Exhibit 10.4
TETON ENERGY CORPORATION
964,060 Shares of Common Stock
($0.001 Par Value)
337,421 Warrants
PLACEMENT AGENCY AGREEMENT
July 19, 2007
Commonwealth Associates, LP
830 Third Avenue, 8th floor
New York, NY 10022
Ferris, Baker Watts, Incorporated
100 Light Street, 8th floor
Baltimore, MD 21202
          The undersigned, Teton Energy Corporation, a Delaware corporation (the
“Company”), hereby addresses Commonwealth Associates, LP (“COMW”), Ferris, Baker
Watts, Incorporated (“FBW”) (each, the “Placement Agent” and collectively, the
“Placement Agents”) and confirms its agreement with the Placement Agents as
follows:
     1. Description of Securities. The Company proposes, subject to the terms
and conditions stated herein, to issue and sell an aggregate of (i) 964,060
shares (the “Offered Common Shares”) of the Company’s common stock, $0.001 par
value per share (the “Common Stock”) and (ii) 337,421 warrants to purchase
Common Stock (the “Offered Warrants” in the form attached hereto as Exhibit A),
to certain investors (each, an “Investor” and, collectively, the “Investors”),
in a direct offering under its Registration Statement on Form S-3 (Registration
No. 333-132451). The shares of Common Stock issuable upon exercise of the
Offered Warrants are hereinafter referred to as the “Offered Warrant Shares.”
The Offered Common Shares and the Offered Warrants are hereinafter referred to
as the “Securities.” Subject to the provisions of Section 2, below, the Company
desires to engage the Placement Agents as its placement agents in connection
with such issuance and sale. The Securities are more fully described in the
Prospectus hereinafter defined.
     2. Agreement to Act as Placement Agents; Delivery and Payment. On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, the Placement Agents agree to act
as the Company’s exclusive placement agents to assist the Company, on a best
efforts basis, in connection with the proposed

 

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issuance and sale by the Company of the Securities to the Investors. The Company
expressly acknowledges and agrees that this Agreement does not in any way
constitute a commitment by the Placement Agents or either of them to purchase
any of the Securities and does not ensure successful placement of the Securities
or any portion thereof. The Company shall pay to the Placement Agents
concurrently with the Closing (as defined below) an aggregate of (i) an amount
in cash equal to 7.0% of the gross purchase price of the Securities, which gross
purchase price does not include any consideration that may be paid to the
Company in the future upon exercise of the Offered Warrants, and (ii) such
number of Common Stock purchase warrants (the “Placement Warrants”) equal to 8%
of the number of Offered Common Shares purchased from the Company (collectively
with the cash amount set forth in (i) above, the “Placement Fee”). The terms of
the Placement Warrants shall be identical to the terms of the Offered Warrants.
The shares of Common Stock issuable upon exercise of the Placement Warrants are
hereinafter referred to as the “Placement Warrant Shares.” The Placement Fee
shall be split equally between COMW and FBW.
          Upon satisfaction of the conditions set forth in Section 5 hereof, the
closing of the sale and issuance of the Securities (the “Closing”) shall occur
at the offices of Gersten Savage LLP, 600 Lexington Avenue, 9th Floor, New York,
New York, or at such other place as may be agreed upon between the Placement
Agents and the Company (the “Place of Closing”), at 10:00 a.m., New York City
time, on July 25, 2007, or at such other time and date as the Placement Agent
and the Company may agree, such time and date of payment and delivery being
herein called the “Closing Date.”
          The Offered Common Shares will be settled through the facilities of
The Depository Trust Company’s DWAC system and the Offered Warrants and
Placement Warrants will be issued in registered physical certificated form.
          The Company acknowledges and agrees that each Placement Agent shall
act as an independent contractor, and not as a fiduciary, and any duties of the
Placement Agent with respect to investment banking services to the Company,
including the offering of the Securities contemplated hereby (including in
connection with determining the terms of the offering), shall be contractual in
nature, as expressly set forth herein, and shall be owed solely to the Company.
Each party disclaims any intention to impose any fiduciary or similar duty on
the other. Additionally, the Placement Agents have not advised, nor are
advising, the Company or any other person as to any legal, tax, investment,
accounting or regulatory matters in any jurisdiction with respect to the
transactions contemplated hereby. The Company shall consult with its own
advisors concerning such matters and shall be responsible for making its own
independent investigation and appraisal of the transactions contemplated hereby,
and the Placement Agents shall have no responsibility or liability to the
Company with respect thereto. Any review by the Placement Agents of the Company,
the transactions contemplated hereby or other matters relating to such
transactions has been and will be performed solely for the benefit of the
Placement Agents and has not been and shall not be on behalf of the Company or
any other person. It is understood that the Placement Agents have not and will
not be rendering an opinion to the Company as to the fairness of the terms of
the offering. Notwithstanding anything in this Agreement to the contrary, the
Company acknowledges that the Placement Agents may have financial interests in
the success of the offering contemplated hereby that are not limited to the
Placement Fee. The Company hereby waives and releases, to the fullest extent
permitted by law,

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any claims that the Company may have against the Placement Agents with respect
to any breach or alleged breach of fiduciary duty.
          It is understood that the Company proposes to offer the Securities to
the Investors upon the terms and conditions set forth in the Registration
Statement (hereinafter defined).
     3. Representations, Warranties and Agreements of the Company.
          (a) The Company represents and warrants to and agrees with the
Placement Agents and each of them as of the date hereof and as of the Closing
Date and any other date specified below, that:
          (i) At the time of filing the Registration Statement on Form S-3 (File
No. 333-132451), the Company met the requirements for use of Form S-3 under the
1933 Act for a primary offering. A Registration Statement on Form S-3
(Registration No. 333-132451) with respect to the Securities, including a base
prospectus (the “Base Prospectus”), and such amendments to such registration
statement as may have been required to the date of this Agreement, has been
carefully prepared by the Company pursuant to and in conformity with the
requirements of the Securities Act of 1933, as amended (the “1933 Act”), and the
rules and regulations thereunder (the “1933 Act Rules and Regulations”) of the
Securities and Exchange Commission (the “SEC”) and has been filed with the SEC
under the 1933 Act. Such registration statement has been declared effective by
the SEC. Copies of such registration statement, including any amendments
thereto, each related preliminary prospectus (meeting the requirements of
Rule 430, 430A or 430B of the 1933 Act Rules and Regulations) contained therein,
and the exhibits, financial statements and schedules thereto have heretofore
been delivered by the Company to the Placement Agent (it being understood among
the parties hereto that any reference to “delivery,” “furnishing” or similar
words or phrases by the Company to the Placement Agent of any information that
is on file with the SEC will be deemed to be so delivered in the absence of an
express request from the Placement Agent). A final prospectus supplement
containing information permitted to be omitted at the time of effectiveness by
Rule 430A or 430B of the 1933 Act Rules and Regulations will be filed promptly
by the Company with the SEC in accordance with Rule 424(b) of the 1933 Act Rules
and Regulations. The term “Registration Statement” as used herein means the
registration statement as amended at the time was declared effective by the SEC
under the 1933 Act (the “Effective Date”), including financial statements, all
exhibits and all documents incorporated by reference therein and, if applicable,
the information deemed to be included by Rule 430A or 430B of the 1933 Act Rules
and Regulations. If an abbreviated registration statement is prepared and filed
with the SEC in accordance with Rule 462(b) under the 1933 Act (an “Abbreviated
Registration Statement”), the term “Registration Statement” as used in this
Agreement includes the Abbreviated Registration Statement. The term “Prospectus”
as used herein means, together with the Base Prospectus, the one or more final
prospectus supplements as filed with the SEC in connection with the offering of
the Securities pursuant to Rule 424(b) of the 1933 Act Rules and Regulations,
including the documents incorporated by reference therein. The term “Preliminary
Prospectus” as used herein shall mean one or more preliminary prospectuses in
connection with the offering of the Securities as contemplated by Rule

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430, 430A or 430B of the 1933 Act Rules and Regulations included at any time in
the Registration Statement, including the Base Prospectus and any preliminary
prospectus supplement in connection with the offering of the Securities, and
including in each case the documents incorporated by reference therein. The term
“Free Writing Prospectus” as used herein shall have the meaning set forth in
Rule 405 of the 1933 Act. The term “Issuer Free Writing Prospectus” as used
herein shall have the meaning set forth in Rule 433 of the 1933 Act Rules and
Regulations. The term “Disclosure Package” as used herein shall mean the
Preliminary Prospectus as most recently amended or supplemented prior to the
Initial Time of Sale (as defined below) together with the Issuer Free Writing
Prospectuses identified in Schedule I hereto, if any, and any other Free Writing
Prospectus that the parties hereto shall hereafter expressly agree to treat as
part of the Disclosure Package. The Preliminary Prospectus, and, if any, any
Issuer Free Writing Prospectus required to be filed pursuant to Rule 433(d) of
the 1933 Act Rules and Regulations and the Prospectus delivered to the Placement
Agent for use in connection with the offering of the Securities have been and
will be identical to the respective versions thereof transmitted to the SEC for
filing via the Electronic Data Gathering Analysis and Retrieval System
(“EDGAR”), except to the extent permitted by Regulation S-T. For purposes of
this Agreement, the words “amend,” “amendment,” “amended,” “supplement” or
“supplemented” with respect to the Registration Statement, the Prospectus, any
Free Writing Prospectus or the Disclosure Package shall mean amendments or
supplements to the Registration Statement, the Prospectus, any Free Writing
Prospectus or the Disclosure Package, as the case may be, as well as documents
filed after the date of this Agreement and prior to the completion of the
distribution of the Securities and incorporated by reference therein as
described above.
          (ii) Neither the SEC nor any state or other jurisdiction or other
regulatory body has issued, and neither is, to the knowledge of the Company,
threatening to issue, any stop order under the 1933 Act or other order
suspending the effectiveness of the Registration Statement (as amended or
supplemented) or preventing or suspending the use of any Preliminary Prospectus,
Issuer Free Writing Prospectus, the Disclosure Package or the Prospectus or
suspending the qualification or registration of the Securities for offering or
sale in any jurisdiction nor instituted or, to the knowledge of the Company,
threatened to institute proceedings for any such purpose. The Preliminary
Prospectus at its date of issue and as of 5:00 p.m. New York City time on the
date hereof (the “Initial Time of Sale”), the Registration Statement at each
effective date and the Initial Time of Sale, and the Prospectus and any
amendments or supplements thereto or to the Registration Statement when they are
filed with the SEC or become effective, as the case may be, contain or will
contain, as the case may be, all statements that are required to be stated
therein by, and in all material respects conform or will conform, as the case
may be, to the requirements of, the 1933 Act and the 1933 Act Rules and
Regulations. Neither the Registration Statement nor any amendment thereto, as of
the applicable effective date, contains or will contain, as the case may be, any
untrue statement of a material fact or omits or will omit to state any material
fact required to be stated therein or necessary to make the statements therein,
not misleading. Neither the Preliminary Prospectus, the Prospectus nor any
supplement thereto contains or will contain, as the case may be, any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary to make the statements therein, in

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the light of the circumstances under which they were made, not misleading.
Neither the Disclosure Package nor any supplement thereto, at the Initial Time
of Sale, contains or will contain, as the case may be, any untrue statement of a
material fact or omits or will 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. Notwithstanding the
foregoing, the Company makes no representation or warranty as to information
contained in or omitted from the Registration Statement, the Disclosure Package
or the Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company relating to the
Placement Agents by or on behalf of the Placement Agents expressly for use in
the preparation thereof (as provided in Section 12 hereof). There is no
contract, agreement, understanding or arrangement, whether written or oral, or
document required to be described in the Registration Statement, Disclosure
Package or Prospectus or to be filed as an exhibit to the Registration Statement
that is not described or filed as required. The documents incorporated by
reference in the Disclosure Package or the Prospectus at the time they were
filed with the SEC, complied in all material respects with the requirements of
the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the rules
and regulations adopted by the SEC thereunder (the “1934 Act Rules and
Regulations”). Any future documents incorporated by reference so filed, when
they are filed, will comply in all material respects with the requirements of
the 1934 Act and the 1934 Act Rules and Regulations; no such incorporated
document contained or will contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and, when read together and with the
other information in each of the Disclosure Package and the Prospectus, at the
time the Registration Statement became effective, at the Initial Time of Sale
and at the Closing Date, each such incorporated document did not or will not, as
the case may be, 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.
          (iii) The Company is eligible to use Issuer Free Writing Prospectuses
in connection with the offering of the Securities pursuant to Rules 164 and 433
of the 1933 Act. Any Issuer Free Writing Prospectus that the Company is required
to file pursuant to Rule 433(d) of the 1933 Act Rules and Regulations has been,
or will be, timely filed with the SEC in accordance with the requirements of the
1933 Act Rules and Regulations. Each Issuer Free Writing Prospectus that the
Company has filed, or is required to file, pursuant to Rule 433(d) of the 1933
Act or that was prepared by or on behalf of or used by the Company complies or
will comply in all material respects with the requirements of the 1933 Act Rules
and Regulations, including but not limited to legending and recordkeeping
requirements. Except for the Issuer Free Writing Prospectuses, if any,
identified in Schedule I hereto, the Company has not prepared, used or referred
to, and will not, without your prior consent, prepare, use or refer to any Free
Writing Prospectus. Each Issuer Free Writing Prospectus, as of its issue date
and at all times through the completion of the offering and sale of the
Securities, did not, does not and will not include any information that
conflicted, conflicts or will conflict with the information contained in the
Registration Statement. The Company filed the Registration Statement with the
SEC before using any Free Writing Prospectus. The Company has satisfied and

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will satisfy the conditions of Rule 433 of the 1933 Act Rules and Regulations
such that any electronic road show need not be filed with the SEC.
          (iv) This Agreement has been duly authorized, executed and delivered
by the Company and constitute a valid and legally binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally and by general principles of equity.
          (v) The Company and its Subsidiaries have been duly organized and are
validly existing as corporations in good standing under the laws of the states
or other jurisdictions in which they are incorporated, with full power and
authority (corporate and other) to own, lease and operate their properties and
conduct their businesses as described in each of the Disclosure Package and the
Prospectus and, with respect to the Company, to execute and deliver, and perform
the Company’s obligations under, this Agreement; the Company and its
Subsidiaries are duly qualified to do business as foreign corporations in good
standing in each state or other jurisdiction in which their ownership or leasing
of property or conduct of business legally requires such qualification, except
where the failure to be so qualified, individually or in the aggregate, would
not have a Material Adverse Effect. The term “Material Adverse Effect” as used
herein means any material adverse effect on the condition (financial or other),
net worth, business, affairs, management, prospects, results of operations or
cash flow of the Company and its Subsidiaries, taken as a whole. The Company has
no significant subsidiaries (as such term is defined in Rule 1-02(w) of
Regulation S-X promulgated by the Commission) other than those Subsidiaries
listed on Schedule II hereto (the “Subsidiaries”).
          (vi) Neither the Company nor any of its Subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Disclosure Package any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree otherwise than as set forth in each of the
Disclosure Package and the Prospectus and, since the respective dates as of
which information is given in the Disclosure Package, there has not been any
change in the capital stock or long-term debt of the Company or any of its
Subsidiaries or any Material Adverse Change, or any development involving a
prospective Material Adverse Change, otherwise than as set forth in each of the
Disclosure Package and the Prospectus. The term “Material Adverse Change” as
used herein means any change that has a Material Adverse Effect.
          (vii) The issuance and sale of the Securities and the execution,
delivery and performance by the Company of this Agreement, and the consummation
of the transactions herein contemplated, will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or any of its
Subsidiaries under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of its

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Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound or to which any of the properties or assets of the Company or any of its
Subsidiaries is subject, except to such extent as, individually or in the
aggregate, does not have a Material Adverse Effect, nor will such action result
in any violation of the provisions of the Company’s certificate of incorporation
or bylaws or any statute, rule, regulation or other law, or any order or
judgment, of any court or governmental agency or body having jurisdiction over
the Company or any of its Subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement, the issuance and sale of
the Securities or the consummation of the transactions contemplated hereby,
except such as have been, or will be prior to the Closing Date, obtained under
the 1933 Act or as may be required by the National Association of Securities
Dealers, Inc. (the “NASD”) and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the Securities
to the Investors.
          (viii) The Company has duly and validly authorized capital stock as
set forth in each of the Disclosure Package and Prospectus; all outstanding
shares of Common Stock of the Company and the Offered Common Shares conform, or
when issued will conform, to the description thereof in the Prospectus and have
been, or, when issued and paid for in the manner described herein will be, duly
authorized, validly issued, fully paid and non-assessable; and the issuance of
the Securities as contemplated by the Prospectus is not subject to preemptive or
other similar rights, or any restriction upon the voting or transfer thereof
pursuant to applicable law or the Company’s certificate of incorporation,
by-laws or governing documents or any agreement to which the Company or any of
its Subsidiaries is a party or by which any of them may be bound. All corporate
action required to be taken by the Company for the authorization, issuance and
sale of the Securities has been duly and validly taken. The Offered Warrants and
the Placement Warrants conform, or when issued will conform, to the description
thereof in the Prospectus and have been duly and validly authorized by the
Company and upon delivery to the Investors, and/or Placement Agents, as
applicable, at the Closing Date will be valid and binding obligations of the
Company, enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights and remedies of creditors
generally or subject to general principles of equity. The Offered Warrant Shares
initially issuable upon exercise of the Offered Warrants conform, or when issued
will conform, to the description thereof in the Prospectus and have been duly
authorized and reserved for issuance and when issued upon payment of the
exercise price therefor will be validly issued, fully paid and nonassessable.
The Placement Warrant Shares initially issuable upon exercise of the Placement
Warrants conform, or when issued will conform, to the description thereof in the
Prospectus and have been duly authorized and reserved for issuance and when
issued to the Placement Agents, will be validly issued, fully paid and
nonassessable. Except as disclosed in each of the Disclosure Package,
Prospectus, and the Company’s regulatory filings pursuant to the 1934 Act, there
are no outstanding subscriptions, rights, warrants, options, calls, convertible
securities, commitments of sale or rights related to or entitling any person to
purchase or otherwise to acquire any shares

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of, or any security convertible into or exchangeable or exercisable for, the
capital stock of, or other ownership interest in, the Company. The outstanding
membership interests of the Company’s Subsidiaries have been duly authorized and
validly issued, are fully paid and non-assessable and are owned by the Company
free and clear of any mortgage, pledge, lien, encumbrance, charge or adverse
claim and are not the subject of any agreement or understanding with any person
and were not issued in violation of any preemptive or similar rights; and there
are no outstanding subscriptions, rights, warrants, options, calls, convertible
securities, commitments of sale or instruments related to or entitling any
person to purchase or otherwise acquire any shares of, or any security
convertible into or exchangeable or exercisable for, the capital stock of, or
other ownership interest in any of the Subsidiaries.
          (ix) The statements set forth in each of the Disclosure Package and
the Prospectus describing the Securities and this Agreement, insofar as they
purport to describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair.
          (x) Each of the Company and its Subsidiaries is in possession of and
is operating in compliance with all franchises, grants, authorizations,
licenses, certificates, permits, easements, consents, orders and approvals
(“Permits”) from all state, federal, foreign and other regulatory authorities,
and has satisfied the requirements imposed by regulatory bodies, administrative
agencies or other governmental bodies, agencies or officials, that are required
for the Company and its Subsidiaries lawfully to own, lease and operate their
properties and conduct their businesses as described in each of the Disclosure
Package and the Prospectus, and each of the Company and its Subsidiaries is
conducting its business in compliance with all of the laws, rules and
regulations of each jurisdiction in which it conducts its business, in each case
with such exceptions, individually or in the aggregate, as would not have a
Material Adverse Effect; each of the Company and its Subsidiaries has filed all
notices, reports, documents or other information (“Notices”) required to be
filed under applicable laws, rules and regulations, in each case, with such
exceptions, individually or in the aggregate, as would not have a Material
Adverse Effect; and, except as otherwise specifically described in each of the
Disclosure Package and the Prospectus, neither the Company nor any of its
Subsidiaries has received any notification from any court or governmental body,
authority or agency, relating to the revocation or modification of any such
Permit or to the effect that any additional authorization, approval, order,
consent, license, certificate, permit, registration or qualification
(“Approvals”) from such regulatory authority is needed to be obtained by any of
them, in any case where it is reasonably expected that obtaining such Approvals
or the failure to obtain such Approvals, individually or in the aggregate, would
have a Material Adverse Effect.
          (xi) The Company and its Subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns required to be filed
prior to the date hereof and paid all taxes shown as due thereon; all such tax
returns are complete and correct in all material respects; all tax liabilities
are adequately provided for on the books of the Company and its Subsidiaries
except to such extent as would not have a Material Adverse Effect; the Company
and its Subsidiaries have made all necessary payroll tax

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payments; and the Company and its Subsidiaries have no knowledge of any tax
proceeding or action pending or threatened against the Company or its
Subsidiaries that, individually or in the aggregate, might have a Material
Adverse Effect.
          (xii) Except as described in each of the Disclosure Package and the
Prospectus, the Company and its Subsidiaries own or possess, or can acquire on
reasonable terms, adequate patents, patent licenses, trademarks, service marks
and trade names necessary to conduct the business now operated by them, and
neither the Company nor any of its Subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
patents, patent licenses, trademarks, service marks or trade names that,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect.
          (xiii) The Company and its Subsidiaries have good and marketable title
to all items of real property (except oil and gas real property) and good and
marketable title to all personal property owned by them, in each case free and
clear of all liens, encumbrances, restrictions and defects except such as are
described in each of the Disclosure Package and the Prospectus or do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property; and any such property held under
lease or sublease by the Company or any of its Subsidiaries is held under valid,
subsisting and enforceable leases or subleases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property by the Company and its Subsidiaries; and neither the Company nor any of
its Subsidiaries has any notice or knowledge of any material claim of any sort
that has been, or may be, asserted by anyone adverse to the Company’s or any of
its Subsidiaries rights as lessee or sublessee under any lease or sublease
described above, or affecting or questioning the Company’s or any of its
Subsidiaries’ rights to the continued possession of the leased or subleased
premises under any such lease or sublease in conflict with the terms thereof.
               As to items of oil and gas real property (including, for example,
fee mineral interests, oil and gas leasehold interests and other operating
interests, as well as overriding royalties and other nonoperating interests),
the Company and its Subsidiaries have (i) good and defensible title to their
interest in all such producing property and (ii) such title to their interest in
all such nonproducing property as would be consistent with customary industry
practices for newly acquired exploratory properties that are held in inventory
and are not scheduled for drilling in the foreseeable future, in both cases
subject to liens, encumbrances, restrictions and defects (x) that are described
in the Prospectus or (y) that do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property.
          (xiv) Except as described in each of the Disclosure Package and the
Prospectus, there is no pending action, suit or other proceeding involving the
Company or any of its Subsidiaries or any of their material assets for any
failure of the Company or any of its Subsidiaries, or any predecessor thereof,
to comply with any requirements of federal, state or local regulation relating
to air, water, solid waste management, hazardous or toxic substances, or the
protection of health, safety or the environment. Except as

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described in each of the Disclosure Package and the Prospectus, none of the
property owned or leased by the Company or any of its Subsidiaries is, to the
best knowledge of the Company, contaminated with waste or hazardous or toxic
substances, and neither the Company nor any of its Subsidiaries may be deemed an
“owner or operator” of a “facility” or “vessel” that owns, possesses,
transports, generates or disposes of a “hazardous substance” as those terms are
defined in §9601 of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. §9601 et seq.
          (xv) No labor disturbance exists with the employees of the Company or
any of its Subsidiaries or is imminent that, individually or in the aggregate,
would have a Material Adverse Effect. None of the employees of the Company or
any of its Subsidiaries is represented by a union and, to the best knowledge of
the Company and its Subsidiaries, no union organizing activities are taking
place. Neither the Company nor any of its Subsidiaries has violated any federal,
state or local law or foreign law relating to discrimination in hiring,
promotion or pay of employees, nor any applicable wage or hour laws, or the
rules and regulations thereunder, or analogous foreign laws and regulations,
that would, individually or in the aggregate, result in a Material Adverse
Effect.
          (xvi) The Company and its Subsidiaries are in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder (“ERISA”); no “reportable event” (as
defined in ERISA) has occurred with respect to any “pension plan” (as defined in
ERISA) for which the Company and its Subsidiaries would have any liability; the
Company and its Subsidiaries have not incurred and do not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the “Code”); and each “pension plan” for which the
Company or any of its Subsidiaries would have any liability that is intended to
be qualified under Section 401(a) of the Code is so qualified in all material
respects, and nothing has occurred, whether by action or by failure to act, that
would cause the loss of such qualification.
          (xvii) The Company and its Subsidiaries maintain insurance of the
types and in the amounts generally deemed adequate for its business, including,
but not limited to, directors’ and officers’ insurance, insurance covering real
and personal property owned or leased by the Company and its Subsidiaries
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect.
Neither the Company nor any of its Subsidiaries has been refused any insurance
coverage sought or applied for, and the Company has no reason to believe that it
and its Subsidiaries will not be able to renew their existing insurance coverage
as and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect.

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          (xviii) Neither the Company nor any of its Subsidiaries is, or with
the giving of notice or lapse of time or both would be, in default or violation
with respect to its certificate of incorporation or by-laws. Neither the Company
nor any of its Subsidiaries is, or with the giving of notice or lapse of time or
both would be, in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement, lease 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
properties or assets owned by the Company or any of its Subsidiaries is subject,
or in violation of any statutes, laws, ordinances or governmental rules or
regulations or any orders or decrees to which it is subject, including, without
limitation, Section 13 of the 1934 Act, which default or violation, individually
or in the aggregate, would have a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries has, at any time during the past five years,
(A) made any unlawful contributions to any candidate for any political office,
or failed fully to disclose any contribution in violation of law, or (B) made
any payment to any state, federal or foreign government official, or other
person charged with similar public or quasi-public duty (other than payment
required or permitted by applicable law).
          (xix) Other than as set forth in each of the Disclosure Package and
the Prospectus, there are no legal or governmental proceedings pending to which
the Company or any of its Subsidiaries is a party or of which any property of
the Company or any of its Subsidiaries is the subject that, if determined
adversely to the Company or any of its Subsidiaries, would individually or in
the aggregate have a Material Adverse Effect or that would materially and
adversely affect the consummation of the transactions contemplated hereby or
that is required to be disclosed in each of the Disclosure Package or the
Prospectus; to the best of the Company’s knowledge, no such proceedings are
threatened or contemplated.
          (xx) The Company is not and, after giving effect to the offering and
sale of the Securities, will not be a “holding company,” or a “subsidiary
company” of a “holding company,” or an “affiliate” of a “holding company” or of
a “subsidiary company,” as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended, or the Public Utility Holding Company Act of
2005.
          (xxi) The Company is not and, after giving effect to the offering and
sale of the Securities, will not 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 “1940 Act”).
          (xxii) At the earliest time after the filing of the Registration
Statement at which the Company or another offering participant made a bona fide
offer (within the meaning of Rule 164(a)(2) of the 1933 Act Rules and
Regulations) and as of the date hereof, the Company was not and is not an
“ineligible issuer” as such term is defined in Rule 405 of the 1933 Act Rules
and Regulations, without taking account of any determination by the SEC that it
is not necessary that the Company be considered an “ineligible issuer.”

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          (xxiii) Ehrhardt Keefe Steiner and Hottman PC, the accounting firm
that has issued an opinion on the financial statements filed with or
incorporated by reference in and as a part of the Registration Statement, is an
independent registered public accounting firm within the meaning of the 1933 Act
and the 1933 Act Rules and Regulations and the rules and regulations of the
Public Company Accounting Oversight Board (“PCAOB”) of the United States. The
Company and each of its Subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurance that: (1) transactions are
executed in accordance with management’s general or specific authorization;
(2) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (3) access to assets is permitted only in
accordance with management’s general or specific authorization; and (4) the
recorded accounts for assets are compared with the existing assets at reasonable
intervals and appropriate action is taken with respect thereto. The consolidated
financial statements and schedules of the Company, including the notes thereto,
filed with (or incorporated by reference) and as a part of the Registration
Statement, Disclosure Package or Prospectus, present fairly the financial
condition of the Company and its Subsidiaries as of the respective dates thereof
and the consolidated results of operations and changes in financial position and
consolidated statements of cash flow for the respective periods covered thereby,
all in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved except as otherwise disclosed
therein. All adjustments necessary for a fair presentation of results for such
periods have been made. The selected financial data included or incorporated by
reference in the Registration Statement, Disclosure Package and Prospectus
present fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements. Any operating or other
statistical data included or incorporated by reference in the Registration
Statement, Disclosure Package and Prospectus comply in all material respects
with the 1933 Act and the 1933 Act Rules and Regulations and present fairly the
information shown therein and are based on or derived from sources that the
Company reasonably and in good faith believes are reliable and accurate, and
such data agree with the sources from which they are derived. All non-GAAP
financial information included (or incorporated by reference) in the
Registration Statement, Disclosure Package or Prospectus complies in all
material respects with the requirements of Regulation G and Item 10 of
Regulation S-K under the 1933 Act.
          (xxiv) Except as disclosed in each of the Disclosure Package and the
Prospectus, no holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the Company
because of the filing of the Registration Statement or the consummation of the
transactions contemplated hereby and, except as disclosed in each of the
Disclosure Package and the Prospectus, no person has the right to require
registration under the 1933 Act of any shares of Common Stock or any other
securities of the Company. No person has the right, contractual or otherwise, to
cause the Company to permit such person to underwrite the sale of any of the
Securities. Except for this Agreement, there are no contracts, agreements or
understandings between the Company or any of its Subsidiaries and any person
that would give rise to a valid claim against the Company, its Subsidiaries or
any Placement Agent for a brokerage

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commission, finder’s fee or like payment in connection with the issuance,
purchase and sale of the Securities.
          (xxv) The Company has not distributed and, prior to the later to occur
of (A) the Closing Date and (B) completion of the distribution of the
Securities, will not distribute any offering material in connection with the
offering and sale of the Securities other than the Registration Statement, the
Preliminary Prospectus, any Issuer Free Writing Prospectus identified in
Schedule I hereto, the Disclosure Package and the Prospectus.
          (xxvi) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Company’s Common
Stock, and the Company is not aware of any such action taken or to be taken by
affiliates of the Company.
          (xxvii) There is not currently and has not in the past been a failure
on the part of the Company or any of its respective directors or officers, in
their capacities as such, to comply with any applicable provisions of the
Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules and regulations
promulgated in connection therewith, including Sections 302, 402 and 906, and
the statements contained in any certification pursuant to such Act and related
rules and regulations are complete and correct.
          (xxviii) The Company has established and maintains disclosure controls
and procedures and internal control over financial reporting as are currently
required (as such terms are defined in Rule 13a-15 and 15d-15 under the 1934
Act); the Company’s disclosure controls and procedures (i) are designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is accumulated and communicated to
management, including the principal executive and principal financial officer of
the Company, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure, and that such information is
recorded, processed, summarized and reported, within the time periods specified
in the 1934 Act Rules and Regulations; (ii) have been evaluated for
effectiveness; and (iii) are effective in all material respects to perform the
functions for which they were established.
          (xxix) Except as discussed with the Company’s auditors and audit
committee and as disclosed in each of the Disclosure Package and the Prospectus,
(i) there are no significant deficiencies or material weaknesses in the design
or operation of internal control over financial reporting that are reasonably
likely to adversely affect the Company’s ability to record, process, summarize,
and report financial data and (ii) there is, and there has been, no fraud,
whether or not material, that involves management or other employees who have a
role in the Company’s internal control over financial reporting.
          (xxx) Since the date of the end of the last fiscal year for which
audited financial statements are included or incorporated by reference in each
of the Disclosure

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Package and the Prospectus, there have been no significant changes in internal
control over financial reporting or in other factors that could significantly
affect internal control over financial reporting, including any corrective
actions with regard to significant deficiencies and material weaknesses.
          (xxxi) The Company has received no written comments from the SEC staff
regarding its periodic or current reports under the 1934 Act that remain
unresolved and have not been disclosed in the Registration Statement, Disclosure
Package and Prospectus.
          (xxxii) No relationship, direct or indirect, exists between or among
the Company and any director, officer or stockholder of the Company, or any
member of his or her immediate family, or any customers or suppliers that is
required to be described in the Registration Statement, the Disclosure Package
or the Prospectus and that is not so described and described as required in
material compliance with such requirement. There are no outstanding loans,
advances (except normal advances for business expenses in the ordinary course of
business) or guarantees of indebtedness by the Company to or for the benefit of
any of the officers or directors of the Company or any member of their
respective immediate families, except as disclosed in the Registration
Statement, the Disclosure Package and the Prospectus. The Company has not, in
violation of the Sarbanes-Oxley Act, directly or indirectly, extended or
maintained credit, arranged for the extension of credit, or renewed an extension
of credit, in the form of a personal loan to or for any director or executive
officer of the Company.
          (xxxiii) To the best knowledge of the Company, no change in any laws
or regulations is pending that could reasonably be expected to be adopted and if
adopted, is reasonably expected to have, individually or in the aggregate with
all such changes, a Material Adverse Effect, except as set forth in or
contemplated in each of the Disclosure Package and the Prospectus.
          (xxxiv) The minute books of each of the Company and its Subsidiaries
have been made available to the Placement Agent and contain a complete summary
of all meetings and other actions of the directors and shareholders of each such
entity in all material respects, and reflect all transactions referred to in
such minutes accurately in all material respects.
          (xxxv) Neither the Company nor any of its Subsidiaries, nor any
director, officer, agent, employee or other person associated with or acting on
behalf of the Company or any of its Subsidiaries, has, directly or indirectly,
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee or to foreign or domestic political parties or campaigns from corporate
funds; violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.

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          (xxxvi) The operations of the Company and its Subsidiaries are and
have been conducted at all times in compliance in all material respects with
applicable financial recordkeeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, the money laundering
statutes of all jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any governmental agency (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its
Subsidiaries with respect to the Money Laundering Laws is pending, or to the
knowledge of the Company, threatened.
          (xxxvii) Neither the Company nor any of its Subsidiaries nor, to the
knowledge of the Company, any director, officer, agent, employee or affiliate of
the Company or any of its Subsidiaries is currently subject to any U.S.
sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the Company will not directly or indirectly
use the proceeds of the offering, or lend, contribute or otherwise make
available such proceeds to any Subsidiary, joint venture partner or other person
or entity that, to the Company’s knowledge, will use such proceeds, for the
purpose of financing the activities of any person currently subject to any U.S.
sanctions administered by OFAC.
          (xxxviii) No customer of or supplier to the Company or any of its
Subsidiaries has ceased purchases or shipments of merchandise to the Company or
indicated, to the Company’s knowledge, an interest in decreasing or ceasing its
purchases from the Company or otherwise modifying its relationship with the
Company, other than in the normal and ordinary course of business consistent
with past practices in a manner which would not, singly or in the aggregate,
result in a Material Adverse Effect.
          (b) Any certificate signed by any officer of the Company and delivered
to the Placement Agents or to their respective counsel shall be deemed a
representation and warranty by the Company to the Placement Agents as to the
matters covered thereby.
     4. Additional Covenants. The Company covenants and agrees with the
Placement Agents and each of them that:
          (a) The Company will timely transmit copies of the Prospectus, and any
amendments or supplements thereto, to the SEC for filing pursuant to Rule 424(b)
of the 1933 Act Rules and Regulations.
          (b) The Company has furnished or will deliver to the Placement Agents
and to their respective counsel (i) such number of signed copies of the
Registration Statement as originally filed, including copies of exhibits thereto
(other than any exhibits incorporated by reference therein), and any amendments
and supplements to the Registration Statement (including all documents
incorporated by reference therein), as may be reasonably requested by the
Placement Agents or their respective counsel and (ii) a signed copy of each
consent and certificate included or incorporated by reference in, or filed as an
exhibit to, the Registration Statement as so amended or supplemented; the
Company will deliver to the Placement Agents as

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soon as practicable after the date of this Agreement as many copies of the
Disclosure Package and the Prospectus (including all documents incorporated by
reference therein) as the Placement Agents may reasonably request for the
purposes contemplated by the 1933 Act; the Company will promptly advise the
Placement Agents of any request of the SEC for amendment of the Registration
Statement or for supplement to the Disclosure Package or the Prospectus or for
any additional information, and of the issuance by the SEC or any state or other
jurisdiction or other regulatory body of any stop order under the 1933 Act or
other order suspending the effectiveness of the Registration Statement (as
amended or supplemented) or preventing or suspending the use of any Preliminary
Prospectus, Disclosure Package or the Prospectus or suspending the qualification
or registration of the Securities, or the Offered Warrant Shares for offering or
sale in any jurisdiction, and of the institution or threat of any proceedings
therefor, of which the Company shall have received notice or otherwise have
knowledge prior to the completion of the distribution of the Securities; and the
Company will use its best efforts to prevent the issuance of any such stop order
or other order and, if issued, to secure the prompt removal thereof.
          (c) The Company will obtain the Placement Agent’s consent before
taking, or failing to take, any action that would cause the Company to make an
offer of Securities that would constitute an Issuer Free Writing Prospectus or
to be required to file a Free Writing Prospectus pursuant to Rule 433(d) of the
1933 Act Rules and Regulations, other than the Issuer Free Writing Prospectuses,
if any, listed on Schedule I hereto.
          (d) The Company will not take any action that would result in the
Placement Agent being required to file with the SEC pursuant to Rule 433(d) of
the 1933 Act Rules and Regulations a Free Writing Prospectus prepared by or on
behalf of the Placement Agents that the Placement Agents otherwise would not
have been required to file thereunder.
          (e) If the Disclosure Package is being used to solicit offers to buy
the Securities at a time when the Prospectus is not yet available to prospective
purchasers and any event shall occur or condition exist as a result of which it
is necessary to amend or supplement the Disclosure Package in writing in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or if, in the opinion of counsel for the Placement
Agent, it is necessary to amend or supplement the Disclosure Package to comply
with applicable law, the Company will forthwith prepare, file with the SEC and
furnish, at its own expense, to the Placement Agent, either amendments or
supplements to the Disclosure Package so that statements in the Disclosure
Package as so amended or supplemented will not, in light of the circumstances
when delivered to a prospective purchaser, be misleading or so that the
Disclosure Package, as amended or supplemented, will comply with law.
          (f) The Company will not file any amendment or supplement to the
Registration Statement, the Disclosure Package, the Prospectus (or any other
prospectus relating to the Securities filed pursuant to Rule 424(b) of the 1933
Act Rules and Regulations that differs from the Prospectus as filed pursuant to
such Rule 424(b)) and will not file any document under the 1934 Act before the
termination of the offering of the Securities by the Company if the document
would be deemed to be incorporated by reference into the Registration Statement,
the Disclosure Package, or the Prospectus, of which the Placement Agent shall
not previously have been advised and furnished with a copy or to which the
Placement Agent shall have reasonably objected or which is not in compliance
with the 1933 Act Rules and Regulations; and the

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Company will promptly notify the Placement Agent after it shall have received
notice thereof of the time when any amendment to the Registration Statement
becomes effective or when any supplement to, the Disclosure Package, the
Prospectus has been filed.
          (g) During the period when a prospectus (or in lieu thereof, the
notice contemplated by Rule 173(a) of the 1933 Act Rules and Regulations)
relating to any of the Securities is required to be delivered under the 1933 Act
by any Placement Agent, the Company will comply, at its own expense, with all
requirements imposed by the 1933 Act and the 1933 Act Rules and Regulations, as
now and hereafter amended, and by the rules and regulations of the SEC
thereunder, as from time to time in force, as necessary to permit the
continuance of sales of or dealing in the Securities during such period in
accordance with the provisions hereof and as contemplated by the Prospectus.
          (h) If, during the period when a prospectus (or in lieu thereof, the
notice contemplated by Rule 173(a) of the 1933 Act Rules and Regulations)
relating to any of the Securities is required to be delivered under the 1933 Act
by any Placement Agent, (i) any event relating to or affecting the Company or of
which the Company shall be advised in writing by the Placement Agent shall occur
as a result of which, in the opinion of the Company or the Placement Agent, the
Disclosure Package or the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state 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) any event shall
occur as a result of which any Free Writing Prospectus conflicted or would
conflict with the information in the Registration Statement, or (iii) it shall
be necessary to amend or supplement the Registration Statement, the Disclosure
Package or the Prospectus to comply with the 1933 Act, the 1933 Act Rules and
Regulations, the 1934 Act or the 1934 Act Rules and Regulations, the Company
will forthwith at its expense prepare and file with the SEC, and furnish to the
Placement Agents a reasonable number of copies of, such amendment or supplement
or other filing that will correct such statement or omission or effect such
compliance.
          (i) During the period when a prospectus (or in lieu thereof, the
notice contemplated by Rule 173(a) of the 1933 Act Rules and Regulations)
relating to any of the Securities is required to be delivered under the 1933 Act
by any Placement Agent, the Company will furnish such proper information as may
be lawfully required and otherwise cooperate in qualifying the Securities for
offer and sale under the securities or blue sky laws of such jurisdictions as
such Placement Agent may reasonably designate and will file and make in each
year such statements or reports as are or may be reasonably required by the laws
of such jurisdictions; provided, however, that the Company shall not be required
to qualify as a foreign corporation or shall be required to qualify as a dealer
in securities or to file a general consent to service of process under the laws
of any jurisdiction.
          (j) In accordance with Section 11(a) of the 1933 Act and Rule 158 of
the 1933 Act Rules and Regulations, the Company has made generally available to
its security holders and to holders of the Securities an earnings statement
(which need not be audited) in reasonable detail covering the 12 months
beginning not later than the first day of the month next succeeding the month in
which occurred the effective date (within the meaning of Rule 158) of the
Registration Statement.

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          (k) The Company will apply the proceeds from the sale of the
Securities as set forth in the description under “Use of Proceeds” in the
Disclosure Package and the Prospectus, which description complies in all
respects with the requirements of Item 504 of Regulation S-K.
          (l) The Company will promptly provide the Placement Agents with copies
of all correspondence to and from, and all documents issued to and by, the SEC
in connection with the registration of the Securities under the 1933 Act or
relating to any documents incorporated by reference into the Registration
Statement, the Disclosure Package or the Prospectus.
          (m) Prior to the Closing Date, the Company will furnish to the
Placement Agents, as soon as they have been prepared, copies of any unaudited
interim consolidated financial statements of the Company and its Subsidiaries
for any periods subsequent to the periods covered by the financial statements
appearing in the Registration Statement and the Prospectus or incorporated
therein by reference.
          (n) The Company will use its best efforts to obtain approval for, and
maintain the listing of the Offered Common Shares, the Offered Warrant Shares
and the Placement Warrant Shares for trading on, the American Stock Exchange
(the “AMEX”).
          (o) [Reserved]
          (p) [Reserved]
          (q) [Reserved].
          (r) The Company and its Subsidiaries will maintain and keep accurate
books and records reflecting their assets and maintain internal accounting
controls that provide reasonable assurance that (1) transactions are executed in
accordance with management’s general or specific authorization, (2) transactions
are recorded as necessary to permit the preparation of the Company’s
consolidated financial statements in conformity with generally accepted
accounting principles and to maintain accountability for the assets of the
Company and its Subsidiaries, (3) access to the assets of the Company and its
Subsidiaries is permitted only in accordance with management’s general or
specific authorization, and (4) the recorded accounts of the assets of the
Company and its Subsidiaries are compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
          (s) During any period in which a prospectus (or in lieu thereof, a
notice contemplated by Rule 173(a) of the 1933 Act Rules and Regulations) is
required by law to be delivered by the Placement Agents, the Company will
promptly file all documents required to be filed with the SEC pursuant to
Sections 13, 14 or 15(d) of the 1934 Act and will furnish to its security
holders annual reports containing financial statements audited by independent
public accountants and quarterly reports containing financial statements and
financial information, which may be unaudited. The Company will deliver to the
Placement Agents similar reports with respect to any significant Subsidiaries,
as that term is defined in the 1933 Act Rules and Regulations, that are not
consolidated in the Company’s financial statements. Any report, document or
other information required to be furnished under this paragraph (s) shall be
furnished as soon as practicable after such report, document or information
becomes available.

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          (t) The Company will comply with all applicable securities and other
applicable laws, rules and regulations, including, without limitation, the
Sarbanes-Oxley Act of 2002, and will use its best efforts to cause the Company’s
directors and officers, in their capacities as such, to comply with such laws,
rules and regulations, including, without limitation, the provisions of the
Sarbanes-Oxley Act of 2002.
          (u) Except as required by law, prior to the Closing Date, the Company
will issue no press release or other communication, directly or indirectly, and
will hold no press conferences with respect to the Company or any of its
Subsidiaries, the financial condition, results of operations, business,
properties, assets or liabilities of the Company or any of its Subsidiaries, or
the offering of the Securities, without the Placement Agents’ prior written
consent which shall include e-mail. In the event that any such disclosure is
required by law, the Company will promptly notify the Placement Agent of such
required disclosure prior to issuing any press release or other communication or
holding any press conference, and, to the extent reasonably practicable, the
Company will permit the Placement Agents to comment on any press release or
other communication.
          (v) The Company shall reserve and keep available at all times a
sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue shares of Common Stock and upon exercise of the Offered
Warrants and Placement Warrants.
          (w) If the Company elects to rely on Rule 462(b) under the 1933 Act,
the Company shall both file an Abbreviated Registration Statement with the SEC
in compliance with Rule 462(b) and pay the applicable fees in accordance with
Rule 111 of the 1933 Act by the earlier of (i) 10:00 p.m., Eastern Standard
time, or Eastern Daylight Savings time, whichever is in effect, on the date of
this Agreement, and (ii) the time that confirmations are given or sent, as
specified by Rule 462(b)(2).
     5. Conditions of Closing. The Closing shall be subject to the accuracy, as
of the date hereof and as of the Closing Date, of the representations and
warranties of the Company contained herein, to the performance by the Company of
its covenants and obligations hereunder, and to the following additional
conditions, and the Company shall not issue or sell the Securities unless and
until all of the conditions of this Section 5 shall have been satisfied or
waived by the Placement Agents:
          (a) The Registration Statement has been declared effective by the SEC
and the offering of the Securities by the Company complies with Rule 415 of the
1933 Act Rules and Regulations. All filings required by Rule 424, Rule 430A,
Rule 430B and Rule 433(d) of the 1933 Act Rules and Regulations will be promptly
made. No stop order suspending the effectiveness of the Registration Statement,
as amended from time to time, shall have been issued and no proceeding for that
purpose shall have been initiated or, to the knowledge of the Company or any
Placement Agents, threatened or contemplated by the SEC, and any request of the
SEC for additional information (to be included in the Registration Statement,
the Disclosure Package or the Prospectus or otherwise) shall have been complied
with to the reasonable satisfaction of the Placement Agents.

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          (b) The Placement Agents shall not have advised the Company on or
prior to the Closing Date, that the Registration Statement, the Disclosure
Package or Prospectus or any amendment or supplement thereto contains an untrue
statement of fact that, in the opinion of counsel to the Placement Agents, is
material, or omits to state a fact that, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
          (c) On the Closing Date, the Placement Agents shall have received the
opinion of Gersten Savage LLP, counsel for the Company, addressed to the
Placement Agents and the Investors and dated the Closing Date, in substance as
set forth on Exhibit B hereto.
          (d) [Reserved].
          (e) On the date of this Agreement and on the Closing Date, each of the
Placement Agent shall have received from Ehrhardt Keefe Steiner and Hottman PC,
a letter or letters, dated the date of this Agreement and the Closing Date,
respectively, in form and substance satisfactory to each Placement Agent and its
respective counsel, confirming that they are independent registered public
accountants with respect to the Company within the meaning of the 1933 Act and
the published Rules and Regulations and the rules and regulations of the PCAOB,
and stating the conclusions and findings of such firm with respect to the
financial information and other matters ordinarily covered by accountants’
“comfort letters” to placement agents in connection with registered public
offerings.
          (f) Except as contemplated in each of the Disclosure Package and the
Prospectus, (i) neither the Company nor any of its Subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Disclosure Package and the Prospectus any loss
or interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree; and (ii) subsequent to the respective
dates as of which information is given in the Registration Statement, the
Disclosure Package and the Prospectus, neither the Company nor any of its
Subsidiaries shall have incurred any liability or obligation, direct or
contingent, or entered into any transactions, and there shall not have been any
change in the capital stock or short-term or long-term debt of the Company and
its Subsidiaries or any change, or any development involving or which is
reasonably expected to involve a prospective change in the condition (financial
or other), net worth, business, affairs, management, results of operations or
cash flow of the Company or its Subsidiaries, the effect of which, in any such
case described in clause (i) or (ii), is in your reasonable judgment so material
or adverse as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Securities being delivered on such Closing Date
on the terms and in the manner contemplated in each of the Disclosure Package
and the Prospectus.
          (g) There shall not have occurred any of the following: (i) a
suspension or material limitation in trading in securities generally on the New
York Stock Exchange or the AMEX or the establishing on such exchanges by the SEC
or by such exchanges of minimum or maximum prices that are not in force and
effect on the date hereof; (ii) a suspension or material limitation in trading
in the Company’s securities on the AMEX or the establishing on such exchange by
the SEC or by such exchange of minimum or maximum prices that are not in force

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and effect on the date hereof; (iii) a general moratorium on commercial banking
activities declared by either federal or any state authorities; (iv) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, which in your
reasonable judgment makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities in the manner contemplated in
the Prospectus; or (v) any calamity or crisis, change in national, international
or world affairs, act of God, change in the international or domestic markets,
or change in the existing financial, political or economic conditions in the
United States or elsewhere, that in your reasonable judgment makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities in the manner contemplated in each of the Disclosure Package
and the Prospectus.
          (h) The Placement Agents shall have received a certificate, dated the
Closing Date and signed by the Chief Executive Officer and the Chief Financial
Officer of the Company, in their capacities as such, stating that:
          (i) the conditions set forth in Section 5(a) have been fully
satisfied;
          (ii) they have carefully examined the Registration Statement, the
Disclosure Package and the Prospectus as amended or supplemented and all
documents incorporated by reference therein and nothing has come to their
attention that would lead them to believe that any of the Registration
Statement, the Disclosure Package or the Prospectus, or any amendment or
supplement thereto or any documents incorporated by reference therein as of
their respective effective, issue or filing dates, contained, and the Prospectus
as amended or supplemented and all documents incorporated by reference therein
and when read together with the documents incorporated by reference therein, at
such Closing Date, contains any untrue statement of a material fact, or omits to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading;
          (iii) since the Effective Date, there has occurred no event required
to be set forth in an amendment or supplement to the Registration Statement, the
Disclosure Package or the Prospectus which has not been so set forth; there has
been no Issuer Free Writing Prospectus required to be filed under Rule 433(d) of
the 1933 Act Rules and Regulations that has not been so filed; and there has
been no document required to be filed under the 1934 Act and the 1934 Act Rules
and Regulations that upon such filing would be deemed to be incorporated by
reference into the Disclosure Package or the Prospectus that has not been so
filed;
          (iv) all representations and warranties made herein by the Company are
true and correct in all respects at such Closing Date, with the same effect as
if made on and as of such Closing Date, and all agreements herein to be
performed or complied with by the Company on or prior to such Closing Date have
been duly performed and complied with by the Company;
          (v) neither the Company nor any of its Subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in

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each of the Disclosure Package and the Prospectus any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree; and
          (vi) except as disclosed in each of the Disclosure Package and the
Prospectus, subsequent to the respective dates as of which information is given
in the Registration Statement, each of the Disclosure Package and the
Prospectus, neither the Company nor any of its Subsidiaries has incurred any
liabilities or obligations, direct or contingent, other than in the ordinary
course of business, or entered into any transactions not in the ordinary course
of business, which in either case are material to the Company or such
Subsidiary; and there has not been any change in the capital stock or material
increase in the short-term debt or long-term debt of the Company or any of its
Subsidiaries or any material adverse change or any development involving or that
is reasonably expected to involve a prospective material adverse change, in the
condition (financial or other), net worth, business, affairs, management,
results of operations or cash flow of the Company and its Subsidiaries taken as
a whole; and there has been no dividend or distribution of any kind, paid or
made by the Company on any class of its capital stock.
          (i) The Company shall have furnished to the Placement Agents at the
Closing Date such further information, opinions, certificates, letters and
documents as the Placement Agents or each of them may have reasonably requested.
          (j) The Offered Common Shares, the Offered Warrant Shares and the
Placement Warrant Shares shall have been listed for trading on the AMEX.
          (k) The Placement Agents shall have received duly and validly executed
letter agreements referred to in Section 4(o) hereof.
          (l) The NASD shall have confirmed that it has not raised any objection
with respect to the fairness and reasonableness of the placement agency terms
and conditions.
          (m) [Reserved].
          (n) All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to COMW and FBW and to Vinson & Elkins LLP, counsel for COMW and FBW.
          (o) If any of the conditions specified above in this Section 5 shall
not have been satisfied at or prior to the Closing Date or waived by the
Placement Agents in writing, this Agreement may be terminated by the Placement
Agents on written notice to the Company, whereupon the Company shall not issue
or sell the Securities.
     6. Indemnification and Contribution.
          (a) The Company will indemnify and hold harmless the Placement Agents
and each of them from and against any losses, damages or liabilities, joint or
several, to which the Placement Agents may become subject, under the 1933 Act or
otherwise, insofar as such

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losses, damages or liabilities (or actions or claims in respect thereof) arise
out of or are based upon (i) an untrue statement or alleged untrue statement of
a material fact contained (A) in any Preliminary Prospectus, the Registration
Statement, any Issuer Free Writing Prospectus that the Company has filed or is
required to file pursuant to Rule 433(d) of the 1933 Act Rules and Regulations,
the Prospectus or any other prospectus relating to the Securities, or any
amendment or supplement thereto, (B) in any blue sky application or other
document executed by the Company or based on any information furnished in
writing by the Company, filed in any state or other jurisdiction in order to
qualify any or all of the Securities under the securities laws thereof (the
“Blue Sky Application”) or (C) in any materials or information provided to
investors by, or with the approval of, the Company in connection with the
marketing of the offering of the Securities (“Marketing Materials”), including
any road show or investor presentations made to investors by the Company
(whether in person or electronically), when read together with the Registration
Statement and the Prospectus, (ii) the omission or alleged omission to state in
any Preliminary Prospectus, the Registration Statement, any Issuer Free Writing
Prospectus that the Company has filed or is required to file pursuant to Rule
433(d) of the 1933 Act Rules and Regulations, the Prospectus or any other
prospectus relating to the Securities, or any amendment or supplement thereto or
in any Blue Sky Application or in any Marketing Materials, when read together
with the Registration Statement and the Prospectus, a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
(iii) any act or failure to act or any alleged act or failure to act by the
Placement Agent in connection with, or relating in any manner to, the Securities
or the offering contemplated hereby, and that is the result of the matters
giving rise to any loss, damage or liabilities (or actions or claims in respect
thereof) arising out of or based upon matters covered by clause (i) or
(ii) above (provided that the Company shall not be liable under this clause
(iii) to the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, damage or liabilities (or actions or
claims in respect thereof) resulted directly from any such acts or failures to
act undertaken or omitted to be taken by the Placement Agents through their
gross negligence or willful misconduct), and will reimburse the Placement Agents
promptly upon demand for any legal or other expenses incurred by the Placement
Agents in connection with investigating, preparing, pursuing or defending
against or appearing as a third party witness in connection with any such loss,
damage, liability or action or claim, including, without limitation, any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to the
indemnified party, as such expenses are incurred (including such losses,
damages, liabilities or expenses to the extent of the aggregate amount paid in
settlement of any such action or claim, provided that (subject to Section 6(d)
hereof) any such settlement is effected with the written consent of the
Company); provided, however, that the Company shall not be liable in any such
case to the extent, but only to the extent, that any such loss, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement, any Issuer Free Writing Prospectus that the Company
has filed or is required to file pursuant to Rule 433(d) of the 1933 Act Rules
and Regulations, the Prospectus or any other prospectus relating to the
Securities, or any such amendment or supplement, or in any Blue Sky Application
or in any Marketing Materials, read together with the Registration Statement and
the Prospectus, in reliance upon and in conformity with written information
relating to the Placement Agents furnished to the Company by the Placement
Agents expressly for use in the preparation thereof (as provided in Section 12
hereof).

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          (b) The Placement Agents will indemnify and hold harmless the Company
from and against any losses, damages or liabilities to which the Company may
become subject, under the 1933 Act or otherwise, insofar as such losses, damages
or liabilities (or actions or claims in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement, any Issuer
Free Writing Prospectus that the Company has filed or is required to file
pursuant to Rule 433(d) of the 1933 Act Rules and Regulations, the Prospectus or
any other prospectus relating to the Securities, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement, any Issuer Free Writing Prospectus that the Company has filed or is
required to file pursuant to Rule 433(d) of the 1933 Act Rules and Regulations,
the Prospectus or any other prospectus relating to the Securities, or any such
amendment or supplement, in reliance upon and in conformity with written
information relating to the Placement Agents furnished to the Company by the
Placement Agents, expressly for use in the preparation thereof (as provided in
Section 12 hereof). The Placement Agents will reimburse the Company for any
legal or other expenses incurred by the Company in connection with investigating
or defending any such action or claim as such expenses are incurred (including
such losses, damages, liabilities or expenses to the extent of the aggregate
amount paid in settlement of any such action or claim, provided that (subject to
Section 6(c) hereof) any such settlement is effected with the written consent of
the Placement Agents). Notwithstanding the provisions of this Section 6(b), in
no event shall any indemnity by the Placement Agents under this Section 6(b)
exceed the total compensation received by such Placement Agents in accordance
with this Agreement.
          (c) Promptly after receipt by an indemnified party under Section 6(a)
or 6(b) hereof of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party under Section 6(a) or 6(b) hereof, notify each such indemnifying party in
writing of the commencement thereof, but the failure so to notify such
indemnifying party shall not relieve such indemnifying party from any liability
except to the extent that it has been prejudiced in any material respect by such
failure or from any liability that it may have to any such indemnified party
otherwise than under Section 6(a) or 6(b) hereof. In case any such action shall
be brought against any such indemnified party and it shall notify each
indemnifying party of the commencement thereof, each such indemnifying party
shall be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party under Section 6(a) or 6(b) hereof
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of such
indemnified party, be counsel to such indemnifying party), and, after notice
from such indemnifying party to such indemnified party of its election so to
assume the defense thereof, such indemnifying party shall not be liable to such
indemnified party under Section 6(a) or 6(b) hereof for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ its
own counsel in any such action, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the employment of counsel
by such indemnified party at the expense of the indemnifying party has been
authorized by the indemnifying party, (ii) the

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indemnified party shall have been advised by such counsel that there may be a
conflict of interest between the indemnifying party and the indemnified party in
the conduct of the defense, or certain aspects of the defense, of such action
(in which case the indemnifying party shall not have the right to direct the
defense of such action with respect to those matters or aspects of the defense
on which a conflict exists or may exist on behalf of the indemnified party) or
(iii) the indemnifying party shall not in fact have employed counsel reasonably
satisfactory to such indemnified party to assume the defense of such action, in
any of which events such fees and expenses to the extent applicable shall be
borne, and shall be paid as incurred, by the indemnifying party. If at any time
such indemnified party shall have requested such indemnifying party under
Section 6(a) or 6(b) hereof to reimburse such indemnified party for fees and
expenses of counsel, such indemnifying party agrees that it shall be liable for
any settlement of the nature contemplated by Section 6(a) or 6(b) hereof
effected without its written consent if (I) such settlement is entered into more
than 45 days after receipt by such indemnifying party of such request for
reimbursement, (II) such indemnifying party shall have received notice of the
terms of such settlement at least 30 days prior to such settlement being entered
into and (III) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request for reimbursement prior to the
date of such settlement. No such indemnifying party shall (1) without the
written consent of such indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action, claim or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not such indemnified party is
an actual or potential party to such action, claim or proceeding) unless such
settlement, compromise or judgment (A) includes an unconditional release of such
indemnified party from all liability arising out of such action, claim or
proceeding and (B) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any such indemnified party
or (2) be liable for any settlement or any such action effected without its
written consent, but if settled with the consent of the indemnifying party or if
there be a final judgment of the plaintiff in any such action, the indemnifying
party agrees to indemnify and hold harmless any indemnified party from and
against any loss or liability by reason of such settlement or judgment. In no
event shall such indemnifying parties be liable for the fees and expenses of
more than one counsel, in addition to any local counsel, for all such
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances.
          (d) If the indemnification provided for in this Section 6 is by its
terms due and owing but is unavailable or insufficient to indemnify or hold
harmless an indemnified party under Section 6(a) or 6(b) hereof in respect of
any losses, damages or liabilities (or actions or claims in respect thereof)
referred to therein, then each indemnifying party under Section 6(a) or 6(b)
hereof shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, damages or liabilities (or actions or claims in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Placement Agents, on
the other hand, from the offering of the Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under Section
6(c) hereof and such indemnifying party was prejudiced in a material respect by
such failure, then each such indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative

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fault, as applicable, of the Company, on the one hand, and the Placement Agents,
on the other hand, in connection with the statements or omissions that resulted
in such losses, damages or liabilities (or actions or claims in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by, as applicable, the Company, on the one hand, and the
Placement Agents, on the other hand, shall be deemed to be in the same
proportion as the total net proceeds from such offering (before deducting
expenses) received by the Company bear to the portion of the total Placement Fee
received by the Placement Agents. The relative fault, as applicable, of the
Company, on the one hand, and the Placement Agents, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, on the one hand,
or the Placement Agents, on the other hand, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Placement Agents agree that it would
not be just and equitable if contribution pursuant to this Section 6(d) were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to above in this
Section 6(d). The amount paid or payable by such an indemnified party as a
result of the losses, damages or liabilities (or actions or claims in respect
thereof) referred to above in this Section 6(d) shall be deemed to include any
legal or other expenses incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), the Placement Agents shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Securities were sold to the Investors exceeds the amount of any damages that
the Placement Agents have otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
          (e) The obligations of the Company under this Section 6 shall be in
addition to any liability that the Company may otherwise have and shall extend,
upon the same terms and conditions, to each officer, director, employee, agent
or other representative and to each person, if any, who controls the Placement
Agents within the meaning of the 1933 Act; and the obligations of the Placement
Agents under this Section 6 shall be in addition to any liability that the
Placement Agents may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company who signed the
Registration Statement and to each person, if any, who controls the Company
within the meaning of the 1933 Act.
          (f) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof, including, without limitation, the
provisions of this Section 6, and are fully informed regarding such provisions.
They further acknowledge that the provisions of this Section 6 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement, any Preliminary Prospectus, the Disclosure Package, the
Prospectus, and any supplement or amendment thereof, as required by the 1933
Act.
     7. Representations and Agreements to Survive Delivery. The respective
representations, warranties, agreements and statements of the Company and the
Placement

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Agents, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain operative and in full
force and effect regardless of any investigation (or any statement as to the
results thereof) made by or on behalf of the Placement Agents or any controlling
person of the Placement Agents, the Company or any of its officers, directors or
any controlling persons, and shall survive the Closing.
     8. [Reserved].
     9. Effective Date and Termination. This Agreement may be terminated by the
mutual agreement of the Placement Agents at any time at or prior to the Closing
Date (by telephone, facsimile or telegram, confirmed by letter) if any condition
specified in Section 5 hereof shall not have been satisfied on or prior to the
Closing Date; provided, however, that the provisions of this Section 9 and of
Section 6 and Section 10 hereof shall at all times be effective. Any such
termination shall be without liability of any party to any other party except as
provided in Section 6 or Section 10 hereof.
     10. Costs and Expenses. The Company, whether or not the transactions
contemplated hereby are consummated or this Agreement is terminated, will bear
and pay the costs and expenses incident to the registration of the Securities
and offering thereof, including, without limitation, (a) all expenses (including
stock transfer taxes) incurred in connection with the delivery to the several
Investors of the Securities, the filing fees of the SEC, and the fees and
expenses of the Company’s counsel and accountants, (b) the preparation,
printing, filing, delivery and shipping of the Registration Statement, each
Preliminary Prospectus, the Disclosure Package, any Free Writing Prospectus, the
Prospectus and any amendments or supplements thereto and the printing, delivery
and shipping of this Agreement and other offering documents, including the Blue
Sky Memoranda, and any instruments or documents related to any of the foregoing,
(c) the furnishing of copies of such documents to the Placement Agents, (d) the
registration or qualification of the Securities for offering and sale under the
securities laws of the various states and other jurisdictions, (e) the filing
fees of the NASD (if any), (f) the fees and disbursements of respective counsel
to the Placement Agents relating to the Securities and the offering thereof,
including, without limitation, relating to any review of the offering by the
NASD, (g) all printing and engraving costs related to preparation of the
certificates for the Securities, including transfer agent and registrar fees,
(h) all fees and expenses relating to the listing of the Offered Common Shares
and the Offered Warrant Shares for trading on the AMEX, (i) the costs and
expenses relating to any investor presentations or any “road show” undertaken in
connection with the marketing of the offering of the Securities, including,
without limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in connection with
the road show presentations, travel and lodging expenses of the representatives
and officers or representatives of the Company or the Placement Agents and any
such consultants, and the cost of any aircraft chartered in connection with the
road show and (j) all of the other costs and expenses incident to the
performance by the Company of the registration and offering of the Securities;
provided, that each Placement Agent will bear and pay any advertising costs and
expenses incurred by such Placement Agent incident to the offering of the
Securities. Notwithstanding the foregoing, in no event shall the Company be
obligated to reimburse the Placement Agents for expenses in excess of $50,000 in
the aggregate.

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     11. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to COMW, shall
be mailed, delivered, sent by facsimile transmission, or telegraphed and
confirmed, to Commonwealth Associates, LP, 830 Third Avenue, 8th Floor, New
York, NY 10022, Attn.: Robert A. O’Sullivan, facsimile number (212) 829-5994,
with a copy (which shall not constitute notice) to: Vinson & Elkins LLP, Attn.:
Robert Seber, Esq., facsimile number (917) 849-5340; and, if sent to FBW, shall
be mailed, delivered, sent by facsimile transmission, or telegraphed and
confirmed, to Ferris, Baker Watts, Incorporated, 100 Light Street, 8th Floor,
Baltimore, MD 21202, Attn.: Edward Armstrong, facsimile number (410) 659-4632,
with a copy (which shall not constitute notice) to: Vinson & Elkins LLP, Attn.:
Robert Seber, Esq., facsimile number (917) 849-5340; or if sent to the Company,
shall be mailed, delivered, sent by facsimile transmission, or telegraphed and
confirmed to Teton Energy Corporation, 410 17th Street, Suite 1850, Denver,
Colorado 80202, Attn.: Chief Financial Officer, facsimile number (303) 565-0118,
with a copy (which shall not constitute notice) to: Gersten Savage LLP, 600
Lexington Avenue, 9th Floor, New York, New York 10022, Attn.: David E.
Danovitch, Esq., facsimile number (212) 980-5192.
     12. Information Furnished by Placement Agent. The statements set forth in
the first, fourth and sixth paragraphs under the caption “Plan of Distribution”
in the Preliminary Prospectus, Prospectus and the Disclosure Package, solely to
the extent included in reliance upon and in conformity with written information
related to the Placement Agents furnished to the Company by the Placement
Agents, expressly for use in the preparation thereof, constitute the only
information furnished by or on behalf of the Placement Agents as such
information is referred to herein.
     13. Parties. This Agreement shall inure to the benefit of and be binding
upon the Placement Agents, the Company and, to the extent provided in Sections 6
and 7, the officers and directors of the Company and each person who controls
the Company or the Placement Agents and their respective heirs, executors,
administrators, and successors. Nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any person, corporation or other
entity any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective successors and said
controlling persons and with respect to said Sections 6 and 7 said officers and
directors, and for the benefit of no other person, corporation or other entity.
     14. Entire Agreement; Amendments and Waivers. This Agreement, between and
among the Company, COMW and FBW, constitutes the entire agreement between the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements among the parties in connection with the subject matter hereof except
as set forth specifically herein or contemplated hereby. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. The failure of a party to exercise any
right or remedy shall not be deemed or constitute a waiver of such right or
remedy in the future. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (regardless
of whether similar), nor shall any such waiver constitute a continuing waiver
unless otherwise expressly provided.

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     15. Counterparts. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
     16. Pronouns. Whenever a pronoun of any gender or number is used herein, it
shall, where appropriate, be deemed to include any other gender and number.
     17. Time of Essence. Time shall be of the essence of this Agreement.
     18. Headings. The headings herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
     19. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to the
principles of conflicts of law that would require the application of the laws of
any other jurisdiction.

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     If the foregoing is in accordance with your understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement between the Company and the Placement
Agents.

                  TETON ENERGY CORPORATION    
 
           
 
  By:        
 
  Name:  
 
   
 
  Title:        

Accepted as of the date
first above written.
COMMONWEALTH ASSOCIATES, LP

         
By:
       
Name:
 
 
   
Title:
       

FERRIS, BAKER WATTS, INCORPORATED

         
By:
       
Name:
 
 
   
Title:
       

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SCHEDULE I
FREE WRITING PROSPECTUSES
Power Point presentation

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SCHEDULE II
SUBSIDIARIES
Teton North America LLC, which is the parent company of the following entities:
Teton DJ LLC
Teton Piceance LLC
Teton Williston LLC
Teton Big Horn LLC

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Exhibit A
Form of Offered Warrant
TETON ENERGY CORPORATION
COMMON STOCK PURCHASE WARRANT
Original Issue Date: JULY 25, 2007
Void After: 11:59 P.M., JULY 25, 2012
This Warrant is Issued to
 
(hereinafter called the “Holder,” which term shall include the Holder’s legal
representatives, heirs, successors and assigns) by Teton Energy Corporation, a
Delaware corporation (hereinafter referred to as the “Company”). This Warrant
may be transferred by the Holder only in accordance with the provisions of
Section 11.
     1. Exercise of Warrant. For value received and subject to the terms and
conditions hereinafter set forth, the Holder is entitled, upon surrender of this
Warrant at any time on or after July 25, 2007 and on or prior to July 25, 2012
(the “Exercise Date”) (with the subscription form annexed hereto (the
“Subscription Form”) duly executed) at the office of the Company at 410 17th
Street, Suite 1850, Denver, Colorado 80202, or such other office in the United
States of which the Company shall notify the Holder hereof in writing, to
purchase from the Company, at the purchase price hereinafter specified (as
adjusted from time to time, the “Exercise Price”),                     shares
(the “Warrant Shares”) (as adjusted from time to time) of the Common Stock,
$0.001 par value per share, of the Company (the “Common Stock”). The initial
Exercise Price shall be $6.06 per share.
     2. Issuance of Stock Certificates. As promptly as practicable after
surrender of this Warrant and receipt of payment of the Exercise Price, the
Company shall issue and deliver to the Holder a certificate or certificates for
the shares purchased hereunder, in certificates of such denominations and in
such names as the Holder may specify.
     3. Payment of Exercise Price. Payment of the Exercise Price shall be made
by check made payable to the order of the Company or wire transfer of
immediately available funds to a bank account designated by the Company.
     4. Limitation on Exercise. Notwithstanding anything to the contrary
contained herein, the number of Warrant Shares that may be acquired by the
Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall
be limited to the extent necessary to insure that, following such exercise (or
other issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its affiliates and any other persons whose beneficial
ownership of Common Stock would be aggregated with the Holder’s for purposes of
Section 13(d) of the Exchange Act, does not exceed 9.999% of the total number of
issued and outstanding shares of Common Stock (including for such purpose the
shares of Common Stock issuable upon such exercise). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
     5. Adjustment for Dividends, Distributions, Subdivisions, Combinations,
Mergers, Consolidations or Sale of Assets.
          5.1 Manner of Adjustment.

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               (a) Stock Dividends, Distributions or Subdivisions. In the event
the Company shall issue shares of Common Stock in a stock dividend, stock
distribution or subdivision, the Exercise Price in effect immediately before
such stock dividend, stock distribution or subdivision shall, concurrently with
the effectiveness of such stock dividend, stock distribution or subdivision, be
proportionately decreased and the number of shares of Common Stock purchasable
by exercise of this Warrant shall be proportionately increased.
               (b) Combinations or Consolidations. In the event the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased and the number of shares of Common Stock purchasable
by exercise of this Warrant shall be proportionately decreased.
               (c) Adjustment for Reclassification, Exchange or Substitution. In
the event that the class of securities issuable upon the exercise of this
Warrant shall be changed into the same or a different number of shares of any
class or classes of stock, whether by capital reorganization, reclassification
or otherwise (other than any event addressed by Sections 5.1(a), 5.1(b) or
5.1(d)), then and in each such event the Holder shall have the right thereafter
to exercise this Warrant for the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by holders of the number of shares of the class of securities
into which such Warrant might have been exercisable for immediately prior to
such reorganization, reclassification, or change, all subject to further
adjustment as provided herein.
               (d) Adjustment for Merger, Consolidation or Sale of Assets. In
the event that the Company shall merge or consolidate with or into another
entity or sell all or substantially all of its assets, this Warrant shall
thereafter be exercisable for the kind and amount of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of the Company deliverable upon exercise of this Warrant would have been
entitled upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Company’s Board of Directors)
shall be made in the application of the provisions set forth in this Section 5
with respect to the rights and interest thereafter of the Holder of this
Warrant, to the end that the provisions set forth in this Section 5 shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the exercise of
this Warrant.
          5.2 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 5, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based.
          5.3 Closing of Books. The Company shall at no time close its transfer
books against the transfer of any shares of Common Stock issued or issuable upon
the exercise of this Warrant in any manner which interferes with the timely and
proper issuance of such shares.
     6. Covenants of the Company. During the period within which the rights
represented by this Warrant may be exercised, the Company shall at all times
have authorized and reserved for the purpose of issue upon exercise of the
rights evidenced hereby, a sufficient number of shares of the class of
securities issuable upon exercise of this Warrant to provide for the exercise of
such rights. All securities which may be issued upon the exercise of the rights
represented by this Warrant shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens

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and charges with respect to the issue thereof. Upon surrender for exercise, this
Warrant shall be canceled and shall not be reissued; provided, however, that
upon the partial exercise hereof a substitute Warrant of like tenor and date
representing the rights to subscribe for and purchase any such unexercised
portion hereof shall be issued.
     7. No Rights as Shareholder Until Exercise. This Warrant shall not entitle
the Holder to any voting rights or any other rights as a stockholder of the
Company but upon presentation of this Warrant with the Subscription Form duly
executed and the tender of payment of the Exercise Price at the office of the
Company pursuant to the provisions of this Warrant, the Holder shall forthwith
be deemed a stockholder of the Company in respect of the securities for which
the Holder has so subscribed and paid.
     8. No Change Necessary. The form of this Warrant need not be changed
because of any adjustment in the Exercise Price or in the number of shares
issuable upon its exercise. A Warrant issued after any adjustment or any partial
exercise or upon replacement may continue to express the same Exercise Price and
the same number of shares (appropriately reduced in the case of partial
exercise) as are stated on this Warrant as initially issued, and that Exercise
Price and that number of shares shall be considered to have been so changed as
of the close of business on the date of adjustment.
     9. Addresses for Notices. All notices, requests, consents and other
communications hereunder shall be in writing, either delivered in hand or mailed
by registered or certified mail, return receipt requested, or sent by facsimile,
and shall be deemed to have been duly made when delivered:
          If to the Holder, to the Holder’s address as shown on the books of the
Company; or
          If to the Company, to the address set forth on the first page of this
Warrant.
     10. Substitution. In the case this Warrant shall be mutilated, lost, stolen
or destroyed, the Company shall issue a new Warrant of like tenor and
denomination and deliver the same (a) in exchange and substitution for and upon
surrender and cancellation of any mutilated Warrant, or (b) in lieu of any
Warrant lost, stolen or destroyed, upon receipt of evidence satisfactory to the
Company of the loss, theft, or destruction of such Warrant (including, without
limitation, a reasonably detailed affidavit with respect to the circumstances of
any loss, theft or destruction), and of indemnity (or, in the case of the
initial Holder or any other institutional holder, an indemnity agreement)
satisfactory to the Company.
     11. Transfer Restrictions. This Warrant shall be freely transferable by the
Holder, and may be assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise).
     12. Taxes. The Company makes no representation about tax treatment to the
Holder with respect to receipt or exercise of the Warrant or acquiring, holding
or disposing of the Common Stock, and the Holder represents that the Holder has
had the opportunity to discuss such treatment with the Holder’s tax advisers.
     13. Remedies. Each party stipulates that the remedies at law in the event
of any default or threatened default by the other party in the performance or
compliance with any of the terms of this Warrant are and shall not be adequate,
and that such terms may be specifically enforced by a decree for that specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
     14. Governing Law. This Warrant shall be construed and enforced in
accordance with, and governed by, the laws of the State of New York without
regard to its principles of conflicts of laws.

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     15. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the Holder
and the Company.
[remainder of page intentionally left blank]

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* * *
     IN WITNESS WHEREOF, the parties have caused this Warrant to be executed
this 25th day of July, 2007.

                  TETON ENERGY CORPORATION    
 
           
 
  By:        
 
     
 
Bill I. Pennington    
 
      Chief Financial Officer and Executive    
 
      Vice President    

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Exhibit B
Form of Company Counsel Legal Opinion
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties and
assets, and to conduct its business as described in the Disclosure Package and
the Prospectus and to carry out and perform its obligations under the Placement
Agency Agreement, the Subscription Agreements, the Offered Warrants and the
Placement Warrants.
(ii) The Company is duly qualified as a foreign corporation for the transaction
of business and is in good standing in the State of Colorado.
(iii) The Company has an authorized equity capitalization as set forth in the
Disclosure Package and the Prospectus.
(iv) The Offered Common Shares to be issued and sold by the Company pursuant to
the Placement Agency Agreement and the Subscription Agreements have been duly
authorized and reserved for issuance and, when issued and delivered in
accordance with the provisions of the Placement Agency Agreement and the
Subscription Agreements, will be duly and validly issued and fully paid and
non-assessable, and will conform in all material respects to the description
thereof contained in the Disclosure Package, and the Prospectus.
(v) The number of Offered Warrant Shares issuable upon exercise of the Offered
Warrants based on the exercise price in effect on the date hereof have been duly
authorized and reserved for issuance and, when issued and delivered upon
exercise by a holder in accordance with the provisions of the Offered Warrants,
will be duly and validly issued and fully paid and non-assessable.
(vi) The number of Placement Warrant Shares issuable upon exercise of the
Placement Warrants based on the exercise price in effect on the date hereof have
been duly authorized and reserved for issuance and, when issued and delivered
upon exercise by a holder in accordance with the provisions of the Placement
Warrants, will be duly and validly issued and fully paid and non-assessable.
(vii) There are no preemptive rights or similar rights to subscribe for or
purchase, nor any restrictions upon the voting or transfer of, the shares of
Common Stock, Offered Warrant Shares or Placement Warrant Shares pursuant to the
Certificate of Incorporation, Bylaws or DGCL.
(viii) Each of the Placement Agency Agreement, the Subscription Agreements, the
Offered Warrants and the Placement Warrants has been duly authorized, executed
and delivered by the Company, and each of the Placement Agency Agreement, the
Subscription Agreements, the Offered Warrants and the Placement Warrants is a
valid and legally binding obligation of the Company, enforceable in accordance
with its terms.
(ix) The Offered Warrants and Placement Warrants being issued on the date hereof
have been duly authorized by the Company and, when executed by the Company and
issued and delivered in accordance with the terms of the Placement Agency
Agreement

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and the Subscription Agreements, will constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors’ rights generally and by general principles of equity and
will conform in all material respects to the description thereof contained in
the Disclosure Package and the Prospectus.
(x) The execution, delivery and performance by the Company of the Placement
Agency Agreement, the Subscription Agreements, the Offered Warrants and the
Placement Warrants, and the consummation of the transactions contemplated
thereby, including the issuance and sale of the Securities being delivered on
the date hereof, do not conflict with and do not result in a breach or violation
by the Company of any of the terms or provisions of, or constitute a default
under, any Material Agreement (“Material Agreement” means only a contract that
is expressly identified on Exhibit B hereto), nor will such actions result in
any violation by the Company of (i) the Certificate of Incorporation or the
Bylaws, (ii) any U.S. federal, New York or Colorado state statute or the DGCL,
or (iii) any rule or any order, judgment, decree or regulation known to us of
any U.S. federal, New York or Colorado state court or governmental agency or
body having jurisdiction over the Company or any of its properties.
(xii) No consent, approval, authorization, order, registration or qualification
of or with any U.S. federal, New York, Colorado or Delaware state court or
governmental agency or body is required under New York or Colorado law or the
DGCL for the execution, delivery and performance of the Placement Agency
Agreement, the Subscription Agreements, the Offered Warrants and the Placement
Warrants and the issue and sale of the Securities on the date hereof or the
consummation by the Company of the transactions contemplated by the Placement
Agency Agreement, the Subscription Agreements, the Offered Warrants and the
Placement Warrants, except (i) such as may have been obtained or made under the
Securities Act, (ii) such consents, approvals, authorizations, orders,
registrations or qualifications as may be required under applicable state
securities or Blue Sky laws in connection with the purchase and distribution of
the Securities, and (iii) as may be expressly contemplated by the Placement
Agency Agreement, the Subscription Agreements, the Offered Warrants and the
Placement Warrants.
(xiii) The statements set forth in the Disclosure Package and the Prospectus
under the captions “Description of Common Stock”, and “Description of Warrants”
with respect to the issuance of the Offered Common Shares, the Offered Warrants
and the Placement Warrants, pursuant to the Placement Agency Agreement and the
Subscription Agreements, insofar as such statements purport to constitute
summaries of the legal matters, documents or proceedings referred to therein,
fairly summarize in all material respects the matters referred to therein.
(xiv) To our knowledge, there are no legal or governmental proceedings pending
against the Company required to be disclosed in the Disclosure Package or the
Prospectus by the Securities Act or the Rules and Regulations, other than those
described therein.
(xv) As of immediately prior to the Closing Date, the Company is not required to
register as an “investment company,” as such term is defined in the Investment
Company Act of 1940, as amended.

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(xvi) The Registration Statement is effective under the Securities Act and the
Prospectus was filed on                     , 2007 pursuant to Rule 424(b) of
the Rules and Regulations and, to our knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or threatened by the Commission.

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