to an
exemption from registration under the Securities Act or pursuant to an effective
registration statement in compliance with Section 5 under the Securities Act, or
(b) in accordance with all applicable securities laws of the states of the
United States and other jurisdictions.
 
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ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
 
4.1    Transfer Restrictions.
 
(a)    The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Shares under the Securities Act.
 
(b)    The Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following form:
 
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE “RESTRICTED SECURITIES”
AS THAT TERM IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT. SUCH SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
THEREUNDER, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE REASONABLE
SATISFACTION OF COUNSEL TO THE ISSUER.
 
4.2    Furnishing of Information. As long as any Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Shares under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, to the extent required from time to time to
enable such Person to sell such Securities without registration under the
Securities Act within the requirements of the exemption provided by Rule 144.
 
4.3    Integration. The Company shall not sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Shares in a manner that would require the registration under the
Securities Act of the sale of the Shares to the Purchasers or that would be
integrated with the offer or sale of the Shares for purposes of the rules and
regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
 
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4.4    Securities Laws Disclosure; Publicity. The Company shall, within one
Business Day of the Closing Date, issue a press release disclosing the material
terms of the transactions contemplated hereby, and the Company shall file a
Current Report on Form 8-K which shall attach the Transaction Documents thereto
by 8:30 am on the second Business Day following the Closing Date. The contents
of the press release and Form 8-K shall be acceptable to the Purchasers in their
reasonable discretion. No Purchaser shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company; provided, however, that such consent shall not be required for any
disclosure by any Purchaser of this Agreement and the other Transaction
Documents in a confidential offering memorandum related to such Purchaser and
its affiliated funds and accounts. The Company shall not publicly disclose the
name of any Purchaser, or include the name of any Purchaser in any filing with
the Commission or any regulatory agency or Trading Market, without the prior
written consent of such Purchaser, except (i) as required by federal securities
law in connection with (A) any registration statement contemplated by the
Registration Rights Agreement and (B) the filing of final Transaction Documents
(including signature pages thereto) with the Commission and (ii) to the extent
such disclosure is required by law or Trading Market regulations, in which case
the Company shall provide the Purchasers with prior notice of such disclosure
permitted under this subclause (ii).
 
4.5    Form D and Blue Sky. The Company agrees to file a Form D with respect to
the Shares as required under Regulation D and to provide a copy thereof to each
Purchaser promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the Shares for sale
to the Purchasers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States, and shall
provide evidence of any such action so taken to the Purchasers on or prior to
the Closing Date. The Company shall make all filings and reports relating to the
offer and sale of the Shares required under applicable securities or “Blue Sky”
laws of the states of the United States following the Closing Date.
 
4.6    Reservation of Shares. The Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, the number
of shares of Common Stock needed to provide for the issuance of the shares of
Common Stock upon (i) conversion of all outstanding Shares (without regard to
any limitations on conversions), and (ii) exercise of all outstanding Remaining
Warrants (without regard to any limitations on exercises).
 
4.7    Listing of Common Stock. The Company hereby agrees to use best efforts to
maintain the listing of the Common Stock on a Trading Market, and as soon as
reasonably practicable following the Closing to list all of the Underlying
Shares on such Trading Market. The Company further agrees that, if the Company
applies to have the Common Stock traded on any other Trading Market, it will
include in such application all of the Underlying Shares, and will take such
other action as is necessary to cause all of the Underlying Shares to be listed
on such other Trading Market as promptly as possible. The Company will take all
action reasonably necessary to continue the listing and trading of its Common
Stock on a Trading Market and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Trading
Market.
 
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4.8    Short Sales and Confidentiality After The Date Hereof. Each Purchaser,
severally and not jointly with the other Purchasers, covenants that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding with it
will engage in any transactions, including any Short Sales, in the securities of
the Company during the period commencing as of the date hereof and ending 48
hours after the time that the transactions contemplated by this Agreement are
consummated. Each Purchaser, severally and not jointly with the other
Purchasers, covenants that until 48 hours after the time that the transactions
contemplated by this Agreement are consummated, such Purchaser will maintain the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that the covering of
short sales of shares of the Common Stock “against the box” made prior to the
Effective Date of the Registration Statement with the Shares is a violation of
Section 5 of the Securities Act, as set forth in Item 65, Section A, of the
Manual of Publicly Available Telephone Interpretations, dated July 1997,
compiled by the Office of Chief Counsel, Division of Corporation Finance.
 
ARTICLE V.
INDEMNIFICATION
 
5.1    Indemnification by the Company. In addition to all other sums due
hereunder or provided for in this Agreement and each other Transaction Document,
the Company agrees to indemnify and hold harmless the Purchasers, their
respective Affiliates and their respective officers, directors, agents,
employees and partners (each, an “Indemnified Party”) to the fullest extent
permitted by law from and against any and all losses, claims, damages,
out-of-pocket expenses (including reasonable fees, disbursements and other
charges of counsel), damages or other Liabilities (“Losses”) resulting from (i)
any breach of any representation or warranty, covenant or agreement of the
Company or any of its Subsidiaries made to the Purchasers in any of the
Transaction Documents or any other certificates or documents delivered by the
Company to the Purchasers pursuant to the Transaction Documents at the Closing,
or (ii) any legal, administrative or other actions (including actions brought by
any equity holders of the Company or derivative actions brought by any Person
claiming through the Company or in the Company’s name), proceedings or
investigations (whether formal or informal), or written threats thereof, based
upon, relating to or arising out of this Agreement or any other Transaction
Document, the transactions contemplated thereby, or any Indemnified Party’s role
herein or therein; provided, however, that the Company shall not be liable for
any Losses subject to clause (ii) that arise from the material breach of a
Transaction Document, intentional malfeasance by a Purchaser or an Indemnified
Party. In addition, the Company shall not be liable under this Section 5.1 for
any amount paid in settlement of claims without the Company’s consent. If and to
the extent that any indemnification under this Section 5.1 is unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of such indemnified Liability which shall be permissible under
applicable laws. In connection with the obligation of the Company to indemnify
for out-of-pocket expenses as set forth above, the Company agrees to reimburse
each Indemnified Party for all such out-of-pocket expenses (including reasonable
fees, disbursements and other charges of counsel) as they are incurred by such
Indemnified Party.
 
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5.2    Notification. Each Indemnified Party under this Article V will, promptly
after the receipt of notice of the commencement of any action or other
proceeding against such Indemnified Party in respect of which indemnity may be
sought from the Company under this Article V, notify the Company in writing of
the commencement thereof. The omission of any Indemnified Party to so notify the
Company of any such action shall not relieve the Company from any Liability
which it may have to such Indemnified Party other than pursuant to this
Article V or, unless, and only to the extent that, such omission is materially
prejudicial to the Company. In case any such action or other proceeding shall be
brought against any Indemnified Party and it shall notify the Company of the
commencement thereof, the Company shall be entitled to participate therein and,
to the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnified Party; provided, however, that any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any action or
proceeding in which both the Company and an Indemnified Party is, or is
reasonably likely to become, a party, such Indemnified Party shall have the
right to employ separate counsel at the Company’s expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel to
such Indemnified Party, any conflict or potential conflict exists between the
Company and such Indemnified Party that would make such separate representation
advisable; provided, however, that in no event shall the Company be required to
pay fees and expenses under this Article V for more than one firm of attorneys
in any jurisdiction in any one legal action or group of related legal actions.
The Company shall not, without the prior written consent of the Indemnified
Party, consent to the entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all Liability in respect
to such claim or litigation or which requires action other than the payment of
money by the Company. The rights accorded to indemnified parties hereunder shall
be in addition to any rights that any Indemnified Party may have at common law,
by separate agreement or otherwise.
 
ARTICLE VI.
MISCELLANEOUS
 
6.1    Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement, except that the Purchasers shall
reimburse the Company for one-half of the Company’s legal fees incurred in
connection with the transactions contemplated by this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the delivery of any Shares to the Purchasers.
 
6.2    Entire Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
 
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6.3    Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 3:30 p.m. (Houston
time) on a Business Day, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Business Day or later than 3:30 p.m. (Houston time) on any Business
Day, (c) the 2nd Business Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
 
6.4    Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchasers holding not less than 51% of the Shares then
outstanding or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought. No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.
 
6.5    Headings. The headings herein are for convenience only, do not constitute
a part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
 
6.6    Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. Neither
the Company nor any Purchasers may assign this Agreement or any rights or
obligations hereunder without the prior written consent of each the other party
(other than by merger); provided, however, that each Purchaser may assign all of
its rights or obligations hereunder without the consent of the Company, to an
Affiliate of such Purchaser or in connection with such Purchaser’s private sale
or transfer of 50% or more of the Shares to a third party (or to one or more
third parties that are Affiliates).
 
6.7    No Third-Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective successors and permitted assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.
 
6.8    Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
Delaware, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in
Delaware State. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
 
6.9    Survival. The provisions of Article III and Article V of this Agreement
shall survive the Closing and the delivery of the Shares.
 
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6.10   Further Assurances. Each of the parties shall execute, acknowledge and
deliver any further documents, assurances or other matters, and will take any
other action consistent with the terms of this Agreement that may reasonably be
requested by the other party and as are necessary or desirable to carry out the
purpose of this Agreement.
 
6.11    Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.
 
6.12    Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
 
6.13    Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Purchaser exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights.
 
6.14    Replacement of Shares. If any certificate or instrument evidencing any
Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause
to be issued in exchange and substitution for and upon cancellation thereof (in
the case of mutilation), or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Shares.
 
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6.15    Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
 
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 

PETRO RESOURCES CORPORATION
 
Address for Notice:
By:       /s/ Wayne P.
Hall                                                                             
Wayne P. Hall,
Chief Executive Officer
5100 Westheimer, Suite 200
Houston, TX 77056
Fax: (713) 968-9283

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
 
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SCHEDULE A
 

 

   
Purchaser’s Portion of Aggregate Consideration
 
Name & Address of Purchaser
 
Shares Purchased
 
Cash
 
Consideration Shares
 
Warrants
 
Touradji DeepRock Master Fund, Ltd.
 
101 Park Avenue
47th Floor
New York, NY 10178
Attn: Thomas S. Dwan
 
1,344,280
 
$1,200,000
 
944,280
 
96,000
 
Touradji Global Resources Master Fund, Ltd.
 
101 Park Avenue
47th Floor
New York, NY 10178
Attn: Thomas S. Dwan
 
896,187
 
$800,000
 
629,520
 
64,000
 

 
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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser:    Touradji Global Resources Master Fund,
Ltd.                                                                                                                       
 
Signature of Authorized Signatory of Purchaser:   /s/ Thomas S.
Dwan                                                                                                               
 
Name of Authorized Signatory:   Thomas S.
Dwan                                                                                                                                                     
 
Title of Authorized Signatory:   CFO of Investment
Manager                                                                                                                                   
 
Email Address of Purchaser:
   td@touradji.com                                                                                                                                                          
 
Fax Number of Purchaser:
   212-984-8881                                                                                                                                                                     
 
Address for Notice of Purchaser:
101 Park Avenue, 48th Floor
New York, New York 10178

Address for Delivery of Shares for Purchaser (if not same as above):

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
 
[SIGNATURE PAGES CONTINUE]

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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser:    Touradji Deep Rock Master Fund,
Ltd.                                                                                                                                  
 
Signature of Authorized Signatory of Purchaser:   /s/ Thomas S.
Dwan                                                                                                               
 
Name of Authorized Signatory:   Thomas S.
Dwan                                                                                                                                                     
 
Title of Authorized Signatory:   CFO of Investment
Manager                                                                                                                                   
 
Email Address of Purchaser:
   td@touradji.com                                                                                                                                                          
 
Fax Number of Purchaser:
   212-984-8881                                                                                                                                                                     
 
Address for Notice of Purchaser:
101 Park Avenue, 48th Floor
New York, New York 10178

Address for Delivery of Shares for Purchaser (if not same as above):

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
 
[SIGNATURE PAGES CONTINUE]
 
29