Exhibit 10.1

 

EXECUTION VERSION

 

ZAZA ENERGY CORPORATION

 

Common Stock
(par value $0.01 per share)

 

At-the-Market Issuance Sales Agreement

 

March 31, 2014

 

MLV & Co. LLC

1251 Avenue of the Americas
41st Floor

New York, New York 10020

 

Ladies and Gentlemen:

 

ZaZa Energy Corporation, a Delaware corporation (the “Company”), confirms its
agreement (this “Agreement”), with MLV & Co. LLC (“MLV”), as follows:

 

1.                                           Issuance and Sale of Shares.  The
Company agrees that, from time to time during the term of this Agreement, on the
terms and subject to the conditions set forth herein, it may issue and sell
through MLV shares (the “Placement Shares”) of the Company’s common stock, par
value $0.01 per share (the “Common Stock”); provided, however, that in no event
shall the Company issue or sell through MLV such number or dollar amount of
Placement Shares that (a) would cause the Company or the offering of the
Placement Shares to fail to satisfy the eligibility and transaction requirements
for use of Form S-3 (including, if applicable, Instruction I.B.6 thereof),
(b) exceeds the number or dollar amount of shares of Common Stock registered on
the effective Registration Statement (as defined below) pursuant to which the
offering is being made, (c) exceeds the number of authorized but unissued shares
of the Company’s Common Stock under its charter, or (d) exceeds the number or
dollar amount of shares of Common Stock for which the Company has filed a
Prospectus Supplement (as defined below) (the least of (a), (b), and (c), the
“Maximum Amount”).  Notwithstanding anything to the contrary contained herein,
the parties hereto agree that compliance with the limitations set forth in this
Section 1 on the number or dollar amount of Placement Shares issued and sold
under this Agreement shall be the sole responsibility of the Company and that
MLV shall have no obligation in connection with such compliance.  The issuance
and sale of Placement Shares through MLV will be effected pursuant to the
Registration Statement (as defined below) filed by the Company and declared
effective by the Securities and Exchange Commission (the “Commission”) on
February 14, 2014 although nothing in this Agreement shall be construed as
requiring the Company to use the Registration Statement to issue any Placement
Shares or other shares of Common Stock.  MLV and the Company are sometimes
referred to herein individually as a “Party” and collectively as the “Parties.”

 

The Company has filed with the Commission, in accordance with the provisions of
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively, the “Securities Act”), a registration statement on Form S-3 (File
No. 333-192257), including a base prospectus (the “Base Prospectus”), relating
to certain securities of the Company, including the Placement Shares, to be
issued from time to time by the Company pursuant to Rule 415 under

 

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the Securities Act, and which incorporates by reference documents that the
Company has filed or will file in accordance with the provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (collectively, the “Exchange Act”).  The Company has prepared a
prospectus supplement specifically relating to the Placement Shares (the
“Prospectus Supplement”) to the Base Prospectus.  The Company will furnish to
MLV, for use by MLV, copies of the Base Prospectus included as part of such
registration statement, as supplemented by the Prospectus Supplement, relating
to the Placement Shares.  Except where the context otherwise requires, such
registration statement, including any information contained in a Prospectus (as
defined below) subsequently filed with the Commission pursuant to
Rule 424(b) under the Securities Act or deemed to be a part of such registration
statement pursuant to Rule 430B of the Securities Act, is herein called the
“Registration Statement.”  The Base Prospectus, as it may be supplemented by the
Prospectus Supplement, in the form in which such prospectus and/or Prospectus
Supplement is filed by the Company with the Commission pursuant to
Rule 424(b) under the Securities Act is herein called the “Prospectus.”  Any
reference herein to the Registration Statement, the Prospectus or any amendment
or supplement thereto shall be deemed to refer to and include the documents
incorporated or deemed incorporated by reference therein (the “Incorporated
Documents”), and any reference herein to the terms “amend,” “amendment” or
“supplement” with respect to the Registration Statement or the Prospectus shall
be deemed to refer to and include the filing after the execution hereof of any
document with the Commission deemed to be incorporated by reference therein.

 

For purposes of this Agreement, all references to the Registration Statement,
the Prospectus or to any amendment or supplement thereto, or any Issuer Free
Writing Prospectus (as defined below) (other than any Issuer Free Writing
Prospectus that, pursuant to Rule 433, is not required to be filed with the
Commission) shall be deemed to include the most recent copy filed with the
Commission pursuant to its Electronic Data Gathering Analysis and Retrieval
System, or if applicable, the Interactive Data Electronic Application system
when used by the Commission (collectively, “EDGAR”).

 

2.                                           Placements.  Each time that the
Company wishes to issue and sell Placement Shares hereunder (each, a
“Placement”), it will notify MLV by email notice (or other method mutually
agreed to in writing by the Parties) of the number of Placement Shares to be
sold, the time period during which sales are requested to be made, any
limitation on the number of Placement Shares that may be sold in any one day or
in any one transaction and any minimum price below which sales may not be made
(a “Placement Notice”), the form of which is attached hereto as Schedule 1. The
Placement Notice shall originate from any of the individuals from the Company
set forth on Schedule 3 (with a copy to each of the other individuals from the
Company listed on such schedule), and shall be addressed to each of the
individuals from MLV set forth on Schedule 3, as such Schedule 3 may be amended
from time to time. Provided that the Company is otherwise in compliance with the
terms of this Agreement, the Placement Notice shall be effective immediately
upon receipt by MLV unless and until (i) MLV declines to accept the terms
contained therein for any reason, in its sole discretion, (ii) the entire amount
of the Placement Shares thereunder have been sold, (iii) the Company suspends or
terminates the Placement Notice or (iv) this Agreement has been terminated under
the provisions of Section 13. The amount of any discount, commission or other
compensation to be paid by the Company to MLV in connection with the sale of the

 

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Placement Shares shall be calculated in accordance with the terms set forth in
Schedule 2. It is expressly acknowledged and agreed that neither the Company nor
MLV will have any obligation whatsoever with respect to a Placement or any
Placement Shares unless and until the Company delivers a Placement Notice to MLV
and MLV does not decline such Placement Notice pursuant to the terms set forth
above, and then only upon the terms specified therein and herein. In the event
of a conflict among the terms of Sections 2, 3 and 4 of this Agreement and the
terms of a Placement Notice, the terms of the Placement Notice will control.

 

3.                                           Sale of Placement Shares by MLV.

 

a.                                      Subject to the terms and conditions of
this Agreement, MLV, for the period specified in the Placement Notice, will use
its commercially reasonable efforts consistent with its normal trading and sales
practices and applicable state and federal laws, rules and regulations and the
rules of the NASDAQ Capital Market (the “Exchange”), to sell the Placement
Shares up to the amount specified in, and otherwise in accordance with the terms
of, such Placement Notice.  MLV will provide written confirmation to the Company
no later than the opening of the Trading Day (as defined below) immediately
following the Trading Day on which it has made sales of Placement Shares
hereunder setting forth the number of Placement Shares sold on such day, the
compensation payable by the Company to MLV pursuant to Section 2 with respect to
such sales, and the Net Proceeds (as defined below) payable to the Company, with
an itemization of the deductions made by MLV (as set forth in Section 5(a)) from
the gross proceeds that it receives from such sales.  Subject to the terms of
the Placement Notice, MLV may sell Placement Shares by any method permitted by
law deemed to be an “at-the-market” offering as defined in Rule 415 of the
Securities Act, including without limitation sales made directly on the
Exchange, on any other existing trading market for the Common Stock or to or
through a market maker.  Subject to the terms of a Placement Notice, MLV may
also sell Placement Shares by any other method permitted by law, including but
not limited to negotiated transactions, with the Company’s consent.  The Company
acknowledges and agrees that (i) there can be no assurance that MLV will be
successful in selling Placement Shares, (ii) MLV will incur no liability or
obligation to the Company or any other person or entity if it does not sell
Placement Shares for any reason other than a failure by MLV to use its
commercially reasonable efforts consistent with its normal trading and sales
practices and applicable law and regulations to sell such Placement Shares as
required under this Agreement and (iii) MLV shall be under no obligation to
purchase Placement Shares on a principal basis pursuant to this Agreement,
except as otherwise agreed by MLV and the Company. “Trading Day” means any day
on which Common Stock is purchased and sold on the Exchange.

 

b.                                      During the term of this Agreement,
neither MLV nor any of its affiliates or subsidiaries shall engage in (i) any
short sale of any security of the Company or (ii) any sale of any security of
the Company that MLV does not own or any sale that is consummated by the
delivery of a security of the Company borrowed by, or for the account of, MLV.
Neither MLV nor any of its affiliates or subsidiaries shall engage in any
proprietary trading or trading for MLV’s (or its affiliates’ or subsidiaries’)
own account.

 

4.                                           Suspension of Sales.  The Company
or MLV may, upon notice to the other Party in writing (including by email
correspondence to each of the individuals of the other

 

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Party set forth on Schedule 3, if receipt of such correspondence is actually
acknowledged by any of the individuals to whom the notice is sent, other than
via auto-reply) or by telephone (confirmed immediately by verifiable facsimile
transmission or email correspondence to each of the individuals of the other
party set forth on Schedule 3), suspend this offering and any sale of Placement
Shares; provided, however, that such suspension shall not affect or impair any
Party’s obligations with respect to any Placement Shares sold hereunder prior to
the receipt of such notice. Each of the Parties agrees that no such notice under
this Section 4 shall be effective against any other Party unless it is made to
one of the individuals named on Schedule 3 hereto, as such Schedule may be
amended from time to time.

 

5.                                           Settlement.

 

a.                                      Settlement of Placement Shares.  Unless
otherwise specified in the applicable Placement Notice, settlement for sales of
Placement Shares will occur on the third (3rd) Trading Day (or such earlier day
as is industry practice for regular-way trading) following the date on which
such respective sales are made (each, a “Settlement Date”). The amount of
proceeds to be delivered to the Company on a Settlement Date against receipt of
the Placement Shares sold (the “Net Proceeds”) will be equal to the aggregate
sales price received by MLV for such Placement Shares, after deduction for
(i) MLV’s commission, discount or other compensation for such sales payable by
the Company pursuant to Section 2 hereof, and (ii) any transaction fees imposed
by any governmental or self-regulatory organization in respect of such sales.

 

b.                                      Delivery of Placement Shares.  On or
before each Settlement Date, the Company will, or will cause its transfer agent
to, electronically transfer the Placement Shares being sold by crediting MLV’s
or its designee’s account (provided MLV shall have given the Company written
notice of such designee at least one Trading Day prior to the Settlement Date)
at The Depository Trust Company through its Deposit and Withdrawal at Custodian
System or by such other means of delivery as may be mutually agreed upon by the
parties hereto which in all cases shall be freely tradable, transferable,
registered shares in good deliverable form. On each Settlement Date, MLV will
deliver the related Net Proceeds in same day funds to an account designated by
the Company on, or prior to, the Settlement Date. The Company agrees that if the
Company, or its transfer agent (if applicable), defaults in its obligation to
deliver Placement Shares on a Settlement Date through no fault of MLV, then in
addition to and in no way limiting the rights and obligations set forth in
Section 11(a) hereto, the Company will (i) hold MLV harmless against any loss,
claim, damage, or reasonable, documented expense (including reasonable and
documented legal fees and expenses), as incurred, arising out of or in
connection with such default by the Company or its transfer agent (if
applicable) and (ii) pay to MLV (without duplication) any commission, discount,
or other compensation to which it would otherwise have been entitled absent such
default.

 

c.                                       Limitations on Offering Size.  Under no
circumstances shall the Company cause or request the offer or sale of any
Placement Shares if, after giving effect to the sale of such Placement Shares,
the aggregate number of Placement Shares sold pursuant to this Agreement would
exceed the lesser of (i) together with all sales of Placement Shares under this
Agreement, the Maximum Amount and (ii) the amount authorized from time to time
to be

 

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issued and sold under this Agreement by the Company’s board of directors, a duly
authorized committee thereof or a duly authorized executive committee.  Under no
circumstances shall the Company cause or request the offer or sale of any
Placement Shares pursuant to this Agreement at a price lower than the minimum
price authorized from time to time by the Company’s board of directors, a duly
authorized committee thereof or a duly authorized executive committee, and
notice of such minimum price shall have been delivered MLV in writing.

 

6.                                           Representations and Warranties of
the Company.  Except as disclosed in the Registration Statement, Prospectus or a
disclosure schedule delivered in connection herewith, the Company represents and
warrants to, and agrees with MLV that as of the date of this Agreement and as of
each Applicable Time (as defined below), unless such representation, warranty or
agreement specifies a different date or time:

 

a.                                      Registration Statement and Prospectus. 
The Company and, assuming no act or omission on the part of MLV that would make
such statement untrue, the transactions contemplated by this Agreement meet the
requirements for and comply with the conditions for the use of Form S-3 under
the Securities Act. The Registration Statement has been filed with the
Commission and has been declared effective under the Securities Act by the
Commission. The Prospectus Supplement will name MLV as an underwriter acting as
the agent of the Company in the section entitled “Plan of Distribution.” The
Company has not received, and has no notice of, any order of the Commission
preventing or suspending the use of the Registration Statement, or threatening
or instituting proceedings for that purpose. The Registration Statement and the
offer and sale of Placement Shares as contemplated hereby meet the requirements
of Rule 415 under the Securities Act and comply in all material respects with
said Rule. Any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement have been so described or
filed. Copies of the Registration Statement, the Prospectus, and any such
amendments or supplements and all documents incorporated by reference therein
that were filed with the Commission on or prior to the date of this Agreement
have been delivered, or are available through EDGAR, to MLV and its counsel. The
Company has not distributed and, prior to the later to occur of each Settlement
Date and completion of the distribution of the Placement Shares, will not
distribute any offering material in connection with the offering or sale of the
Placement Shares other than the Registration Statement and the Prospectus and
any Issuer Free Writing Prospectus (as defined below) to which MLV has consented
(and such consent shall not be unreasonably withheld, delayed or conditioned).
The Common Stock is currently listed on the Exchange. Except as disclosed in the
Registration Statement, including the Incorporated Documents, the Company has
not, in the 12 months preceding the date hereof, received notice from the
Exchange to the effect that the Company is not in compliance with the Exchange’s
listing or maintenance requirements.

 

b.                                      No Misstatement or Omission.  The
Registration Statement, when it became effective, and the Prospectus, and any
amendment or supplement thereto, on the date of such Prospectus or amendment or
supplement, conformed and will conform in all material respects with the
requirements of the Securities Act. At each Settlement Date, the Registration
Statement and the Prospectus, as of such date, will conform in all material
respects with the requirements of the Securities Act. The Registration
Statement, when it became or becomes effective, did not, and 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.
The Prospectus and any

 

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amendment and supplement thereto, on the date thereof and at each Applicable
Time (defined below), did not or will not include an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The documents incorporated by reference in the Prospectus or any
Prospectus Supplement did not, and any further documents filed and incorporated
by reference therein will not, when filed with the Commission, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated in such document or necessary to make the statements in such document, in
light of the circumstances under which they were made, not misleading. The
foregoing shall not apply to statements in, or omissions from, any such document
made in reliance upon, and in conformity with, information furnished to the
Company by MLV specifically for use in the preparation thereof.

 

c.                                       Conformity with Securities Act and
Exchange Act.  The Registration Statement, the Prospectus, any Issuer Free
Writing Prospectus or any amendment or supplement thereto, and the Incorporated
Documents, when such documents were or are filed with the Commission under the
Securities Act or the Exchange Act or became or become effective under the
Securities Act, as the case may be, conformed or will conform in all material
respects with the requirements of the Securities Act and the Exchange Act, as
applicable.

 

d.                                      Financial Information.  The consolidated
financial statements of the Company included or incorporated by reference in the
Registration Statement and the Prospectus, together with the related notes and
schedules, complied as to form in all material respects with applicable
requirements of the Securities Act and the Exchange Act, as in effect as of the
time of filing.  Such financial statements have been prepared in accordance with
generally accepted accounting principles in the United States (“GAAP”),
consistently applied, during the periods covered thereby (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim financial statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries (as defined below) as of the dates indicated and
the consolidated results of operations and cash flows and changes in
stockholders’ equity of the Company and its Subsidiaries for the periods
specified (subject, in the case of unaudited statements, to normal year-end
audit adjustments that will not be material, either individually or in the
aggregate); the other financial and statistical data with respect to the Company
and the Subsidiaries contained or incorporated by reference in the Registration
Statement and the Prospectus are in all material respects accurately and fairly
presented; there are no financial statements (historical or pro forma) that are
required to be included or incorporated by reference in the Registration
Statement or the Prospectus that are not included or incorporated by reference
as required; the Company and its Subsidiaries do not have any material
liabilities or obligations, direct or contingent (including any off-balance
sheet obligations), not described in the Registration Statement (including the
exhibits thereto), or the Prospectus which such liabilities or obligations are
required to be described in the Registration Statement or the Prospectus
(including Exhibits thereto and Incorporated Documents); and all disclosures
contained or incorporated by reference in the Registration Statement and the
Prospectus, if any, regarding “non-GAAP financial measures” (as such term is
defined by the rules and regulations of the Commission) comply in all material
respects with Regulation G of the Exchange Act and Item 10 of Regulation S-K
under the Securities Act, to the extent applicable.

 

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e.                                       Conformity with EDGAR Filing.  The
Prospectus delivered to MLV for use in connection with the sale of the Placement
Shares pursuant to this Agreement will be identical to the versions of the
Prospectus created to be transmitted to the Commission for filing via EDGAR,
except to the extent permitted by Regulation S-T.

 

f.                                        Organization.  Each of the Company and
its Subsidiaries (as defined below) is, and will be, duly organized, validly
existing as a corporation, limited partnership, limited liability company or
other legal entity and in good standing under the laws of its respective
jurisdictions of organization.  Each of the Company and each of its Subsidiaries
is, and will be, duly qualified as a foreign corporation or other legal entity
and in good standing under the laws of each other jurisdiction in which its
ownership or lease of property or the conduct of its businesses requires such
qualification, and has all corporate power and authority necessary to own or
hold its properties and to conduct its businesses as described in the
Registration Statement and the Prospectus, except where the failure to be so
qualified or in good standing or have such power or authority would not,
individually or in the aggregate, have a material adverse effect or would
reasonably be expected to have a material adverse effect on the assets,
business, operations, earnings, properties, condition (financial or otherwise),
prospects, stockholders’ equity or results of operations of the Company and the
Subsidiaries taken as a whole, or prevent the consummation of the transactions
contemplated hereby (a “Material Adverse Effect”).

 

g.                                       Subsidiaries.  The subsidiaries set
forth on Schedule 4, as may be updated from time to time (collectively, the
“Subsidiaries”), are the Company’s only significant subsidiaries (as such term
is defined in Rule 1-02 of Regulation S-X promulgated by the Commission) as of
the date hereof.  Except as set forth in the Registration Statement and in the
Prospectus, the Company owns, directly or indirectly, all of the equity
interests of the Subsidiaries free and clear of any lien, charge, security
interest, encumbrance, right of first refusal or other restriction, and all the
equity interests of the Subsidiaries are validly issued and, to the extent
applicable, are fully paid, nonassessable and free of preemptive and similar
rights.

 

h.                                      No Violation or Default.  Neither the
Company nor any of its Subsidiaries is (i) in violation of its charter or
by-laws or similar organizational documents; (ii) in default, and no event has
occurred that, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound or to which
any of the property or assets of the Company or any of its Subsidiaries are
subject; or (iii) in violation of any law or statute or any judgment, order,
rule or regulation of any court or arbitrator or governmental or regulatory
authority, except, in the case of each of clauses (ii) and (iii) above, for any
such violation or default that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.  Except as described
in the Prospectus or the Incorporated Documents, to the Company’s knowledge, no
other party under any material contract or other agreement to which it or any of
its Subsidiaries is a party is in default in any respect thereunder where such
default would reasonably be expected to have a Material Adverse Effect.

 

i.                                          No Material Adverse Effect.  Since
the date of the most recent financial

 

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statements of the Company included or incorporated by reference in the
Registration Statement and the Prospectus, there has not been (i) any Material
Adverse Effect, or any development involving a prospective Material Adverse
Effect, in or affecting the business, properties, management, condition
(financial or otherwise), results of operations, or prospects of the Company and
the Subsidiaries taken as a whole, (ii) any transaction which is material to the
Company and the Subsidiaries taken as a whole, (iii) any obligation or
liability, direct or contingent (including any off-balance sheet obligations),
incurred by the Company or the Subsidiaries, which is material to the Company
and the Subsidiaries taken as a whole, (iv) any material change in the capital
stock (other than (A) the grant of additional options under the Company’s
existing stock option plans, (B) changes in the number of outstanding shares of
Common Stock of the Company due to the issuance of shares upon the exercise or
conversion of securities exercisable for, or convertible into, Common Stock
outstanding on the date hereof, (C) as a result of the issuance of Placement
Shares, (D) any repurchases of capital stock of the Company, (E) as described in
a proxy statement filed on Schedule 14A or a Registration Statement on Form S-4,
or (F) otherwise publicly announced) or outstanding long-term indebtedness of
the Company or of its Subsidiaries, or (v) any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company or any
Subsidiary, other than in each case above in the ordinary course of business or
as otherwise disclosed in the Registration Statement or Prospectus.

 

j.                                         Capitalization.  The issued and
outstanding shares of capital stock of the Company have been validly issued, are
fully paid and non-assessable and are not subject to any preemptive rights,
rights of first refusal or similar rights. The Company has an authorized, issued
and outstanding capitalization as set forth in the Registration Statement and
the Prospectus as of the dates referred to therein (other than the grant of
additional options under the Company’s existing stock option plans, or changes
in the number of outstanding shares of Common Stock of the Company due to the
issuance of shares upon the exercise or conversion of securities exercisable
for, or convertible into, shares of Common Stock outstanding on the date hereof
as a result of the issuance of Placement Shares) and such authorized capital
stock conforms to the description thereof set forth in the Registration
Statement and the Prospectus. The description of the Common Stock in the
Registration Statement and the Prospectus is complete and accurate in all
material respects. As of the date referred to therein, the Company did not have
outstanding any options to purchase, or any rights or warrants to subscribe for,
or any securities or obligations convertible into, or exchangeable for, or any
contracts or commitments to issue or sell, any shares of capital stock or other
securities.

 

k.                                      S-3 Eligibility.  (i) At the time of
filing the Registration Statement and (ii) at the time of the most recent
amendment thereto for the purposes of complying with Section 10(a)(3) of the
Securities Act (whether such amendment was by post-effective amendment,
incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or
form of prospectus), the Company met the then applicable requirements for use of
Form S-3 under the Securities Act, including compliance with General Instruction
I.B.6 of Form S-3, as applicable.

 

l.                                          Authorization; Enforceability.  The
Company has full legal right, power and authority to enter into this Agreement
and perform the transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Company and is a legal, valid and
binding agreement of the Company enforceable in accordance with its terms,
except to the extent that (i) enforceability may be limited by bankruptcy,
insolvency, reorganization,

 

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moratorium or similar laws affecting creditors’ rights generally and by general
equitable principles and (ii) the indemnification and contribution provisions of
Section 11 hereof may be limited by federal or state securities laws and public
policy considerations in respect thereof.

 

m.                                  Authorization of Placement Shares.  The
Placement Shares, when issued and delivered pursuant to the terms approved by
the board of directors of the Company or a duly authorized committee thereof, or
a duly authorized executive committee, against payment therefor as provided
herein, will be duly and validly authorized and issued and fully paid and
nonassessable, free and clear of any pledge, lien, encumbrance, security
interest or other claim (other than any pledge, lien, encumbrance, security
interest or other claim arising from an act or omission of MLV or a purchaser),
including any statutory or contractual preemptive rights, resale rights, rights
of first refusal or other similar rights, and will be registered pursuant to
Section 12 of the Exchange Act. The Placement Shares, when issued, will conform
in all material respects to the description thereof set forth in or incorporated
into the Prospectus.

 

n.                                      No Consents Required.  No consent,
approval, authorization, order, registration or qualification of or with any
court or arbitrator or any governmental or regulatory authority is required for
the execution, delivery and performance by the Company of this Agreement, and
the issuance and sale by the Company of the Placement Shares as contemplated
hereby, except for the registration of the offering of the Placement Shares
under the Securities Act, the filing of the Prospectus with the Commission and
such consents, approvals, authorizations, orders and registrations or
qualifications as may be required under applicable state securities laws or by
the by-laws and rules of the Financial Industry Regulatory Authority (“FINRA”)
or the Exchange in connection with the sale of the Placement Shares by MLV.

 

o.                                      No Preferential Rights.  (i) No person,
as such term is defined in Rule 1-02 of Regulation S-X promulgated under the
Securities Act (each, a “Person”), has the right, contractual or otherwise, to
cause the Company to issue or sell to such Person any shares of Common Stock or
shares of any other capital stock or other securities of the Company (other than
upon the exercise of options or warrants to purchase Common Stock or upon the
exercise of options that may be granted from time to time under the Company’s
stock option plans), (ii) no Person has any preemptive rights, rights of first
refusal, or any other rights (whether pursuant to a “poison pill” provision or
otherwise) to purchase any shares of Common Stock or shares of any other capital
stock or other securities of the Company from the Company which have not been
duly waived with respect to the offering contemplated hereby, (iii) no Person
has the right to act as an underwriter or as a financial advisor to the Company
in connection with the offer and sale of the Placement Shares, and (iv) no
Person has the right, contractual or otherwise, to require the Company to
register under the Securities Act any shares of Common Stock or shares of any
other capital stock or other securities of the Company, or to include any such
shares or other securities in the Registration Statement or the offering
contemplated thereby, whether as a result of the filing or effectiveness of the
Registration Statement or the sale of the Placement Shares as contemplated
thereby or otherwise, except for such rights as have been waived on or prior to
the date hereof.

 

p.                                      Independent Public Accountant.  Ernst &
Young LLP (the “Accountant”), whose report on the consolidated financial
statements of the Company is filed with the Commission as part of the Company’s
most recent Annual Report on Form 10-K and

 

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incorporated into the Registration Statement, are and, during the periods
covered by their report, were independent public accountants within the meaning
of the Securities Act and the Public Company Accounting Oversight Board (United
States).  To the Company’s knowledge, the Accountant is not in violation of the
auditor independence requirements of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”) with respect to the Company.

 

q.                                      Enforceability of Agreements.  All
agreements between the Company and third parties expressly referenced in the
Prospectus, other than such agreements that have expired by their terms or whose
termination is disclosed in documents filed by the Company with the Commission,
are legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms, except to the extent that
(i) enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ rights generally and by general
equitable principles and (ii) the indemnification provisions of certain
agreements may be limited by federal or state securities laws or public policy
considerations in respect thereof, except for any unenforceability that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.

 

r.                                         No Litigation.  There are no legal,
governmental or regulatory actions, suits or proceedings pending, nor, to the
Company’s knowledge, any legal, governmental or regulatory investigations, to
which the Company or a Subsidiary is a party or to which any property of the
Company or any Subsidiary is the subject that, individually or in the aggregate,
if determined adversely to the Company or any Subsidiary, would reasonably be
expected to have a Material Adverse Effect or materially and adversely affect
the ability of the Company to perform its obligations under this Agreement; and
to the Company’s knowledge, no such actions, suits or proceedings are threatened
or contemplated by any governmental or regulatory authority or threatened by
others that, individually or in the aggregate, if determined adversely to the
Company or any Subsidiary, would reasonably be expected to have a Material
Adverse Effect; and there are no current or pending legal, governmental or
regulatory actions, suits, proceedings or, to the Company’s knowledge,
investigations that are required under the Securities Act to be described in the
Prospectus that are not described in the Prospectus.

 

s.                                        Licenses and Permits.  The Company and
the Subsidiaries possess or have obtained, all licenses, certificates, consents,
orders, approvals, permits and other authorizations issued by, and have made all
declarations and filings with, the appropriate federal, state, local or foreign
governmental or regulatory authorities that are necessary for the ownership or
lease of their respective properties or the conduct of their respective
businesses as described in the Registration Statement and the Prospectus (the
“Permits”), except where the failure to possess, obtain or make the same would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Except as disclosed in the Registration Statement or the
Prospectus, neither the Company nor any Subsidiary has received written notice
of any proceeding relating to revocation or modification of any such Permit or
has any reason to believe that such Permit will not be renewed in the ordinary
course, except where the failure to obtain any such renewal would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

t.                                         No Material Defaults.  Neither the
Company nor any Subsidiary

 

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has defaulted on any installment on indebtedness for borrowed money or on any
rental on one or more long-term leases, which defaults, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect. The
Company has not filed a report pursuant to Section 13(a) or 15(d) of the
Exchange Act since the filing of its last Annual Report on Form 10-K, indicating
that it (i) has failed to pay any dividend or sinking fund installment on
preferred stock or (ii) has defaulted on any installment on indebtedness for
borrowed money or on any rental on one or more long-term leases, which defaults,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.

 

u.                                      Certain Market Activities.  Neither the
Company nor any Subsidiary, nor any of their respective directors, officers or
controlling persons has taken, directly or indirectly, any action designed, or
that has constituted or would reasonably be expected to cause or result in,
under the Exchange Act or otherwise, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Placement Shares.

 

v.                                      Broker/Dealer Relationships.  Neither
the Company nor any Subsidiary (i) is required to register as a “broker” or
“dealer” in accordance with the provisions of the Exchange Act or (ii) directly
or indirectly through one or more intermediaries, controls or is a “person
associated with a member” or “associated person of a member” (within the meaning
set forth in the FINRA Manual).

 

w.                                    No Reliance.  The Company has not relied
upon MLV or legal counsel for MLV for any legal, tax or accounting advice in
connection with the offering and sale of the Placement Shares.

 

x.                                      Taxes.  Each of the Company and its
Subsidiaries has filed all federal, state, local and foreign tax returns that
have been required to be filed and paid all taxes shown thereon through the date
hereof, to the extent that such taxes have become due and are not being
contested in good faith, except where the failure to do so would not reasonably
be expected to have a Material Adverse Effect.  Except as otherwise disclosed in
or contemplated by the Registration Statement or the Prospectus, no tax
deficiency has been determined adversely to the Company or any of its
Subsidiaries which has had, or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.  The Company has no
knowledge of any federal, state or other governmental tax deficiency, penalty or
assessment which has been or might be asserted or threatened against it which
would have a Material Adverse Effect.

 

y.                                      Title to Real and Personal Property. 
Each of the Company and its Subsidiaries has (i) good and defensible title to
all of its oil, gas and mineral leases or mineral interests (including oil and
gas wells, producing leasehold interests and appurtenant personal property), and
title investigations having been carried out by the Company or each of its
Subsidiaries consistent with the reasonable practice in the oil and gas industry
in the areas in which each of the Company and its Subsidiaries operate and
(ii) good title to all other items of real property and to all personal property
described in the Registration Statement or Prospectus as being owned by them
that are material to the businesses of the Company or such Subsidiary, in each
case free and clear of all liens, encumbrances and claims, except (A) those that
do not materially interfere with the use made and proposed to be made of such
property by the

 

11

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Company and any of its Subsidiaries or would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect,
(B) royalties, overriding royalties and other similar burdens under oil and gas
leases, (C) easements, restrictions, rights-of-way and other matters that
commonly affect property, (D) those securing taxes and other governmental
charges, or claims of materialmen, mechanics and similar persons, not yet due
and payable and (E) those under oil or gas sales contracts, geophysical
exploration agreements, operating agreements, farmout agreements, participation
agreements, joint venture agreements, development agreements, unitization,
pooling and commutation agreements, declarations and orders and gas sales
contracts securing payment of amounts not yet due and payable and of a scope and
nature customary in the oil and gas industry.  All of the leases, subleases and
concessions under which the Company or any of its Subsidiaries holds or uses its
properties described in the Registration Statement and Prospectus are in full
force and effect, with such exceptions as would not reasonably be expected to
have a Material Adverse Effect, and neither the Company nor any of its
Subsidiaries has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or its Subsidiaries
under any of the leases, subleases and concessions mentioned above, or affecting
or questioning the rights of the Company or any Subsidiary thereof to the
continued possession or use of the leased or subleased premises or the premises
granted by concessions.  Any real property described in the Registration
Statement or Prospectus as being leased by the Company and any of its
Subsidiaries is held by them under valid, existing and enforceable leases, free
and clear of all liens, encumbrances and claims, except those that (1) do not
materially interfere with the use made or proposed to be made of such property
by the Company or any of its Subsidiaries or (2) would not be reasonably
expected, individually or in the aggregate, to have a Material Adverse Effect.

 

z.                                       Reserve Reports.  The information
underlying the estimates of the Company’s reserves that was supplied to Ryder
Scott Company, L.P. (the “Reserve Engineers”), for the purposes of preparing the
reserve reports and estimates of the proved reserves of the Company disclosed in
the Registration Statement and the Prospectus, including production and costs of
operation, was true and correct in all material respects on the dates such
estimates were made, and such information was supplied and was prepared in
accordance with customary industry practices.  Other than normal production of
the reserves, the impact of changes in prices and costs, and fluctuations in
demand for oil and natural gas, the Company is not aware of any facts or
circumstances that would in the aggregate result in a material adverse change in
the aggregate net proved reserves, or the aggregate present value or the
standardized measure of the future net cash flows therefrom, as described in the
Registration Statement and the Prospectus and as reflected in the reports the
Reserve Engineers prepared with regard to the proved reserves that the Company
and each of its Subsidiaries, considered as one enterprise, own.  The estimates
of such proved reserves and standardized measure as described in the
Registration Statement and the Prospectus and reflected in the reports
referenced therein have been prepared in a manner that complies in all material
respects with the applicable requirements of the rules under the Securities Act
with respect to such estimates.

 

aa.                               Intellectual Property.  Except as set forth in
the Registration Statement or the Prospectus, to the Company’s knowledge, each
of the Company and its Subsidiaries own or possess adequate enforceable rights
to use all patents, patent applications, trademarks (both registered and
unregistered), service marks, trade names, trademark registrations, service mark

 

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registrations, copyrights, licenses and know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) (collectively, the “Intellectual Property”), necessary
for the conduct of their respective businesses as conducted as of the date
hereof, except to the extent that the failure to own or possess adequate rights
to use such Intellectual Property would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; none of the Company
nor any of its Subsidiaries have received any written notice of any claim of
infringement or conflict that asserted Intellectual Property rights of others,
which infringement or conflict, if the subject of an unfavorable decision, would
result in a Material Adverse Effect; there are no pending, or to the Company’s
knowledge, threatened judicial proceedings or interference proceedings against
the Company or its Subsidiaries challenging the Company’s or any of its
Subsidiary’s rights in or to or the validity of the scope of any of the
Company’s or any Subsidiary’s patents, patent applications or proprietary
information; to the Company’s knowledge, no other entity or individual has any
right or claim in any of the Company’s or any of its Subsidiary’s owned,
material patents, patent applications or any patent to be issued therefrom by
virtue of any contract, license or other agreement entered into between such
entity or individual and the Company or a Subsidiary or by any non-contractual
obligation of the Company or a Subsidiary, other than by written licenses
granted by the Company or a Subsidiary; the Company and the Subsidiaries have
not received any written notice of any claim challenging the rights of the
Company or its Subsidiaries in or to any Intellectual Property owned, licensed
or optioned by the Company or any Subsidiary which claim, if the subject of an
unfavorable decision, would result in a Material Adverse Effect.

 

bb.                               Environmental Laws.  The Company and its
Subsidiaries (i) are in compliance with any and all applicable federal, state,
local and foreign laws, rules, regulations, decisions and orders relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (collectively, “Environmental
Laws”); (ii) have received and are in compliance with all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses as described in the Registration Statement and the
Prospectus; and (iii) have not received notice of any actual or potential
liability for the investigation or remediation of any disposal or release of
hazardous or toxic substances or wastes, pollutants or contaminants, except, in
the case of any of clauses (i), (ii) or (iii) above, for any such failure to
comply or failure to receive required permits, licenses, other approvals or
liability as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

 

cc.                                 Disclosure Controls.  The Company maintains
systems of internal accounting controls designed to provide reasonable assurance
that (i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.  From
the end of the Company’s most recent audited fiscal year to the end of the most
recent fiscal quarter for which the Company has filed a Form 10-Q, there has
been (i) no material weakness in the Company’s internal control over financial
reporting and

 

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(ii) no change in the Company’s internal control over financial reporting that
has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.  The Company has
established disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15 and 15d-15) for the Company and designed such disclosure controls
and procedures to ensure that material information relating to the Company and
the Subsidiaries is made known to the certifying officers by others within those
entities, particularly during the period in which the Company’s Annual Report on
Form 10-K or Quarterly Report on Form 10-Q, as the case may be, is being
prepared.  The Company’s certifying officers have evaluated the effectiveness of
the Company’s disclosure controls and procedures as of the end of the period
covered by the most recent periodic report filed by the Company with the
Commission (such date, the “Evaluation Date”).  The Company presented in such
periodic report the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.

 

dd.                               Sarbanes-Oxley Act.  There is, and has been,
no failure on the part of the Company or any of the Company’s directors or
officers, in their capacities as such, to comply with any applicable provisions
of the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder.
Each of the principal executive officer and the principal financial officer of
the Company (or each former principal executive officer of the Company and each
former principal financial officer of the Company as applicable) has made all
certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to all reports, schedules, forms, statements and other documents
required to be filed by it or furnished by it to the Commission during the past
12 months. For purposes of the preceding sentence, “principal executive officer”
and “principal financial officer” shall have the meanings given to such terms in
the Exchange Act Rules 13a-15 and 15d-15.

 

ee.                                 Finder’s Fees.  Neither the Company nor any
Subsidiary has incurred any liability for any finder’s fees, brokerage
commissions or similar payments in connection with the transactions herein
contemplated, except as may otherwise exist with respect to MLV pursuant to this
Agreement.

 

ff.                                   Labor Disputes.  No labor disturbance by
or dispute with employees of the Company or any Subsidiary exists or, to the
knowledge of the Company, is threatened which would reasonably be expected to
result in a Material Adverse Effect.

 

gg.                                 Investment Company Act.  Neither the Company
nor any Subsidiary is or, after giving effect to the offering and sale of the
Placement Shares, will be an “investment company” or an entity “controlled” by
an “investment company,” as such terms are defined in the Investment Company Act
of 1940, as amended (the “Investment Company Act”).

 

hh.                               Operations.  The operations of the Company and
the Subsidiaries are and have been conducted at all times in compliance with
applicable financial record keeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, the money laundering
statutes of all jurisdictions to which the Company or the Subsidiaries are
subject, the rules and regulations thereunder and any related or similar rules,
regulations or guidelines, issued, administered or enforced by any governmental
agency having jurisdiction over the Company (collectively, the “Money Laundering
Laws”), except as would not reasonably be expected to result in a Material
Adverse Effect; and no action, suit or

 

14

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proceeding by or before any court or governmental agency, authority or body or
any arbitrator involving the Company or any Subsidiary with respect to the Money
Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

ii.                                       Off-Balance Sheet
Arrangements.         There are no transactions, arrangements and other
relationships between and/or among the Company, and/or, to the knowledge of the
Company, any of its affiliates and any unconsolidated entity, including, but not
limited to, any structured finance, special purpose or limited purpose entity
(each, an “Off Balance Sheet Transaction”) that could reasonably be expected to
affect materially the Company’s liquidity or the availability of or requirements
for its capital resources, including those Off Balance Sheet Transactions
described in the Commission’s Statement about Management’s Discussion and
Analysis of Financial Conditions and Results of Operations (Release Nos.
33-8056; 34-45321; FR-61), required to be described in the Prospectus which have
not been described as required.

 

jj.                                     Underwriter Agreements.  The Company is
not a party to any agreement with an agent or underwriter for any other
“at-the-market” or continuous equity transaction.

 

kk.                               ERISA.  To the knowledge of the Company,
(i) each material employee benefit plan, within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that
is maintained, administered or contributed to by the Company or any of its
Subsidiaries (other than a Multiemployer Plan, within the meaning of
Section 3(37) of ERISA) for employees or former employees of the Company and any
of its Subsidiaries has been maintained in compliance with its terms and the
requirements of any applicable statutes, orders, rules and regulations,
including but not limited to ERISA and the Internal Revenue Code of 1986, as
amended (the “Code”); (ii) no prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to
any such plan (excluding transactions effected pursuant to a statutory or
administrative exemption); and (iii) 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) equals
or exceeds the present value of all benefits accrued under such plan determined
using reasonable actuarial assumptions, other than, in the case of (i), (ii) and
(iii) above, as would not reasonably be expected to have a Material Adverse
Effect.

 

ll.                                       Forward-Looking Statements.  No
forward-looking statement (within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act) (a “Forward-Looking Statement”)
contained in the Registration Statement and the Prospectus has been made or
reaffirmed without a reasonable basis or has been disclosed other than in good
faith. The Forward-Looking Statements incorporated by reference in the
Registration Statement and the Prospectus from the Company’s Annual Report on
Form 10-K for the fiscal year most recently ended (i) except for any
Forward-Looking Statement included in any financial statements and notes
thereto, are within the coverage of the safe harbor for forward looking
statements set forth in Section 27A of the Securities Act, Rule 175(b) under the
Securities Act or Rule 3b-6 under the Exchange Act, as applicable, (ii) were
made by the Company with a reasonable basis and in good faith and reflect the
Company’s good faith commercially reasonable best estimate of the matters
described therein as of

 

15

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the respective dates on which such statements were made, and (iii) have been
prepared in accordance with Item 10 of Regulation S-K under the Securities Act.

 

mm.                       Insurance.  The Company and the Subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks as the Company
and the Subsidiaries reasonably believe are adequate for the conduct of their
business and as is customary for companies of similar size engaged in similar
businesses in similar industries.

 

nn.                               No Improper Practices.  Neither the Company
nor any of its Subsidiaries or controlled affiliates, nor any director or
officer, nor, to the Company’s knowledge, any employee, agent or representative
of the Company or of any of its Subsidiaries or controlled affiliates acting on
behalf of the Company or any of its Subsidiaries or controlled affiliates, has
taken any action in furtherance of an offer, payment, promise to pay, or
authorization or approval of the payment or giving of money, property, gifts or
anything else of value, directly or indirectly, to any “government official”
(including any officer or employee of a government or government-owned or
controlled entity or of a public international organization, or any person
acting in an official capacity for or on behalf of any of the foregoing, or any
political party or party official or candidate for political office) to
improperly influence official action or secure an improper advantage for the
Company; and the Company and its Subsidiaries or controlled affiliates have
conducted their businesses in compliance with applicable anti-corruption laws
and have instituted and maintained policies and procedures designed to promote
and achieve compliance with such laws.

 

oo.                               Status Under the Securities Act.  The Company
was not and is not an ineligible issuer as defined in Rule 405 under the
Securities Act at the times specified in Rules 164 and 433 under the Securities
Act in connection with the offering of the Placement Shares.

 

pp.                               No Misstatement or Omission in an Issuer Free
Writing Prospectus.  Each Issuer Free Writing Prospectus, as of its issue date
and as of each Applicable Time (as defined in Section 25 below), did not, does
not and will not include any information that conflicted, conflicts or will
conflict with the information contained in the Registration Statement or the
Prospectus, including any incorporated document deemed to be a part thereof that
has not been superseded or modified. The foregoing sentence does not apply to
statements in or omissions from any Issuer Free Writing Prospectus based upon
and in conformity with written information furnished to the Company by MLV
specifically for use therein.

 

qq.                               No Conflicts.  Neither the execution of this
Agreement, nor the issuance, offering or sale of the Placement Shares, nor the
consummation of any of the transactions contemplated herein and therein, nor the
compliance by the Company with the terms and provisions hereof and thereof will
conflict with, or will result in a breach of, any of the terms and provisions
of, or has constituted or will constitute a default under, or has resulted in or
will result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company pursuant to the terms of any contract
or other agreement to which the Company may be bound or to which any of the
property or assets of the Company is subject, except (i) such conflicts,
breaches or defaults as may have been

 

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waived and (ii) such conflicts, breaches and defaults that would not reasonably
be expected to have a Material Adverse Effect; nor will such action result
(x) in any violation of the provisions of the organizational or governing
documents of the Company, or (y) in any material violation of the provisions of
any statute or any order, rule or regulation applicable to the Company or of any
court or of any federal, state or other regulatory authority or other government
body having jurisdiction over the Company, except where such violation would not
reasonably be expected to have a Material Adverse Effect.

 

rr.                                     OFAC.

 

(i)             The Company represents that, neither the Company nor any
Subsidiary (collectively, the “Entity”) or any director, officer, employee or
agent of the Entity, is a government, individual, or entity (in this paragraph
(ss), “Person”) that is, or is owned or controlled by a Person that is:

 

(a)                            the subject of any sanctions administered or
enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control
(“OFAC”), the United Nations Security Council (“UNSC”), the European Union
(“EU”) or Her Majesty’s Treasury (“HMT”) (collectively, “Sanctions”), nor

 

(b)              located, organized or resident in a country or territory that
is the subject of Sanctions (including, without limitation, Burma/Myanmar,
Cuba, Iran, North Korea, Sudan and Syria).

 

(ii) The Entity represents and covenants that it will not, directly or
indirectly, knowingly use the proceeds of the offering, or lend, contribute or
otherwise make available such proceeds to any subsidiary, joint venture partner
or other Person:

 

(a)                            to fund or facilitate any activities or business
of or with any Person or in any country or territory that, at the time of such
funding or facilitation, is the subject of Sanctions; or

 

(b)              in any other manner that will result in a violation of
Sanctions by any Person (including any Person participating in the offering,
whether as underwriter, advisor, investor or otherwise).

 

(iii) The Entity represents and covenants that, except as detailed in the
Prospectus, for the past 5 years, it has not knowingly engaged in, is not now
knowingly engaged in, and will not engage in, any dealings or transactions with
any Person, or in any country or territory, that at the time of the dealing or
transaction is or was the subject of Sanctions.

 

ss.                                   Stock Transfer Taxes.  On each Settlement
Date, all stock transfer or other taxes (other than income taxes) which are
required to be paid in connection with the sale and transfer of the Placement
Shares to be sold hereunder will be, or will have been, fully paid or provided
for by the Company and all laws imposing such taxes will be or will have been
fully complied with in all material respects.

 

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Any certificate signed by an officer of the Company and delivered to MLV or to
counsel for MLV pursuant to or in connection with this Agreement shall be deemed
to be a representation and warranty by the Company, as applicable, to MLV as to
the matters set forth therein.

 

7.                                           Covenants of the Company.  The
Company covenants and agrees with MLV that:

 

a.                                      Registration Statement Amendments. 
After the date of this Agreement and during any period in which a Prospectus
relating to any Placement Shares is required to be delivered by MLV under the
Securities Act (including in circumstances where such requirement may be
satisfied pursuant to Rule 172 under the Securities Act) (the “Prospectus
Delivery Period”), (i) the Company will notify MLV promptly of the time when any
subsequent amendment to the Registration Statement, other than documents
incorporated by reference or amendments not related to any Placement, has been
filed with the Commission and/or has become effective or any subsequent
supplement to the Prospectus has been filed and of any request by the Commission
for any amendment or supplement to the Registration Statement or Prospectus
related to the Placement or for additional information related to the Placement,
(ii) the Company will prepare and file with the Commission, promptly upon MLV’s
request, any amendments or supplements to the Registration Statement or
Prospectus that, in MLV’s reasonable opinion, may be necessary in connection
with the distribution of the Placement Shares by MLV (provided, however, that
the failure of MLV to make such request shall not relieve the Company of any
obligation or liability hereunder, or affect MLV’s right to rely on the
representations and warranties made by the Company in this Agreement and
provided, further, that the only remedy MLV shall have with respect to the
failure to make such filing shall be to cease making sales under this Agreement
until such amendment or supplement is filed); (iii) the Company will not file
any amendment or supplement to the Registration Statement or Prospectus relating
to the Placement Shares or a security convertible into the Placement Shares
unless a copy thereof has been submitted to MLV within a reasonable period of
time before the filing and MLV has not reasonably objected thereto (provided,
however, that (A) the failure of MLV to make such objection shall not relieve
the Company of any obligation or liability hereunder, or affect MLV’s right to
rely on the representations and warranties made by the Company in this Agreement
and (B) the Company has no obligation to provide MLV any advance copy of such
filing or to provide MLV an opportunity to object to such filing if the filing
does not name MLV or does not relate to the transaction herein provided; and
provided, further, that the only remedy MLV shall have with respect to the
failure by the Company to provide MLV with such copy shall be to cease making
sales under this Agreement) and the Company will furnish to MLV at the time of
filing thereof a copy of any document that upon filing is deemed to be
incorporated by reference into the Registration Statement or Prospectus, except
for those documents available via EDGAR; and (iv) the Company will cause each
amendment or supplement to the Prospectus to be filed with the Commission as
required pursuant to the applicable paragraph of Rule 424(b) of the Securities
Act or, in the case of any document to be incorporated therein by reference, to
be filed with the Commission as required pursuant to the Exchange Act, within
the time period prescribed (the determination to file or not file any amendment
or supplement with the Commission under this Section 7(a), based on the
Company’s reasonable opinion or

 

18

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reasonable objections, shall be made exclusively by the Company).

 

b.                                      Notice of Commission Stop Orders.  The
Company will advise MLV, promptly after it receives notice or obtains knowledge
thereof, of the issuance or threatened issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement, of the
suspension of the qualification of the Placement Shares for offering or sale in
any jurisdiction, or of the initiation or threatening of any proceeding for any
such purpose; and it will promptly use its commercially reasonable efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such a
stop order should be issued. The Company will advise MLV promptly after it
receives any request by the Commission for any amendments to the Registration
Statement or any amendment or supplements to the Prospectus or any Issuer Free
Writing Prospectus or for additional information related to the offering of the
Placement Shares or for additional information related to the Registration
Statement, the Prospectus or any Issuer Free Writing Prospectus.

 

c.                                       Delivery of Prospectus; Subsequent
Changes.  During the Prospectus Delivery Period, the Company will comply with
all requirements imposed upon it by the Securities Act, as from time to time in
force, and to file on or before their respective due dates all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other
provision of or under the Exchange Act. If the Company has omitted any
information from the Registration Statement pursuant to Rule 430A under the
Securities Act, it will use its commercially reasonable efforts to comply with
the provisions of and make all requisite filings with the Commission pursuant to
said Rule 430A and to notify MLV promptly of all such filings. If during the
Prospectus Delivery Period any event occurs as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances then existing, not misleading, or if during
the Prospectus Delivery Period it is necessary to amend or supplement the
Registration Statement or Prospectus to comply with the Securities Act, the
Company will promptly notify MLV to suspend the offering of Placement Shares
during such period and the Company will promptly amend or supplement the
Registration Statement or Prospectus (at the expense of the Company) so as to
correct such statement or omission or effect such compliance; provided, however,
that the Company may delay the filing of any amendment or supplement, if in the
judgment of the Company, it is in the best interest of the Company.

 

d.                                      Listing of Placement Shares.  During the
Prospectus Delivery Period, the Company will use its commercially reasonable
efforts to cause the Placement Shares to be listed on the Exchange and to
qualify the Placement Shares for sale under the securities laws of such
jurisdictions in the United States as MLV reasonably designates and to continue
such qualifications in effect so long as required for the distribution of the
Placement Shares; provided, however, that the Company shall not be required in
connection therewith to qualify as a foreign corporation or dealer in securities
or file a general consent to service of process in any jurisdiction.

 

e.                                       Delivery of Registration Statement and
Prospectus.  The Company will furnish to MLV and its counsel (at the reasonable
expense of the Company) copies of the

 

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Registration Statement, the Prospectus (including all documents incorporated by
reference therein) and all amendments and supplements to the Registration
Statement or Prospectus that are filed with the Commission during the Prospectus
Delivery Period (including all documents filed with the Commission during such
period that are deemed to be incorporated by reference therein), in each case as
soon as reasonably practicable and in such quantities as MLV may from time to
time reasonably request and, at MLV’s request, will also furnish copies of the
Prospectus to each exchange or market on which sales of the Placement Shares may
be made; provided, however, that the Company shall not be required to furnish
any document (other than the Prospectus, exclusive of any document incorporated
by reference therein) to MLV to the extent such document is available on EDGAR.

 

f.                                        Earnings Statement.  The Company will
make generally available to its security holders as soon as practicable, but in
any event not later than 15 months after the end of the Company’s current fiscal
quarter, an earnings statement covering a 12-month period that satisfies the
provisions of Section 11(a) and Rule 158 of the Securities Act.

 

g.                                       Use of Proceeds.  The Company will use
the Net Proceeds as described in the Prospectus in the section entitled “Use of
Proceeds.”

 

h.                                      Notice of Other Sales.  Without the
prior written consent of MLV, the Company will not, directly or indirectly,
offer to sell, sell, contract to sell, grant any option to sell or otherwise
dispose of any Common Stock (other than the Placement Shares offered pursuant to
this Agreement) or securities convertible into or exchangeable for Common Stock,
warrants or any rights to purchase or acquire, Common Stock during the period
beginning on the date on which any Placement Notice is delivered to MLV
hereunder and ending on the third (3rd) Trading Day immediately following the
final Settlement Date with respect to Placement Shares sold pursuant to such
Placement Notice (or, if the Placement Notice has been terminated or suspended
prior to the sale of all Placement Shares covered by a Placement Notice, ending
on the date of such suspension or termination); and will not directly or
indirectly in any other “at-the-market,” equity line of credit or other similar
transaction pursuant to which securities are offered at a future determined
price, offer to sell, contract to sell, grant any option to sell or otherwise
dispose of any shares of Common Stock (other than the Placement Shares offered
pursuant to this Agreement) or securities convertible into or exchangeable for
Common Stock, warrants or any rights to purchase or acquire, Common Stock prior
to the termination of this Agreement; provided, however, that such restrictions
will not be required in connection with the Company’s issuance or sale of
(i) Common Stock, options to purchase shares of Common Stock or Common Stock
issuable upon the exercise of options, or other equity awards, pursuant to any
employee or director stock option, incentive or benefits plan, stock ownership
plan or dividend reinvestment plan (but not Common Stock subject to a waiver to
exceed plan limits in its dividend reinvestment plan) of the Company whether now
in effect or hereafter implemented; (ii) Common Stock issuable upon conversion
of securities or the exercise of warrants, options or other rights in effect or
outstanding, and disclosed in filings by the Company available on EDGAR or
otherwise in writing to MLV; (iii) Common Stock, or securities convertible into
or exercisable for Common Stock, or warrants or any rights to purchase or
acquire Common Stock offered and sold in a privately negotiated transaction to
vendors, customers, strategic partners or potential strategic partners or other
investors conducted in a manner so as not to be integrated with the offering of
Common Stock hereby, and Common Stock issuable upon conversion or

 

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exercise of such securities, warrants or rights.

 

i.                                          Change of Circumstances.  The
Company will, at any time during the pendency of a Placement Notice, advise MLV
promptly after it shall have received notice or obtained knowledge thereof, of
any information or fact that would alter or affect in any material respect any
opinion, certificate, letter or other document required to be provided to MLV
pursuant to this Agreement.

 

j.                                         Due Diligence Cooperation.  During
the term of this Agreement, the Company will cooperate with any reasonable due
diligence review conducted by MLV or its representatives in connection with the
transactions contemplated hereby, including, without limitation, providing
information and making available documents and senior corporate officers, during
regular business hours and at the Company’s principal offices as MLV may
reasonably request.

 

k.                                      Required Filings Relating to Placement
of Placement Shares.  The Company agrees that on such dates as the Securities
Act shall require, the Company will (i) file a prospectus supplement with the
Commission under the applicable paragraph of Rule 424(b) under the Securities
Act (each and every filing under Rule 424(b), a “Filing Date”), which prospectus
supplement will set forth, within the relevant period, the amount of Placement
Shares sold through MLV, the Net Proceeds to the Company and the compensation
payable by the Company to MLV with respect to such Placement Shares, and
(ii) deliver such number of copies of each such prospectus supplement to each
exchange or market on which such sales were effected as may be required by the
rules or regulations of such exchange or market.

 

l.                                          Representation Dates; Certificate. 
Each time during the term of this Agreement that the Company:

 

(i)             amends or supplements (other than a prospectus supplement
relating solely to an offering of securities other than the Placement Shares)
the Registration Statement or the Prospectus relating to the Placement Shares
(other than a prospectus supplement filed in accordance with Section 7(k) of
this Agreement) by means of a post-effective amendment, sticker, or supplement
but not by means of incorporation of documents by reference into the
Registration Statement or the Prospectus relating to the Placement Shares;

 

(ii)          files an annual report on Form 10-K under the Exchange Act
(including any Form 10-K/A containing amended financial information or a
material amendment to the previously filed Form 10-K);

 

(iii)       files its quarterly reports on Form 10-Q under the Exchange Act; or

 

(iv)      files a current report on Form 8-K containing amended financial
statements (other than information “furnished” pursuant to Items 2.02 or 7.01 of
Form 8-K or to provide disclosure pursuant to Item 8.01 of Form 8-K relating to
the reclassification of certain properties as discontinued operations in
accordance with Statement of Financial Accounting Standards No. 144) under the
Exchange Act;

 

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(Each date of filing of one or more of the documents referred to in clauses
(i) through (iv) shall be a “Representation Date.”)

 

the Company shall furnish MLV (but in the case of clause (iv) above only if MLV
reasonably determines that the information contained in such Form 8-K is
material) with a certificate, in the form attached hereto as Exhibit 7(1). The
requirement to provide a certificate under this Section 7(1) shall be waived for
any Representation Date occurring at a time at which no Placement Notice is
pending, which waiver shall continue until the earlier to occur of the date the
Company delivers a Placement Notice hereunder (which for such calendar quarter
shall be considered a Representation Date) and the next occurring Representation
Date on which the Company files its annual report on Form 10-K. Notwithstanding
the foregoing, (i) upon the delivery of the first Placement Notice hereunder and
(ii) if the Company subsequently decides to sell Placement Shares following a
Representation Date when the Company relied on such waiver and did not provide
MLV with a certificate under this Section 7(1), then before MLV sells any
Placement Shares, the Company shall provide MLV with a certificate, in the form
attached hereto as Exhibit 7(1), dated the date of the Placement Notice.

 

m.                                  Legal Opinion.  (i) On or prior to the date
of the first Placement Notice given hereunder and (ii) within seven (7) Trading
Days of each Representation Date with respect to which the Company is obligated
to deliver a certificate in the form attached hereto as Exhibit 7(l) for which
no waiver is applicable, the Company shall cause to be furnished to MLV the
written opinion of Sidley Austin LLP (“Company Counsel”), or other counsel
reasonably satisfactory to MLV, in form and substance reasonably satisfactory to
MLV and Company Counsel; provided, however, the Company shall be required to
furnish to MLV no more than one opinion hereunder per calendar quarter; provided
further that in lieu of such negative assurance for subsequent periodic filings
under the Exchange Act, counsel may furnish MLV with a letter (a “Reliance
Letter”) to the effect that MLV may rely on the negative assurance letter
previously delivered under this Section 7(m) to the same extent as if it were
dated the date of such letter (except that statements in such prior opinion
shall be deemed to relate to the Registration Statement and the Prospectus as
amended or supplemented as of the date of the Reliance Letter).

 

n.                                      Comfort Letter.  (1) On or prior to the
date of the first Placement Notice and (2) within seven (7) Trading Days
following each subsequent date the Company files an annual report on Form 10-K
under the Exchange Act, during the Prospectus Delivery Period and with respect
to which the Company is obligated to deliver a certificate in the form attached
hereto as Exhibit 7(l) for which no waiver is applicable, the Company shall
cause its independent registered public accounting firm to furnish MLV a letter
(the “Comfort Letter”). The Comfort Letter from the Company’s independent
registered public accounting firm shall be in a form and substance reasonably
satisfactory to MLV, (i) confirming that they are an independent public
accounting firm within the meaning of the Securities Act and the PCAOB,
(ii) stating, as of such date, the conclusions and findings of such firm with
respect to the financial information and other matters ordinarily covered by
accountants’ “comfort letters” to underwriters in connection with registered
public offerings (the first such letter, the “Initial Comfort Letter”) and
(iii) updating the Initial Comfort Letter with any information that would have
been included in the Initial Comfort Letter had it been given on such date and
modified as necessary to relate to the Registration Statement and the

 

22

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Prospectus, as amended and supplemented to the date of such letter.

 

o.                                      Market Activities.  The Company will
not, directly or indirectly, (i) take any action designed to cause or result in,
or that constitutes or would reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Placement Shares or (ii) sell, bid for, or
purchase the Placement Shares in violation of Regulation M, or pay anyone any
compensation for soliciting purchases of the Placement Shares other than MLV.

 

p.                                      Investment Company Act.  The Company
will conduct its affairs in such a manner so as to reasonably ensure that
neither it nor the Subsidiaries will be or become, at any time prior to the
termination of this Agreement, an “investment company,” as such term is defined
in the Investment Company Act.

 

q.                                      No Offer to Sell.  Other than an Issuer
Free Writing Prospectus approved in advance by the Company and MLV in its
capacity as agent hereunder pursuant to Section 23, neither MLV nor the Company
(including its agents and representatives, other than MLV in their capacity as
such) will make, use, prepare, authorize, approve or refer to any written
communication (as defined in Rule 405 under the Securities Act), required to be
filed with the Commission, that constitutes an offer to sell or solicitation of
an offer to buy Placement Shares hereunder.

 

r.                                         Sarbanes-Oxley Act.  The Company will
maintain and keep accurate books and records reflecting its assets and maintain
internal accounting controls in a manner designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP and
including those policies and procedures that (i) pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Company, (ii) provide reasonable assurance
that transactions are recorded as necessary to permit the preparation of the
Company’s consolidated financial statements in accordance with GAAP,
(iii) ensure that receipts and expenditures of the Company are being made only
in accordance with management’s and the Company’s directors’ authorization, and
(iv) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that could
have a material effect on its financial statements. The Company will maintain
such controls and other procedures, including, without limitation, those
required by Sections 302 and 906 of the Sarbanes-Oxley Act, and the applicable
regulations thereunder that are designed to ensure that information required to
be disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management,
including its principal executive officer and principal financial officer, or
persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure and to ensure that material information relating
to the Company or the Subsidiaries is made known to them by others within those
entities, particularly during

 

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the period in which such periodic reports are being prepared.

 

8.                                            Representations and Covenants of
MLV.  MLV represents and warrants that it is duly registered as a broker-dealer
under FINRA, the Exchange Act and the applicable statutes and regulations of
each state in which the Placement Shares will be offered and sold, except such
states in which MLV is exempt from registration or such registration is not
otherwise required. MLV shall continue, for the term of this Agreement, to be
duly registered as a broker-dealer under FINRA, the Exchange Act and the
applicable statutes and regulations of each state in which the Placement Shares
will be offered and sold, except such states in which MLV is exempt from
registration or such registration is not otherwise required, during the term of
this Agreement.  MLV shall comply with all applicable law and regulations,
including but not limited to Regulation M, in connection with the transactions
contemplated by this Agreement, including the issuance and sale through MLV of
the Placement Shares.

 

9.                                            Payment of Expenses.  Except as
otherwise provided in this Section 9, the Company will pay all expenses incident
to the performance of its obligations under this Agreement, including (i) the
preparation, filing, including any fees required by the Commission, and printing
of the Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment and supplement thereto and each Free
Writing Prospectus, in such number as MLV shall deem reasonably necessary,
(ii) the printing and delivery to MLV of this Agreement and such other documents
as may be required in connection with the offering, purchase, sale, issuance or
delivery of the Placement Shares, (iii) the preparation, issuance and delivery
of the certificates, if any, for the Placement Shares to MLV, including any
stock or other transfer taxes and any capital duties, stamp duties or other
duties or taxes payable upon the sale, issuance or delivery of the Placement
Shares to MLV, (iv) the fees and disbursements of the counsel, accountants and
other advisors to the Company, (v) the fees and disbursements of counsel to MLV
up to $35,000; (vi) the fees and expenses of the transfer agent and registrar
for the Common Stock, (vii) the filing fees incident to any review by FINRA of
the terms of the sale of the Placement Shares, and (viii) the fees and expenses
incurred in connection with the listing of the Placement Shares on the Exchange.

 

10.                                     Conditions to MLV’s Obligations.  The
obligations of MLV hereunder with respect to a Placement will be subject to the
continuing accuracy and completeness of the representations and warranties made
by the Company herein, to the due performance by the Company of its obligations
hereunder, to the completion by MLV of a due diligence review satisfactory to it
in its reasonable judgment, and to the continuing satisfaction (or waiver by MLV
in its sole discretion) of the following additional conditions:

 

a.                                      Registration Statement Effective.  The
Registration Statement shall have become effective and shall be available for
the sale of all Placement Shares contemplated to be issued by any Placement
Notice.

 

b.                                      No Material Notices.  None of the
following events shall have occurred and be continuing: (i) receipt by the
Company of any request for additional information from the Commission or any
other federal or state governmental authority during the period of effectiveness
of the Registration Statement the response to which

 

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would require any post-effective amendments or supplements to the Registration
Statement or the Prospectus; (ii) the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt by the Company of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Placement Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; or (iv) the occurrence of any
event that makes any material statement made in the Registration Statement or
the Prospectus or any material document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, the Prospectus
or documents so that, in the case of the Registration Statement, it will not
contain any materially untrue statement of a material fact or omit to state any
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 materially untrue statement of a material fact or omit to state any
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.

 

c.                                       No Misstatement or Material Omission. 
MLV shall not have advised the Company that the Registration Statement or
Prospectus, or any amendment or supplement thereto, contains an untrue statement
of fact that in MLV’s reasonable opinion based on advice of counsel is material,
or omits to state a fact that in MLV’s reasonable opinion based on advice of
counsel is material and is required to be stated therein or is necessary to make
the statements therein not misleading.

 

d.                                      Material Changes.  Except as
contemplated in the Prospectus, or disclosed in the Company’s reports filed with
the Commission, there shall not have been any Material Adverse Effect, or any
development that would reasonably be expected to cause a Material Adverse
Effect, or a downgrading in or withdrawal of the rating assigned to any of the
Company’s securities (other than asset backed securities) by any rating
organization or a public announcement by any rating organization that it has
under surveillance or review its rating of any of the Company’s securities
(other than asset backed securities), the effect of which, in the case of any
such action by a rating organization described above, in the reasonable judgment
of MLV (without relieving the Company of any obligation or liability it may
otherwise have), is so material as to make it impracticable or inadvisable to
proceed with the offering of the Placement Shares on the terms and in the manner
contemplated in the Prospectus.

 

e.                                       Legal Opinion.  MLV shall have received
the opinions of Company Counsel required to be delivered pursuant
Section 7(m) on or before the date on which such delivery of such opinions are
required pursuant to Section 7(m).

 

f.                                        Comfort Letter.  MLV shall have
received the Comfort Letter required to be delivered pursuant Section 7(n) on or
before the date on which such delivery of such letter is required pursuant to
Section 7(n).

 

g.                                       Representation Certificate.  MLV shall
have received the certificate required to be delivered pursuant to
Section 7(1) on or before the date on which delivery of such

 

25

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certificate is required pursuant to Section 7(1).

 

h.                                      No Suspension.  Trading in the Common
Stock shall not have been suspended on the Exchange and the Common Stock shall
not have been delisted from the Exchange.

 

i.                                          Other Materials.  On each date on
which the Company is required to deliver a certificate pursuant to Section 7(1),
the Company shall have furnished to MLV such appropriate further information,
certificates and documents as MLV may reasonably request and which are usually
and customarily furnished by an issuer of securities in connection with a
securities offering.

 

j.                                         Securities Act Filings Made.  All
filings with the Commission required by Rule 424 under the Securities Act to
have been filed prior to the issuance of any Placement Notice hereunder shall
have been made within the applicable time period prescribed for such filing by
Rule 424.

 

k.                                      Approval for Listing.  The Placement
Shares shall either have been approved for listing on the Exchange, subject only
to notice of issuance, or the Company shall have filed an application for
listing of the Placement Shares on the Exchange at, or prior to, the issuance of
any Placement Notice.

 

l.                                          No Termination Event.  There shall
not have occurred any event that would permit MLV to terminate this Agreement
pursuant to Section 13(a).

 

11.                                    Indemnification and Contribution.

 

(a)                                 Company Indemnification.  The Company agrees
to indemnify and hold harmless MLV, its partners, members, directors, officers,
employees and agents and each person, if any, who controls MLV within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act as
follows:

 

(i)                                          against any and all loss,
liability, claim and damage whatsoever and any reasonable and documented
expense, as incurred, joint or several, to the extent arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or any amendment thereto), or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading, or arising
out of any untrue statement or alleged untrue statement of a material fact
included in any related Issuer Free Writing Prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;

 

(ii)                                       against any and all loss, liability,
claim, damage whatsoever, and any reasonable and documented expense, as
incurred, joint or several, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or

 

26

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omission; provided that (subject to Section 11(d) below) any such settlement is
effected with the written consent of the Company, which consent shall not
unreasonably be delayed or withheld; and

 

(iii)                                    against any and all documented expense
whatsoever, as incurred (including the reasonable fees and disbursements of
counsel), reasonably incurred in investigating, preparing or defending against
any litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i) or (ii) above,

 

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made solely in
reliance upon and in conformity with written information furnished to the
Company by MLV expressly for use in the Registration Statement (or any amendment
thereto), or in any related Issuer Free Writing Prospectus or the Prospectus (or
any amendment or supplement thereto).

 

(b)                                 MLV Indemnification.  MLV agrees to
indemnify and hold harmless the Company and its directors and each officer of
the Company who signed the Registration Statement, and each person, if any, who
(i) controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act or (ii) is controlled by or is under common
control with the Company against any and all loss, liability, claim, damage and
reasonable and documented expense described in the indemnity contained in
Section 11(a), as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendments thereto), the Prospectus (or any amendment or
supplement thereto) or any Free Writing Prospectus in reliance upon and in
conformity with information relating to MLV and furnished to the Company in
writing by MLV expressly for use therein.

 

(c)                                  Procedure.  Any party that proposes to
assert the right to be indemnified under this Section 11 will, promptly after
receipt of notice of commencement of any action against such party in respect of
which a claim is to be made against an indemnifying party or parties under this
Section 11, notify each such indemnifying party of the commencement of such
action, enclosing a copy of all papers served, but the omission so to notify
such indemnifying party will not relieve the indemnifying party from (i) any
liability that it might have to any indemnified party otherwise than under this
Section 11 and (ii) any liability that it may have to any indemnified party
under the foregoing provision of this Section 11 unless, and only to the extent
that, such omission results in the forfeiture of substantive rights or defenses
by the indemnifying party. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the
indemnifying party will be entitled to participate in and, to the extent that it
elects by delivering written notice to the indemnified party a reasonable time,
but in no event more than ten (10) days after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action, with
counsel reasonably satisfactory to the indemnified party, and after notice from
the

 

27

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indemnifying party to the indemnified party of its election to assume the
defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly after the indemnifying party receives a written
invoice relating to fees, disbursements and other charges in reasonable detail.
An indemnifying party will not, in any event, be liable for any settlement of
any action or claim effected without its written consent. No indemnifying party
shall, without the prior written consent of each indemnified party, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated by this
Section 11 (whether or not any indemnified party is a party thereto), unless
such settlement, compromise or consent (1) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (2) does not include a statement as to or
an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.

 

(d)                                 Contribution.  In order to provide for just
and equitable contribution in circumstances in which the indemnification
provided for in the foregoing paragraphs of this Section 11 is applicable in
accordance with its terms but for any reason is held to be unavailable from the
Company or MLV, the Company and MLV will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than MLV,
such as persons who control the Company within the meaning of the Securities Act
or the Exchange Act, officers of the Company who signed the Registration
Statement and directors of the Company, who also may be liable for contribution)
to which the Company and MLV may be subject in such proportion as shall be
appropriate to reflect the relative benefits received by the Company on the one
hand and MLV on the other hand. The relative benefits received by the Company

 

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on the one hand and MLV on the other hand shall be deemed to be in the same
proportion as the total net proceeds from the sale of the Placement Shares
(before deducting expenses) received by the Company bear to the total
compensation received by MLV (before deducting expenses) from the sale of
Placement Shares on behalf of the Company. If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is appropriate to
reflect not only the relative benefits referred to in the foregoing sentence but
also the relative fault of the Company, on the one hand, and MLV, on the other
hand, with respect to the statements or omission that resulted in such loss,
claim, liability, expense or damage, or action in respect thereof, as well as
any other relevant equitable considerations with respect to such offering.  Such
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or MLV, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and MLV agree that it would not be just and equitable if
contributions pursuant to this Section 11(d) were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense, or
damage, or action in respect thereof, referred to above in this
Section 11(d) shall be deemed to include, for the purpose of this Section 11(d),
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim to the
extent consistent with Section 11(c) hereof. Notwithstanding the foregoing
provisions of this Section 11(d), MLV shall not be required to contribute any
amount in excess of the commissions received by it under this Agreement and no
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 11(d), any person who controls a party to this Agreement within the
meaning of the Securities Act or the Exchange Act, and any officers, directors,
partners, employees or agents of MLV, will have the same rights to contribution
as that party, and each officer and director of the Company who signed the
Registration Statement will have the same rights to contribution as the Company,
subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 11(d), will notify any such party or parties from whom
contribution may be sought, but the omission to so notify will not relieve that
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 11(d) except to the extent that the
failure to so notify such other party materially prejudiced the substantive
rights or defenses of the party from whom contribution is sought. Except for a
settlement entered into pursuant to the last sentence of Section 11(c) hereof,
no party will be liable for contribution with respect to any action or claim
settled without its written consent if such consent is required pursuant to
Section 11(c) hereof.

 

12.                                    Representations and Agreements to Survive
Delivery.  The indemnity and contribution agreements contained in Section 11 of
this Agreement and all representations and warranties of the Company herein or
in certificates delivered pursuant hereto shall survive, as

 

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of their respective dates, regardless of (i) any investigation made by or on
behalf of MLV, any controlling persons, or the Company (or any of their
respective officers, directors or controlling persons), (ii) delivery and
acceptance of the Placement Shares and payment therefor or (iii) any termination
of this Agreement.

 

13.                                    Termination.

 

a.                                      MLV may terminate this Agreement, by
notice to the Company, as hereinafter specified at any time (1) if there has
been, since the time of execution of this Agreement or since the date as of
which information is given in the Prospectus, any Material Adverse Effect, or
any development that is reasonably likely to have a Material Adverse Effect or,
in the sole judgment of MLV, is material and adverse and makes it impractical or
inadvisable to market the Placement Shares or to enforce contracts for the sale
of the Placement Shares, (2) if there has occurred any material adverse change
in the financial markets in the United States or the international financial
markets, any outbreak of hostilities or escalation thereof or other calamity or
crisis or any change or development involving a prospective change in national
or international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of MLV, impracticable or
inadvisable to market the Placement Shares or to enforce contracts for the sale
of the Placement Shares, (3) if trading in the Common Stock has been suspended
or limited by the Commission or the Exchange, or if trading generally on the
Exchange has been suspended or limited, or minimum prices for trading have been
fixed on the Exchange, (4) if any suspension of trading of any securities of the
Company on any exchange or in the over-the-counter market shall have occurred
and be continuing, (5) if a major disruption of securities settlements or
clearance services in the United States shall have occurred and be continuing,
or (6) if a banking moratorium has been declared by either U.S. Federal or New
York authorities. Any such termination shall be without liability of any party
to any other party except that the provisions of Section 9 (Payment of
Expenses), Section 11 (Indemnification and Contribution), Section 12
(Representations and Agreements to Survive Delivery), Section 18 (Governing Law
and Time; Waiver of Jury Trial) and Section 19 (Consent to Jurisdiction) hereof
shall remain in full force and effect notwithstanding such termination. If MLV
elects to terminate this Agreement as provided in this Section 13(a), MLV shall
provide the required notice as specified in Section 14 (Notices).

 

b.                                      The Company shall have the right, by
giving ten (10) days’ notice as hereinafter specified to terminate this
Agreement in its sole discretion at any time after the date of this Agreement.
Any such termination shall be without liability of any party to any other party
except that the provisions of Section 9 (Payment of Expenses), Section 11
(Indemnification and Contribution), Section 12 (Representations and Agreements
to Survive Delivery), Section 18 (Governing Law and Time; Waiver of Jury Trial)
and Section 19 (Consent to Jurisdiction) hereof shall remain in full force and
effect notwithstanding such termination.

 

c.                                       MLV shall have the right, by giving ten
(10) days’ notice as hereinafter specified to terminate this Agreement in its
sole discretion at any time after the date of this Agreement. Any such
termination shall be without liability of any party to any other party except
that the provisions of Section 9 (Payment of Expenses), Section 11

 

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(Indemnification and Contribution), Section 12 (Representations and Agreements
to Survive Delivery), Section 18 (Governing Law and Time; Waiver of Jury Trial)
and Section 19 (Consent to Jurisdiction) hereof shall remain in full force and
effect notwithstanding such termination.

 

d.                                      Unless earlier terminated pursuant to
this Section 13, this Agreement shall automatically terminate upon the issuance
and sale of all of the Placement Shares through MLV on the terms and subject to
the conditions set forth herein except that the provisions of Section 9 (Payment
of Expenses), Section 11 (Indemnification and Contribution), Section 12
(Representations and Agreements to Survive Delivery), Section 18 (Governing Law
and Time; Waiver of Jury Trial) and Section 19 (Consent to Jurisdiction) hereof
shall remain in full force and effect notwithstanding such termination.

 

e.                                       This Agreement shall remain in full
force and effect unless terminated pursuant to Sections 13(a), (b), (c), or
(d) above or otherwise by mutual agreement of the parties; provided, however,
that any such termination by mutual agreement shall in all cases be deemed to
provide that Section 9 (Payment of Expenses), Section 11 (Indemnification and
Contribution), Section 12 (Representations and Agreements to Survive Delivery),
Section 18 (Governing Law and Time; Waiver of Jury Trial) and Section 19
(Consent to Jurisdiction) shall remain in full force and effect. Upon
termination of this Agreement, the Company shall not have any liability to MLV
for any discount, commission or other compensation with respect to any Placement
Shares not otherwise sold by MLV under this Agreement.

 

f.                                        Any termination of this Agreement
shall be effective on the date specified in such notice of termination;
provided, however, that such termination shall not be effective until the close
of business on the date of receipt of such notice by MLV or the Company, as the
case may be. If such termination shall occur prior to the Settlement Date for
any sale of Placement Shares, such Placement Shares shall settle in accordance
with the provisions of this Agreement.

 

14.                         Notices.  All notices or other communications
required or permitted to be given by any party to any other party pursuant to
the terms of this Agreement shall be in writing, unless otherwise specified, and
if sent to MLV, shall be delivered to:

 

MLV & Co. LLC

1251 Avenue of the Americas, 41st Floor

New York, New York 10020

Attention:  General Counsel

Telephone:  (212) 542-5870

Email:  dcolucci@mlvco.com

 

with a copy to:

 

Reed Smith LLP

599 Lexington Avenue

New York, New York 10022

 

31

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Attention:  Daniel I. Goldberg

Telephone:  (212) 549-0380

Email:  dgoldberg@reedsmith.com

 

and if to the Company, shall be delivered to:

 

ZaZa Energy Corporation

1301 McKinney Street, Suite 2850

Houston, Texas 77010

Attention:  Scott Gaille, Chief Compliance Officer & General Counsel

Telephone: (713) 595-1900

Email: scott.gaille@zazaenergy.com

 

with a copy to:

 

Sidley Austin LLP
1000 Louisiana, Suite 6000
Houston, Texas  77002
Attention:  J. Mark Metts
Telephone:  (713) 495-4501
Email:  mmetts@sidley.com

 

Each party to this Agreement may change such address for notices by sending to
the parties to this Agreement written notice of a new address for such purpose.
Each such notice or other communication shall be deemed given (i) when delivered
personally, by email, or by verifiable facsimile transmission (with an original
to follow) on or before 4:30 p.m., New York City time, on a Business Day or, if
such day is not a Business Day, on the next succeeding Business Day, (ii) on the
next Business Day after timely delivery to a nationally-recognized overnight
courier and (iii) on the Business Day actually received if deposited in the U.S.
mail (certified or registered mail, return receipt requested, postage prepaid).
For purposes of this Agreement, “Business Day” shall mean any day on which the
Exchange and commercial banks in the City of New York are open for business.

 

An electronic communication (“Electronic Notice”) shall be deemed written notice
for purposes of this Section 14 if sent to the electronic mail address specified
by the receiving party under separate cover. Electronic Notice shall be deemed
received at the time the party sending Electronic Notice receives confirmation
of receipt by the receiving party. Any party receiving Electronic Notice may
request and shall be entitled to receive the notice on paper, in a nonelectronic
form (“Nonelectronic Notice”) which shall be sent to the requesting party within
ten (10) days of receipt of the written request for Nonelectronic Notice.

 

15.                         Successors and Assigns.  This Agreement shall inure
to the benefit of and be binding upon the Company and MLV and their respective
successors and the affiliates, controlling persons, partners, members, officers,
directors, employees and

 

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agents referred to in Section 11 hereof. References to any of the parties
contained in this Agreement shall be deemed to include the successors and
permitted assigns of such party. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. Neither party may assign its rights or obligations under this
Agreement without the prior written consent of the other party.

 

16.                         Adjustments for Stock Splits.  The parties
acknowledge and agree that all share-related numbers contained in this Agreement
shall be adjusted to take into account any share consolidation, stock split,
stock dividend, corporate domestication or similar event effected with respect
to the Placement Shares.

 

17.                         Entire Agreement; Amendment; Severability.  This
Agreement (including all schedules and exhibits attached hereto and Placement
Notices issued pursuant hereto) constitutes the entire agreement of the Parties
with respect to the subject matter hereof and thereof and supersedes all other
prior and contemporaneous agreements and undertakings, both written and oral,
among the parties hereto with regard to the subject matter hereof and thereof.
Neither this Agreement nor any term hereof may be amended except pursuant to a
written instrument executed by the Company and MLV. In the event that any one or
more of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable as written by a court of
competent jurisdiction, then such provision shall be given full force and effect
to the fullest possible extent that it is valid, legal and enforceable, and the
remainder of the terms and provisions herein shall be construed as if such
invalid, illegal or unenforceable term or provision was not contained herein,
but only to the extent that giving effect to such provision and the remainder of
the terms and provisions hereof shall be in accordance with the intent of the
parties as reflected in this Agreement.

 

18.                         GOVERNING LAW AND TIME; WAIVER OF JURY TRIAL.  THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. THE COMPANY AND MLV EACH
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

19.                         CONSENT TO JURISDICTION.  EACH PARTY HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH ANY TRANSACTION
CONTEMPLATED HEREBY, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN
ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO
THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM OR

 

33

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THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF
(CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED) TO SUCH PARTY AT THE
ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH
SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.

 

20.                         Use of Information.  MLV may not use any information
gained in connection with this Agreement and the transactions contemplated by
this Agreement, including due diligence, to advise any party with respect to
transactions not expressly approved by the Company.

 

21.                         Counterparts.  This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Delivery of an
executed Agreement by one party to the other may be made by facsimile
transmission, email or pdf.

 

22.                         Effect of Headings.  The section and
Exhibit headings herein are for convenience only and shall not affect the
construction hereof.

 

23.                         Permitted Free Writing Prospectuses.  The Company
represents, warrants and agrees that, unless it obtains the prior consent of
MLV, and MLV represents, warrants and agrees that, unless it obtains the prior
consent of the Company, it has not made and will not make any offer relating to
the Placement Shares that would constitute an Issuer Free Writing Prospectus, or
that would otherwise constitute a “free writing prospectus,” as defined in
Rule 405, required to be filed with the Commission. Any such free writing
prospectus consented to by MLV or by the Company, as the case may be, is
hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company
represents and warrants that it has treated and agrees that it will treat each
Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as
defined in Rule 433, and has complied and will comply with the requirements of
Rule 433 applicable to any Permitted Free Writing Prospectus, including timely
filing with the Commission where required, legending and record keeping. For the
purposes of clarity, the parties hereto agree that all free writing
prospectuses, if any, listed in Exhibit 23 hereto are Permitted Free Writing
Prospectuses.

 

24.                         Absence of Fiduciary Relationship.  The Company
acknowledges and agrees that:

 

a.                                      MLV is acting solely as agent in
connection with the public offering of the Placement Shares and in connection
with each transaction contemplated by this Agreement and the process leading to
such transactions, and no fiduciary or advisory relationship between the Company
or any of its respective affiliates, stockholders (or other equity holders),
creditors or employees or any other party, on the one hand, and MLV, on the
other hand, has been or will be created in respect of any of the transactions
contemplated by this Agreement, irrespective of whether or not MLV has advised
or is advising the Company on

 

34

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other matters, and MLV has no obligation to the Company with respect to the
transactions contemplated by this Agreement except the obligations expressly set
forth in this Agreement;

 

b.                                      it is capable of evaluating and
understanding, and understands and accepts, the terms, risks and conditions of
the transactions contemplated by this Agreement;

 

c.                                       MLV has not provided any legal,
accounting, regulatory or tax advice with respect to the transactions
contemplated by this Agreement and it has consulted its own legal, accounting,
regulatory and tax advisors to the extent it has deemed appropriate;

 

d.                                      it is aware that MLV and its affiliates
are engaged in a broad range of transactions which may involve interests that
differ from those of the Company and MLV has no obligation to disclose such
interests and transactions to the Company by virtue of any fiduciary, advisory
or agency relationship or otherwise; and

 

e.                                       it waives, to the fullest extent
permitted by law, any claims it may have against MLV for breach of fiduciary
duty or alleged breach of fiduciary duty in connection with the sale of
Placement Shares under this Agreement and agrees that MLV shall not have any
liability (whether direct or indirect, in contract, tort or otherwise) to it in
respect of such a fiduciary duty claim or to any person asserting a fiduciary
duty claim on its behalf or in right of it or the Company, employees or
creditors of Company, other than in respect of MLV’s obligations under this
Agreement and to keep information provided by the Company to MLV and MLV’s
counsel confidential to the extent not otherwise publicly-available.

 

25.                         Definitions.

 

As used in this Agreement, the following terms have the respective meanings set
forth below:

 

“Applicable Time” means (i) each Representation Date and (ii) the time of each
sale of any Placement Shares pursuant to this Agreement.

 

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as
defined in Rule 433, relating to the Placement Shares that (1) is required to be
filed with the Commission by the Company, (2) is a “road show” that is a
“written communication” within the meaning of Rule 433(d)(8)(i) whether or not
required to be filed with the Commission, or (3) is exempt from filing pursuant
to Rule 433(d)(5)(i) because it contains a description of the Placement Shares
or of the offering that does not reflect the final terms, in each case in the
form filed or required to be filed with the Commission or, if not required to be
filed, in the form retained in the Company’s records pursuant to
Rule 433(g) under the Securities Act.

 

“Rule 164,” “Rule 172,” “Rule 405,” “Rule 415,” “Rule 424,” “Rule 424(b),”
“Rule 430A, “Rule 430B,” and “Rule 433” refer to such rules under the Securities
Act.

 

All references in this Agreement to financial statements and schedules and other
information that is “contained,” “included” or “stated” in the Registration

 

35

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Statement or the Prospectus (and all other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other
information that is incorporated by reference in the Registration Statement or
the Prospectus, as the case may be.

 

All references in this Agreement to the Registration Statement, the Prospectus
or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to EDGAR; all references in
this Agreement to any Issuer Free Writing Prospectus (other than any Issuer Free
Writing Prospectuses that, pursuant to Rule 433, are not required to be filed
with the Commission) shall be deemed to include the copy thereof filed with the
Commission pursuant to EDGAR; and all references in this Agreement to
“supplements” to the Prospectus shall include, without limitation, any
supplements, “wrappers” or similar materials prepared in connection with any
offering, sale or private placement of any Placement Shares by MLV outside of
the United States.

 

[Remainder of the page intentionally left blank]

 

36

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If the foregoing correctly sets forth the understanding between the Company and
MLV, please so indicate in the space provided below for that purpose, whereupon
this letter shall constitute a binding agreement between the Company and MLV.

 

 

 

Very truly yours,

 

 

 

 

 

ZAZA ENERGY CORPORATION

 

 

 

 

 

By:

/s/ Todd A. Brooks

 

 

Todd A. Brooks

 

 

President & Chief Executive Officer

 

[Signature Page to ZaZa Energy Corporation At-the-Market Issuance Sales
Agreement]

 

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ACCEPTED as of the date first-above written:

 

 

 

MLV & CO. LLC

 

 

 

 

 

By:

/s/ Dean Colucci

 

 

Dean Colucci

 

 

President & Chief Operating Officer

 

[Signature Page to ZaZa Energy Corporation At-the-Market Issuance Sales
Agreement]

 

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