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EXHIBIT 10.1
 
EXECUTION COPY

 
SUBSCRIPTION AGREEMENT
 
SUBSCRIPTION AGREEMENT (this “Agreement” or “Subscription Agreement”) dated as
of September 8, 2011 between XTREME OIL & GAS, INC., a Nevada corporation having
its principal offices at 5700 W. Plano Parkway, Suite 3600, Plano, Texas 75093
(the “Company”) and the investors set forth on the signature pages hereto
(individually, a “Subscriber” and collectively, the “Subscribers”) whose name
and address are set forth on the Signature Pages to this Agreement.
 
WHEREAS, on the terms and subject to the conditions hereinafter set forth, the
Company is offering (the “Offering”) up to 25 units (the “Units”) to a limited
number of individuals or entities who qualify as “accredited investors” as
defined in Rule 501 of Regulation D (“Regulation D”) promulgated under the
Securities Act of 1933, as amended (the “Securities Act”), at a price per unit
equal to $100,000 (the “Unit Price”). Each Unit consists of (a) a Senior
Convertible Debenture in the principal amount of $100,000 (the “Notes”) and (b)
warrants (the “Subscriber Warrants” and together with the Placement Agent
Warrants (as defined below), the “Warrants”) to purchase 267,857 shares of the
Company’s Common Stock, par value $0.001 per share (the “Common Stock”) until
the five year anniversary of the applicable Closing (as defined below), at an
exercise price of $0.28 per share, subject to adjustment as provided
therein.  The shares of Common Stock issuable upon conversion of the Notes are
collectively referred to as the “Note Shares.” The shares of Common Stock
issuable upon exercise of the Warrants are collectively referred to as the
“Warrant Shares”, and together with the Note Shares, collectively, the “Shares.”
The Units, Notes, Note Shares, Common Stock Warrants and Warrant Shares are
sometimes hereinafter referred to as the “Securities.”
 
The Company is offering the Units through du Pasquier and Co., Inc., as
placement agent (the “Placement Agent”).
 
WHEREAS, each Subscriber desires to acquire the aggregate number of Units set
forth on such Subscriber’s signature page hereof.
 
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
 
Section 1.        Subscription for Units. On the terms and subject to the
conditions set forth in Sections 5 and 6 below, each Subscriber hereby
subscribes for and agrees to purchase from the Company on the Initial Closing
Date (as defined below), that number of Units as is set forth on such
Subscriber’s signature page hereof, for the purchase price indicated (the
“Initial Purchase Price”) on such signature page (the “Initial Closing”).  The
date and time of the Initial Closing (the “Initial Closing Date”) shall be 10:00
a.m., New York City Time, on the date hereof (or such other date and time as is
mutually agreed to by the Company and each Subscriber) after notification of
satisfaction (or waiver) of the conditions to the Initial Closing set forth in
Sections 5 and 6 below. On the terms and subject to the conditions set forth in
Sections 5 and 6 below, any Person approved by the Company in its sole
discretion may subscribe for and agree to purchase from the Company on an
Additional Closing Date (as defined below), that number of Units as is set forth
on the signature page of such Person’s Joinder Agreement (as defined below), for
the purchase price indicated (the “Additional Purchase Price”, and collectively
with the Initial Purchase Price, the “Purchase Price”) on such signature page
(an “Additional Closing” and together with the Initial Closing, a
“Closing”).  Such Person shall not be eligible to purchase Units at an
Additional Closing unless such Person shall have entered into a joinder
agreement in the form attached hereto as Exhibit A (each, a “Joinder Agreement”)
and such Joinder Agreement is executed and delivered by such Person to the
Company and the Placement Agent.  Effective as of the applicable Additional
Closing Date, such Person shall be become a “Subscriber” for all purpose and
intent under this Agreement and any other Transaction Document (as defined in
Section 3.2). The date and time of an Additional Closing (an “Additional Closing
Date” and together with the Initial Closing Date, a “Closing Date”) shall be
10:00 a.m., New York City Time, on one or more dates that is no later than the
tenth (10th) Business Day after the date hereof (the “Additional Closing
Deadline”) after notification of satisfaction (or waiver) of the conditions to
the Additional Closing set forth in Sections 5 and 6 below.  In the event that a
Closing shall not have occurred with respect to a Subscriber on or before ten
(10) Business Days from the date hereof due to the Company’s or such
Subscriber’s failure to satisfy the conditions set forth in Sections 5 and 6
above (and the nonbreaching party’s failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party.  The Purchase Price is
payable by check made payable to “U.S. Bank National Association”
contemporaneously with the execution and delivery of this Subscription Agreement
to the Company or by wire transfer of immediately available funds to the
following account:
 
 
 
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U.S. Bank National Association
St. Paul, MN
ABA# 091000022
Acct# 180121167365
Attn: Daryl Hosch (651) 495-4046
Re: Xtreme Oil and Gas Sub Esc
 
Contemporaneously with each Closing, a Note and certificates evidencing the
Warrants will be delivered by the Company to each applicable Subscriber.  The
Company may, at its sole discretion, accept subscriptions for fractional Units.
As used herein, (x) “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof and (y)
“Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.
 
Section 2.        Subscriber’s Representations, Warranties and Covenants.  Each
Subscriber, severally and not jointly, hereby represents, warrants and covenants
to the Company and to the Placement Agent as of the date hereof and as of such
Subscriber’s applicable Closing Date that:
 
2.1           Such Subscriber recognizes that the purchase of the Securities
involves a high degree of risk in that (i) an investment in the Company is
highly speculative and only investors who can afford the loss of their entire
investment should consider investing in the Securities; (iii) an investor may
not be able to readily liquidate its investment; (iv) transferability of the
Securities is limited; and (v) such Subscriber could sustain the loss of its
entire investment.
 
2.2           Such Subscriber is an “accredited investor” as such term is
defined in Rule 501(a) of Regulation D promulgated under the Securities Act and
such Subscriber is able to bear the economic risk of an investment in the
Securities. In addition, such Subscriber has such knowledge and experience in
business and financial matters, including prior investments in non-listed and
non-registered securities, as is necessary in order to evaluate the merits and
risks of its investment in the Units. Such Subscriber has conducted and relied
upon its own analysis of the value of its investment in the Company and
expressly disclaims reliance upon the Company’s August 17, 2011 press release
and the third-party valuation discussed therein.
 
2.3           Such Subscriber has received and has carefully read and considered
all of the Company’s United States Securities and Exchange Commission (the
“SEC”) filings, including, without limitation, the information set forth under
“Risk Factors”.  In evaluating the suitability of an investment in the Company,
such Subscriber has not relied upon any representations or other information
(whether oral or written) received from the Company, its officers, directors,
agents, employees or representatives, except information set forth in this
Agreement, the Company’s public filings or information that is obtained from the
Company in order to verify such information. Such Subscriber has been afforded
the opportunity to ask questions of and receive answers from management of the
Company concerning the terms and conditions of the Offering and to obtain such
additional information as such Subscriber deemed necessary in order to evaluate
its investment in the Units.  Such Subscriber understands that the Placement
Agent has acted solely as agent of the Company in this Offering of the
Securities and not to any Subscriber, and that the Placement Agent makes no
representation or warranty with regard to the merits of this transaction or as
to the accuracy of any information such Subscriber may have received in
connection therewith.  Such Subscriber acknowledges that he has not relied on
any information or advice furnished by or on behalf of the Placement Agent.
 
 
 
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2.4           Such Subscriber understands that its purchase of the Securities
may have tax consequences and that such Subscriber must retain its own
professional advisors to evaluate the tax and other consequences of an
investment in the Securities.  Such Subscriber has independently evaluated the
merits of its decision to purchase Securities pursuant to the Transaction
Documents, and such Subscriber confirms that it has been afforded the
opportunity to consult with such Subscriber’s business, tax and/or legal counsel
in making such decision and has availed itself of that opportunity to the extent
deemed advisable by such Subscriber.
 
2.5           Such Subscriber acknowledges that the Offering has not been
reviewed, endorsed or approved by the SEC and that the Units are being offered
without registration under the Securities Act in reliance upon the exemption
from registration afforded by Section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder, and without registration under any state
securities laws. Such Subscriber understands that a legend will be affixed to
each certificate evidencing any of the Securities to the effect that the
Securities have not been registered under the Securities Act or any applicable
state securities laws and setting forth or referring to the restrictions on
transferability and sale thereof.
 
2.6           Such Subscriber is purchasing the Units for its own account for
investment purposes only and not with a view to or for sale in connection with,
or for purposes of, any “distribution” thereof within the meaning of Section
2(11) of the Securities Act.
 
2.7           Such Subscriber understands that the Company reserves the right to
hold one or more Additional Closings of the Offering at any time through the
Additional Closing Deadline.  Such Subscriber further understands that the
Company shall not have any obligation to sell any Units in any jurisdiction in
which the sale of Units would constitute a violation of the securities, “blue
sky” or other similar laws of such jurisdiction.
 
2.8           Such Subscriber’s address set forth on the signature page hereto
is its principal residence if such Subscriber is an individual or its principal
business address if such Subscriber is a corporation or other entity.
 
2.9           Such Subscriber is not subscribing for the Units as a result of
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
presented at any seminar or general meeting.
 
2.10           Such Subscriber has all requisite legal and other power and
authority to execute and deliver this Subscription Agreement and to carry out
and perform such Subscriber’s obligations hereunder.  This Agreement has been
duly and validly authorized, executed, and delivered by such Subscriber. This
Subscription Agreement constitutes a valid and legally binding obligation of
such Subscriber, enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
general principals of equity, whether such enforcement is considered in a
proceeding in equity or law. The funds provided for this investment are either
separate property of such Subscriber, community property over which such
Subscriber has the right of control or are otherwise funds as to which such
Subscriber has the sole right of management.
 
 
 
 
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2.11           There are no actions, suits, proceedings or investigations
pending against such Subscriber or such Subscriber’s assets (nor, to such
Subscriber’s knowledge, is there any threat thereof) which would impair such
Subscriber’s ability to enter into and fully perform such Subscriber’s
commitments and obligations under this Subscription Agreement or the
transactions contemplated hereby.
 
2.12           The execution, delivery and performance of this Subscription
Agreement by such Subscriber will not result in (A) any violation of, or
conflict with, or constitute a default under, (i) any of such Subscriber’s
articles of incorporation or by-laws, if applicable, (ii) any agreement to which
such Subscriber is a party or by which it is bound, or (iii) any law, rule,
regulation, order, judgment  or decree (including federal and state securities
laws) applicable to such Subscriber, nor (B) the creation of any mortgage,
pledge, lien, encumbrance or charge against any of the assets or properties of
such Subscriber or on the Securities, except in the case of clauses (A)(ii) and
(A)(iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Subscriber to perform its obligations
hereunder.
 
2.13           No consent from any other Person is required in order for such
Subscriber to execute this Agreement and perform its obligations hereunder, or
such consent has been obtained and a copy has been provided to the Company.
 
2.14           Such Subscriber understands that the Company intends to pay
compensation to the Placement Agent in connection with the sale of the Units,
including, without limitation, by issuing to the Placement Agent warrants in the
substantially the same form as the Subscriber Warrants (the “Placement Agent
Warrants”).
 
2.15           Such Subscriber has kept confidential the existence of the
Offering and the information contained therein or made available in connection
with any further investigation of the Company.
 
2.16           Such Subscriber does not have any agreement or understanding with
the Company with respect to the transactions contemplated by the Transaction
Documents other than as specified in the Transaction Documents.
 
2.17           Such Subscriber’s representations and warranties contained in
this Subscription Agreement and the Accredited Investor Prospective Participant
Questionnaire accompanying this Subscription Agreement do not contain any untrue
statement of a material fact. Such Subscriber understands that the Company and
the Placement Agent are each relying upon the truth and accuracy of the
representations, warranties and agreements of such Subscriber set forth herein
in making their determination that the Offering and sale of the Units is exempt
from registration under the Securities Act and state securities laws.
 
2.18           If such Subscriber is a corporation, partnership, limited
liability company, trust, joint purchaser, or other entity such Subscriber has
been duly formed is validly and existing and has full power and authority to
purchase the Units and make an investment in the Company.
 

 
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2.19           Such Subscriber understands that: (i) the Securities have not
been and are not being registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Subscriber shall have
delivered to the Company an opinion of counsel, in a form reasonably
satisfactory to the Company, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such Subscriber provides the Company
with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities
Act, as amended, (or a successor rule thereto) (collectively, “Rule 144”); (ii)
any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the Securities Act) may require compliance with some
other exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.  Notwithstanding the foregoing, the Securities may be pledged in
connection with a bona fide margin account or other loan or financing
arrangement secured by the Securities and such pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no
Subscriber effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document, including, without
limitation, this Section 2.19.
 
2.20           Such Subscriber understands that the certificates or other
instruments representing the Notes, the Warrants and the stock certificates
representing the Note Shares and the Warrant Shares, except as set forth below,
shall bear any legend as required by the “blue sky” laws of any state and a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
 
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[CONVERTIBLE][EXERCISABLE]  HAVE BEEN][THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
 
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at The Depository Trust Company (“DTC”), if, unless otherwise required
by state securities laws, (i) such Securities are registered for resale under
the Securities Act, (ii) in connection with a sale, assignment or other
transfer, such holder provides the Company with an opinion of counsel, in a form
reasonably satisfactory to the Company, to the effect that such sale, assignment
or transfer of the Securities may be made without registration under the
applicable requirements of the Securities Act, or (iii) such holder provides the
Company with reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A.  The Company shall be responsible
for the fees of its transfer agent and all DTC fees associated with such
issuance.
 
 
 
 
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2.21           Such Subscriber understands that U.S. Bank National Association
is acting only as an escrow agent in connection with the offering of securities
described herein, and has not endorsed, recommended or guaranteed the purchase,
value or repayment of such securities.
 
Section 3.        Representations and Warranties of the Company.  The Company
represents and warrants to each Subscriber and to the Placement Agent as of the
date hereof and as of each applicable Closing Date that:
 
3.1           The Company is a corporation duly organized, existing and in good
standing under the laws of the State of Nevada and has the power and authority
to conduct the business which it conducts and proposes to conduct.
 
3.2           The Company’s execution, delivery and performance of this
Agreement, the Notes, the Warrants and any other agreements executed and
delivered by the Company pursuant to this Agreement or in connection herewith
(collectively “Transaction Documents”) have been duly authorized, executed and
delivered by the Company and are valid and binding agreements enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights generally and to general principles
of equity. The Company has full corporate power and authority necessary to enter
into and deliver the Transaction Documents and to perform its obligations
thereunder.
 
3.3           No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company,
or any other Person is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation, the
issuance and sale of the Securities.
 
3.4           Assuming the representations and warranties of the Subscribers in
this Agreement are true and correct, neither the issuance and sale of the
Securities nor the performance of the Company’s obligations under this Agreement
and the other Transaction Documents will:
 
(i)           violate, conflict with, result in a breach of, or constitute a
default (or an event which with the giving of notice or the lapse of time or
both would be reasonably likely to constitute a default in any material respect)
of a material nature under (A) the certificate of incorporation, charter or
bylaws of the Company, (B) to the Company’s knowledge, any decree, judgment,
order, law, treaty, rule, regulation or determination applicable to the Company
of any court, governmental agency or body, or arbitrator having jurisdiction
over the Company or over the properties or assets of the Company or any of its
Affiliates (as defined in Rule 405 of Regulation S-K) , or (C) the terms of any
bond, debenture, note or any other evidence of indebtedness, or any agreement,
stock option or other similar plan, indenture, lease, mortgage, deed of trust or
other instrument to which the Company is a party, by which the Company is bound,
or to which any of the properties of the Company is subject; except the
violation, conflict, breach, or default of which would not reasonably be
expected to have a Material Adverse Effect. As used herein, “Material Adverse
Effect” means any material adverse effect on the business, properties, assets,
operations, results of operations or condition (financial or otherwise) of the
Company and its “Subsidiaries” (which for purposes of this Agreement has the
meaning ascribed to such term in Regulation S-X under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)), individually or taken as a whole,
or on the transactions contemplated hereby and the other Transaction Documents
or by the agreements and instruments to be entered into in connection herewith
or therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents; or
 
 
 
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(ii)           result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company.

3.5           The Securities have been duly authorized and, when issued in
accordance with the term of this Agreement and the Notes and Warrants, as
applicable, and upon payment of the agreed upon consideration therefore:

(i)           will be, free and clear of any security interests, liens, claims
or other encumbrances, subject to restrictions upon transfer under the
Securities Act and any applicable state securities laws;

(ii)           will not have been issued or sold in violation of any preemptive
or other similar rights of the holders of any securities of the Company; and

(iii)           assuming the representations and warranties of the Subscribers
pursuant to Section 2 hereof are true and correct, will not result in a
violation of Section 5 under the Securities Act.

The Company has reserved from its duly authorized capital stock the shares of
Common Stock issuable pursuant to the Notes and the Warrants in order to issue
the Note Shares and Warrant Shares.
 
3.6           The Company has not engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) in connection with the offer or sale of the Securities.

3.7           During the two (2) years prior to the date hereof, the Company has
filed annual, quarterly and current reports pursuant to the Exchange Act and has
filed all reports required to be filed by it under the Exchange Act (all of the
foregoing filed prior to the date hereof or prior to the date of the Closing,
and all exhibits included therein and financial statements, notes and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the “SEC Documents”).  As of their respective dates, such reports
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder except to the extent
that the Company filed amendments to such reports in which event, the SEC
Documents, as amended, complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the SEC promulgated
thereunder.  The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing.  Such financial statements have been prepared in
accordance with United States generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, year-end audit adjustments. None of the
SEC Documents at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
 
 
 
 
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3.8           Additional Representations.
 
(a)           Litigation.  There is no action, suit or legal proceeding
(“Action”) which adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Shares.  The SEC has
not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
 
(b)           Solvency.  Based on the financial condition of the Company as of
the applicable Closing Date (and assuming that such applicable Closing shall
have occurred), (i) the Company’s fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company’s
existing indebtedness and other liabilities (including known contingent
liabilities), (ii) the Company is able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and mature, (iii) the Company does not intend to incur or believes that
it will not incur debts that would be beyond its ability to pay as such debts
mature and (iv) the Company does not have unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
 
(c)           Certain Fees.  Except for the Placement Agent, no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement.  The Subscribers shall have no obligation with respect to any
fees or with respect to any claims (other than such fees or commissions owed by
a Subscriber pursuant to written agreements executed by such Subscriber which
fees or commissions shall be the sole responsibility of such Subscriber) made by
or on behalf of other Persons for fees of a type contemplated in this Section
that may be due in connection with the transactions contemplated by this
Agreement.
 
(d)           Investment Company.  The Company is not, and is not an Affiliate
of, and immediately following the Closing will not have become, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
 
(e)           No Additional Agreements.  The Company does not have any agreement
or understanding with any Subscriber with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.
 
(f)           Consultation with Auditors.  The Company has consulted its
independent auditors concerning the accounting treatment of the transactions
contemplated by the Transaction Documents, and in connection therewith has
furnished such auditors complete copies of the Transaction Documents.
 
(g)           Foreign Corrupt Practices Act.  Neither the Company nor any
Subsidiary, nor to the knowledge of the Company, any agent or other Person
acting on behalf of any of the Company or any Subsidiary, has, directly or
indirectly, (i) used any funds, or will use any proceeds from the sale of the
Shares, for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company or any
Subsidiary (or made by any Person acting on their behalf of which the Company is
aware) which is in violation of law, or (iv) has violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder.
 
 
 
 
 
 
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(h)           Money Laundering Laws. The operations of each of the Company and
any Subsidiary are and have been conducted at all times in compliance with the
money laundering statutes of applicable jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any applicable 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 and/or any Subsidiary with respect to the Money Laundering Laws is
pending or, to the best knowledge of the Company, threatened.
 
(i)           No Integrated Offering.  None of the Company, its Subsidiaries,
any of their Affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities Act, whether through integration with prior offerings or
otherwise, or cause this offering of the Securities to require approval of
stockholders of the Company for purposes of any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed, designated or quoted.
 
(j)           Conduct of Business; Regulatory Permits.  Neither the Company nor
its Subsidiaries is in violation of any term of or in default under any
certificate of designations of any outstanding series of preferred stock of the
Company, its Articles of Incorporation or Bylaws or their organizational charter
or certificate of incorporation or bylaws, respectively.  Neither the Company
nor any of its Subsidiaries is in violation of any judgment, decree or order or
any statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.  Without limiting the generality of
the foregoing, the Company is not in violation of any of the rules, regulations
or requirements of the Trading Market and has no knowledge of any facts or
circumstances that would reasonably lead to delisting or suspension of the
Common Stock by the Trading Market in the foreseeable future.  Since February
18, 2011, (i) the Common Stock has been designated for quotation or listed on
the Trading Market, (ii) trading in the Common Stock has not been suspended by
the SEC or the Trading Market and (iii) the Company has received no
communication, written or oral, from the SEC or the Trading Market regarding the
suspension or delisting of the Common Stock from the Trading Market.  The
Company and its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.  As used herein, “Trading Market” means the following markets or
exchanges on which the Common Stock is listed or quoted for trading on the date
in question: the American Stock Exchange, The NASDAQ Capital Market, The NASDAQ
Global Market, The NASDAQ Global Select Market, the New York Stock Exchange, the
OTC Bulletin Board, or the “Pink Sheets” published by Pink OTC Markets Inc.
 
(k)           Dilutive Effect.  The Company understands and acknowledges that
the number of Note Shares issuable upon conversion of the Notes and the number
of Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances.  The Company further acknowledges that its obligation to
issue Note Shares upon conversion of the Notes in accordance with this Agreement
and the Notes and its obligation to issue the Warrant Shares upon exercise of
the Warrants in accordance with this Agreement and the Warrants is, in each
case, is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other shareholders of the
Company.
 
 
 
 
 
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(l)           Absence of Certain Changes.  Except as disclosed in Schedule
3.8(l), since June 30, 2011, there has been no material adverse change and no
material adverse development in the business, assets, properties, operations,
condition (financial or otherwise) or results of operations of the Company or
its Subsidiaries.  Except as disclosed in Schedule 3.8(l), since June 30, 2011,
neither the Company nor any of its Subsidiaries has (i) declared or paid any
dividends, (ii) sold any assets, individually or in the aggregate, in excess of
$100,000 outside of the ordinary course of business or (iii) had capital
expenditures, individually or in the aggregate, in excess of $100,000.  Neither
the Company nor any of its Subsidiaries has taken any steps to seek protection
pursuant to any bankruptcy law nor does the Company have any knowledge or reason
to believe that its creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact that would reasonably lead a
creditor to do so.  The Company and its Subsidiaries, individually and on a
consolidated basis, are not as of the date hereof, and after giving effect to
the transactions contemplated hereby to occur at the Closing, will not be
Insolvent (as defined below).  For purposes of this Section 3.8(l), “Insolvent”
means, with respect to any Person, (i) the present fair saleable value of such
Person’s assets is less than the amount required to pay such Person’s total
Indebtedness (as defined in Section 3.8(q)), (ii) such Person is unable to pay
its debts and liabilities, subordinated, contingent or otherwise, as such debts
and liabilities become absolute and matured, (iii) such Person intends to incur
or believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
 
(m)           Bank Holding Company Act.  Neither the Company nor any of its
Subsidiaries or affiliates is subject to the Bank Holding Company Act of 1956,
as amended (the “BHCA”) and to regulation by the Board of Governors of the
Federal Reserve System (the “Federal Reserve”).  Neither the Company nor any of
its Subsidiaries or affiliates owns or controls, directly or indirectly, five
percent (5%) or more of the outstanding shares of any class of voting securities
or twenty-five percent (25%) or more of the total equity of a bank or
any  entity that is subject to the BHCA and to regulation by the Federal
Reserve.  Neither the Company nor any of its Subsidiaries or affiliates
exercises a controlling influence over the management or policies of a bank or
any entity that is subject to the BHCA and to regulation by the Federal Reserve.
 
(n)           Sarbanes-Oxley Act.  The Company is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof.
 
(o)           Transactions With Affiliates.  Except as disclosed in Schedule
3.8(o), none of the officers, directors or employees of the Company or any of
its Subsidiaries is presently a party to any transaction with the Company or any
of its Subsidiaries (other than for ordinary course services as employees,
officers or directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company or any of
its Subsidiaries, any corporation, partnership, trust or other entity in which
any such officer, director, or employee has a substantial interest or is an
officer, director, trustee or partner.
 
 
 
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(p)           Equity Capitalization.  As of the date hereof, the authorized
capital stock of the Company consists of (i) 200,000,000 shares of Common Stock,
of which as of the date hereof, 45,915,246 shares are issued and outstanding, no
shares are reserved for issuance pursuant to the Company’s employee incentive
plan or other options and warrants outstanding and 3,776,879 shares are reserved
for issuance pursuant to securities (other than the aforementioned options and
warrants and the Warrants) exercisable or exchangeable for, or convertible into,
Common Stock and (ii) 50,000,000 shares of preferred stock, par value $0.001 per
share, of which as of the date hereof none are issued and outstanding and 1,000
shares of non-transferable preferred stock, par value $0.001 per share, of which
as of the date hereof 1,000 are issued and outstanding.  All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable.  Except as disclosed in Schedule 3.8(p):  (i) none of the
Company’s capital stock is subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company; (ii)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its Subsidiaries; (iii) there
are no outstanding debt securities, notes, credit agreements, credit facilities
or other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its Subsidiaries; (v) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the
Securities Act; (vi) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities; (viii) the
Company does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and (ix) the Company and its
Subsidiaries have no liabilities or obligations required to be disclosed in the
SEC Documents but not so disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company’s or any of its Subsidiary’s’
respective businesses and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect.  The Company has furnished or made
available on the SEC's EDGAR system to the Subscribers true, correct and
complete copies of the Company’s Articles of Incorporation, as amended and as in
effect on the date hereof (the “Articles of Incorporation”), and the Company’s
Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the
terms of all securities convertible into, or exercisable or exchangeable for,
shares of Common Stock and the material rights of the holders thereof in respect
thereto.
 
(q)           Indebtedness and Other Contracts.  Except as disclosed in Schedule
3.8(q), neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined in the Notes), (ii) is a party to any contract,
agreement or instrument, the violation of which, or default under which, by the
other party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect.  Schedule 3.8(q) provides a detailed
description of the material terms of any such outstanding Indebtedness.
 

 
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(r)           Insurance.  The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged.  Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
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.
 
(s)           Employee Relations.
 
(i)           Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or employs any member of a union.  The Company
and its Subsidiaries believe that their relations with their employees are
good.  No executive officer of the Company or any of its Subsidiaries (as
defined in Rule 501(f) of the Securities Act) has notified the Company or any
such Subsidiary that such officer intends to leave the Company or any such
Subsidiary or otherwise terminate such officer’s employment with the Company or
any such Subsidiary.  No executive officer of the Company or any of its
Subsidiaries, to the knowledge of the Company or any of its Subsidiaries, is, or
is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.
 
(ii)           The Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
 
(t)           Title.  The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as 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 by
the Company and any of its Subsidiaries.   Any real property and facilities held
under lease by the Company and any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries.
 
(u)           Intellectual Property Rights.  The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, original works of
authorship, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights and all applications and registrations therefor (“Intellectual Property
Rights”) necessary to conduct their respective businesses as now
conducted.  Except as set forth in Schedule 3.8(u), none of the Company’s
Intellectual Property Rights have expired or terminated or have been abandoned
or are expected to expire or terminate or are expected to be abandoned, within
three years from the date of this Agreement.  The Company does not have any
knowledge of any infringement by the Company or its Subsidiaries of Intellectual
Property Rights of others.  There is no claim, action or proceeding being made
or brought, or to the knowledge of the Company or any of its Subsidiaries, being
threatened, against the Company or any of its Subsidiaries regarding its
Intellectual Property Rights.  Neither the Company nor any of its Subsidiaries
is aware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings.  The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights.
 
 
 
 
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(v)           Environmental Laws.  The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect.  The term “Environmental Laws” means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
 
(w)           Tax Status.  The Company and each of its Subsidiaries (i) has made
or filed all foreign, U.S. federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply.  There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.
 
(x)           Internal Accounting and Disclosure Controls.  The Company and each
of its Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.  The
Company maintains disclosure controls and procedures (as such term is defined in
Rule 13a-15 under the Exchange Act) that are effective in ensuring that
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the rules and forms of the SEC,
including, without limitation, controls and procedures designed in to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is accumulated and communicated to the
Company’s management, including its principal executive officer or officers and
its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure.  During the twelve (12) months prior to
the date hereof neither the Company nor any of its Subsidiaries has received any
notice or correspondence from any accountant relating to any material weakness
in any part of the system of internal accounting controls of the Company or any
of its Subsidiaries.
 

 
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(y)           Off Balance Sheet Arrangements.  There is no transaction,
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company
in its Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
 
(z)           Transfer Taxes.  On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to each
Subscriber hereunder will be, or will have been, fully paid or provided for by
the Company, and all laws imposing such taxes will be or will have been complied
with.
 
(aa)           Manipulation of Price.  The Company has not, and to its knowledge
no one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result, or that could reasonably be expected to cause or
result, in the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities, (ii) other
than the Placement Agent, sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) other than the
Placement Agent, paid or agreed to pay to any person any compensation for
soliciting another to purchase any Securities.
 
(bb)           Disclosure.  The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Subscribers or their agents
or counsel with any information that constitutes or could reasonably be expected
to constitute material, nonpublic information, other than the existence of the
transactions contemplated by this Agreement and the other Transaction
Documents.  The Company understands and confirms that each of the Subscribers
will rely on the foregoing representations in effecting transactions in
securities of the Company.  All disclosure provided to the Subscribers regarding
the Company, or any of its Subsidiaries, their business and the transactions
contemplated hereby, including the disclosure schedules to this Agreement,
furnished by or on behalf of the Company is true and correct and does not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.  Each press release
issued by the Company or any of its Subsidiaries during the twelve (12) months
preceding the date of this Agreement did not at the time of release contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.  No event
or circumstance has occurred or information exists with respect to the Company
or any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed.  The Company acknowledges and
agrees that no Subscriber makes or has made any representations or warranties
with respect to the transactions contemplated hereby other than those
specifically set forth in Section 2.
 
(cc)           Stock Option Plans. Each stock option granted by the Company was
granted (i) in accordance with the terms of the applicable Company stock option
plan and (ii) with an exercise price at least equal to the fair market value of
the Common Stock on the date such stock option would be considered granted under
United States Generally Accepted Accounting Principals, consistently applied,
and applicable law. No stock option granted under the Company’s stock option
plan has been backdated.  The Company has not knowingly granted, and there is no
and has been no Company policy or practice to knowingly grant, stock options
prior to, or otherwise knowingly coordinate the grant of stock options with, the
release or other public announcement of material information regarding the
Company or its Subsidiaries or their financial results or prospects.
 

 
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Section 4.        Additional Agreements.
 
4.1           Integration.  The Company shall not, and shall use its reasonable
best efforts to ensure that no Affiliate of the Company shall, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Shares in a manner that would require the registration
under the Securities Act of the sale of the Shares in the Offering, or that
would be integrated with the offer or sale of the Shares for purposes of the
rules and regulations of any Trading Market in a manner that would require
stockholder approval of the sale of the securities to the Subscribers.

4.2           Indemnification of Subscribers.  In addition to the indemnity
provided herein, the Company will indemnify and hold each Subscriber and the
Placement Agent and its respective directors, officers, shareholders, partners,
employees and agents (each, an “Investor Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees (collectively, “Losses”) that any such Investor Party
may suffer or incur as a result of or relating to any misrepresentation, breach
or inaccuracy of any representation, warranty, covenant or agreement made by the
Company in any Transaction Document.  In addition to the indemnity contained
herein, the Company will reimburse each Investor Party for its reasonable legal
and other expenses incurred in connection therewith, as such expenses are
incurred.  Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section and shall only relieve it
from any liability which it may have to such indemnified party under this
Section, except and only if and to the extent the indemnifying party is
prejudiced by such omission. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party, and, after
notice from the indemnifying party to such indemnified party of its election so
to assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties, as a group, shall have the right to select one
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.

4.3           Public Information.  At any time during the period commencing on
the six (6) month anniversary of the Initial Closing Date and ending at such
time that all of the Securities can be sold without the requirement to be in
compliance with Rule 144(c)(1) and otherwise without restriction or limitation
pursuant to Rule 144, including, if applicable, Rule 144(i), if a registration
statement is not available for the resale of all of the Securities and the
Company shall fail for any reason to satisfy the current public information
requirement under Rule 144 (a “Public Information Failure”) then, as partial
relief for the damages to any holder of Securities by reason of any such delay
in or reduction of its ability to sell the Securities (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall pay to each such holder an amount in cash equal to two percent (2.0%) of
the aggregate Purchase Price of such holder’s Securities on every thirtieth day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (i) the date such Public Information Failure is cured and (ii) such
time that such public information is no longer required pursuant to Rule
144.  The payments to which a holder shall be entitled pursuant to this Section
4.3 are referred to herein as “Public Information Failure Payments.”  Public
Information Failure Payments shall be paid on the earlier of (I) the last day of
the calendar month during which such Public Information Failure Payments are
incurred and (II) the third Business Day after the event or failure giving rise
to the Public Information Failure Payments is cured.  In the event the Company
fails to make Public Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at the rate of to one
percent (1.0%) per month (prorated for partial months) until paid in full.
 
 
 
 
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4.6           Disclosure of Transactions and Other Material Information.  The
Company shall, on or before 8:30 a.m., New York City time, on the first Business
Day after the date of this Agreement, issue a press release and file a Current
Report on Form 8-K describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the Exchange Act, and attaching
the material Transaction Documents (including, without limitation, this
Agreement (and all schedules to this Agreement), the form of Note and the form
of Warrant as exhibits to such filing (including all attachments, the “Initial
8-K Filing”).  Upon any Additional Closings, to the extent the Company
determines that knowledge of such Additional Closing constitutes material,
nonpublic information, the Company shall, on or before 8:30 a.m., New York City
time, on the first Business Day after the date of the applicable Joinder
Agreement is executed with respect to such Additional Closing, issue a press
release (an “Additional Press Release”) or file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Joinder Agreement
in the form required by the Exchange Act (an “Additional 8-K Filing” and
together with the Initial 8-K Filing, the “8-K Filing”). From and after the
filing of the Initial 8-K Filing with the SEC and after the issuance of either
an Additional Press Release or the filing of an Additional 8-K Filing with the
SEC, as applicable, the applicable Subscriber(s) shall not be in possession of
any material, nonpublic information received from the Company, any of its
Subsidiaries or any of their respective officers, directors, employees or
agents, that is not disclosed in the 8-K Filing, or, if applicable, Additional
Press Release.  Thereafter, the Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide any Subscriber with any material, nonpublic
information regarding the Company or any of its Subsidiaries without the prior
express written consent of such Subscriber.  Except as contemplated above,
without the prior written consent of any applicable Subscriber, neither the
Company nor any of its Subsidiaries or affiliates shall disclose the name of
such Subscriber in any filing, announcement, release or otherwise.

4.7           Additional Notes; Variable Securities.  So long as any Subscriber
beneficially owns any Securities, the Company will not issue any Notes (other
than to the Subscribers as contemplated hereby) and the Company shall not issue
any other securities that would cause a breach or default under the Notes.  For
so long as any Notes or Warrants remain outstanding, the Company shall not, in
any manner, issue or sell any rights, warrants or options to subscribe for or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary with the
market price of the Common Stock, including by way of one or more reset(s) to
any fixed price unless the conversion, exchange or exercise price of any such
security cannot be less than the then applicable Conversion Price (as defined in
the Notes) with respect to the Common Stock into which any Note is convertible
or the then applicable Exercise Price (as defined in the Warrants) with respect
to the Common Stock into which any Warrant is exercisable.

4.8           Corporate Existence.  So long as any Subscriber beneficially owns
any Securities, the Company shall not be party to any Fundamental Transaction
(as defined in the Notes) unless the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth in the Notes
and the Warrants.
 
 
 
 
 
 
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4.9           Reservation of Shares.  So long as any Subscriber owns any
Securities, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than the sum of
the number of shares of Common Stock issuable (i) upon conversion of the Notes
and (ii) upon exercise of the Warrants then outstanding (without taking into
account any limitations on the conversion of the Notes or exercise of the
Warrants set forth in the Notes and Warrants, respectively) (the “Required
Reserved Amount).  If at any time number of shares of Common Stock authorized
and reserved for issuance is not sufficient to meet the Required Reserved
Amount, the Company will promptly take all corporate action necessary to
authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of stockholders to authorize additional
shares to meet the Company’s obligations under Section 3.5, in the case of an
insufficient number of authorized shares, obtain stockholder approval of an
increase in such authorized number of shares, and voting the management shares
of the Company in favor of an increase in the authorized shares of the Company
to ensure that the number of authorized shares is sufficient to meet the
Required Reserved Amount.

4.10           Conduct of Business.  The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.

4.11           Additional Issuances of Securities.  From the date hereof until
the eighteen (18) month anniversary of the Closing Date, the Company will not,
directly or indirectly, effect any Subsequent Placement unless the Company shall
have first complied with this Section 4.11. As used herein, (w) “Subsequent
Placement” means the direct or indirect, offer, sale, grant of any option to
purchase, or other disposition of (or announcement of any offer, sale, grant or
any option to purchase or other disposition of) any of the Company’s or the
Company’s Subsidiaries’ equity or equity equivalent securities, including
without limitation any debt, preferred stock or other instrument or security
that is, at any time during its life and under any circumstances, convertible
into or exchangeable or exercisable for Common Stock or Common Stock
Equivalents, (x) “Convertible Securities” means any stock or securities (other
than Options) convertible into or exercisable or exchangeable for shares of
Common Stock, (y) “Options” means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities and (z) “Common Stock
Equivalents” means, collectively, Options and Convertible Securities.

(1)           At least four (4) Trading Days prior to any proposed or intended
Subsequent Placement, the Company shall deliver to each Subscriber a written
notice of its proposal or intention to effect a Subsequent Placement (a
“Pre-Notice”), which Pre-Notice (i) shall not contain any material non-public
information about the Company, (ii) shall not include any details regarding the
proposed terms of such Subsequent Placement and (iii) shall ask each such
Subscriber if it wants to review the details of such Subsequent Placement.  If a
Subscriber elects not to receive additional information about a Subsequent
Placement, the Company’s obligations with respect to such Subsequent Placement
shall be deemed satisfied.  If a Subscriber elects to receive additional
information about such Subsequent Placement and agrees to (i) use such
information only for the purposes of considering such Subsequent Placement, and
(2) keep any such information confidential until the earlier of (x) the Company
informing the Subscriber of the termination of the Subsequent Placement and (y)
the disclosure by the Company of the material terms of the Subsequent Placement
in a “Public Disclosure” (as defined in Regulation FD), upon the written request
of such Subscriber within one (1) Trading Day of the delivery of the Pre-Notice,
but only upon the written request of such Subscriber, the Company shall promptly
deliver to such Subscriber an irrevocable written notice (the “Offer Notice”) of
any proposed or intended issuance or sale or exchange (the “Offer”) of the
securities being offered (the “Offered Securities”) in a Subsequent Placement,
which Offer Notice shall (w) identify and describe the Offered Securities, (x)
describe the price and other terms upon which they are to be issued, sold or
exchanged, and the number or amount of the Offered Securities to be issued, sold
or exchanged, (y) identify the Persons (if known) to which or with which the
Offered Securities are to be offered, issued, sold or exchanged and (z) offer to
issue and sell to or exchange with such Subscribers twenty-five percent (25%) of
the Offered Securities, allocated among such Subscribers based on such
Subscriber’s pro rata portion of the of the aggregate principal amount of Notes
purchased hereunder (the “Basic Amount”).
 
 
 
 
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(2)           To accept an Offer, in whole or in part, such Subscriber must
deliver a written notice to the Company prior to the end of the second (2nd)
Business Day after such Subscriber’s receipt of the Offer Notice (the “Offer
Period”), setting forth the portion of such Subscriber’s Basic Amount that such
Subscriber elects to purchase (the “Notice of Acceptance”).  Notwithstanding
anything to the contrary contained herein, if the Company desires to modify or
amend the terms and conditions of the Offer prior to the expiration of the Offer
Period, the Company may deliver to the Subscribers a new Offer Notice and the
Offer Period shall expire on the second (2nd) Business Day after such
Subscriber’s receipt of such new Offer Notice.

(3)           The Company shall have ten (10) Business Days from the expiration
of the Offer Period above to offer, issue, sell or exchange all or any part of
such Offered Securities as to which a Notice of Acceptance has not been given by
the Subscribers (the “Refused Securities”) pursuant to a definitive agreement
(the “Subsequent Placement Agreement”) but only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
more favorable to the acquiring Person or Persons or less favorable to the
Company than those set forth in the Offer Notice and (ii) to publicly announce
(a) the execution of such Subsequent Placement Agreement, and (b) either (x) the
consummation of the transactions contemplated by such Subsequent Placement
Agreement or (y) the termination of such Subsequent Placement Agreement, which
shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent
Placement Agreement and any documents contemplated therein filed as exhibits
thereto.

(4)           In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms specified
in Section 4.11(3) above), then each Subscriber may, at its sole option and in
its sole discretion, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that such Subscriber elected to
purchase pursuant to Section 4.11(2) above multiplied by a fraction, (i) the
numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Subscribers pursuant to Section 4.11(3) above
prior to such reduction) and (ii) the denominator of which shall be the original
amount of the Offered Securities.  In the event that any Subscriber so elects to
reduce the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the Subscribers in accordance with Section 4.11(1) above.
 
 
 

 
 
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(5)           Upon the closing of the issuance, sale or exchange of all or less
than all of the Refused Securities, the Subscribers shall acquire from the
Company, and the Company shall issue to the Subscribers, the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant
to Section 4.11(3) above if the Subscribers have so elected, upon the terms and
conditions specified in the Offer.

(6)           Any Offered Securities not acquired by the Subscribers or other
Persons in accordance with Section 4.11(3) above may not be issued, sold or
exchanged until they are again offered to the Subscribers under the procedures
specified in this Agreement.

(7)           Notwithstanding anything to the contrary in this Section 4.11 and
unless otherwise agreed to by the Subscribers, the Company shall either confirm
in writing to the Subscribers that the transaction with respect to the
Subsequent Placement has been abandoned or shall publicly disclose its intention
to issue the Offered Securities, in either case in such a manner such that the
Subscribers will not be in possession of material non-public information, by the
fifteenth (15th) Business Day following delivery of the Offer Notice.  If by the
fifteenth (15th)Business Day following delivery of the Offer Notice no public
disclosure regarding a transaction with respect to the Offered Securities has
been made, and no notice regarding the abandonment of such transaction has been
received by the Subscribers, such transaction shall be deemed to have been
abandoned and the Subscribers shall not be deemed to be in possession of any
material, non-public information with respect to the Company.  Should the
Company decide to pursue such transaction with respect to the Offered
Securities, the Company shall provide each Subscriber with another Offer Notice
and each Subscriber will again have the right of participation set forth in this
Section 4.11.  The Company shall not be permitted to deliver more than one such
Offer Notice to the Subscribers in any 30 day period.

(8)           The restrictions contained in this Section 4.11 shall not apply in
connection with the issuance of any Excluded Securities.  As used herein,
“Excluded Securities” means: means any Common Stock issued or issuable: (i) in
connection with any Approved Stock Plan; (ii) upon conversion of the Notes or
the exercise of the Warrants; and (iii) upon exercise of any Options or
Convertible Securities which are outstanding on the day immediately preceding
the Subscription Date, provided that the terms of such Options or Convertible
Securities are not amended, modified or changed on or after the Subscription
Date to lower the conversion or exercise price or increase the number of
securities issuable thereunder.

4.12           Repayment of Certain Outstanding Notes.  The Company shall repay
as soon as practicable but in no event later than ten (10) Business Days after
the Initial Closing the following notes: (i) $60,000 principal amount of 8%
Convertible Promissory Notes due 2012 issued on or about May 5, 2011, (ii)
$40,000 principal amount of 8% Convertible Promissory Notes due 2012 issued on
or about May 18, 2011 and (iii) $60,000 principal amount of 8% Convertible
Promissory Notes due 2012 issued on or about July 13, 2011, including, without
limitation, in each case, any and all accrued but unpaid interest thereon.
 
 

 
 
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Section 5.        Conditions to the Company’s Obligation to Sell.  The
obligation of the Company hereunder to issue and sell the Units to each
Subscriber at the applicable Closing is subject to the satisfaction, at or
before the applicable Closing Date, of each of the following conditions,
provided that these conditions are for the Company’s sole benefit and may be
waived by the Company at any time in its sole discretion by providing each
Subscriber with prior written notice thereof:
 
(a)           Such Subscriber shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
 
(b)           Such Subscriber and each other Subscriber shall have delivered to
the Company the applicable Purchase Price for the Units being purchased by such
Subscriber at the applicable Closing by wire transfer of immediately available
funds pursuant to the wire instructions set forth in Section 1.
 
(c)           The representations and warranties of such Subscriber shall be
true and correct in all material respects (except for those representations and
warranties that are qualified by materiality or material adverse effect, which
shall be true and correct in all respect) as of the date when made and as of the
applicable Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date which shall be true and correct
as of such specified date), and such Subscriber shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by such Subscriber at or prior to the applicable Closing Date.
 
Section 6.        Conditions to each Subscriber’s Obligation to Purchase.  The
obligation of each Subscriber hereunder to purchase the Units at the applicable
Closing is subject to the satisfaction, at or before the applicable Closing
Date, of each of the following conditions, provided that these conditions are
for each Subscriber’s sole benefit and may be waived by such Subscriber at any
time in its sole discretion by providing the Company with prior written notice
thereof:
 
(a)           The Company shall have duly executed and delivered to such
Subscriber (i) each of the Transaction Documents, (ii) the Notes (allocated in
such principal amounts as such Subscriber shall request), being purchased by
such Subscriber at the applicable Closing pursuant to this Agreement, and (iii)
the related Warrants (allocated in such amounts as such Subscriber shall
request) being purchased by such Subscriber at the applicable Closing pursuant
to this Agreement.
 
(b)           Such Subscriber and the Placement Agent shall have received (i)
the opinion of Robert A. Forrester, Esq., the Company’s outside Nevada counsel,
dated as of the applicable Closing Date, in substantially the form of Exhibit
B-1 attached hereto and (ii) the opinion of Morrison & Foerster LLP, the
Company’s outside counsel, dated as of the applicable Closing Date, in
substantially the form of Exhibit B-2 attached hereto.
 
(c)           The Company shall have delivered to such Subscriber a certificate
evidencing the formation and good standing of the Company in its state of
incorporation issued by the Secretary of State or comparable office) of such
state of incorporation as of a date within ten (10) days of the applicable
Closing Date.
 
(d)           The Common Stock (I) shall be listed on the Trading Market and
(II) shall not have been suspended, as of the applicable Closing Date, by the
SEC or the Trading Market from trading on the Trading Market nor shall
suspension by the SEC or the Trading Market have been threatened, as of the
applicable Closing Date, either (A) in writing by the SEC or the Trading Market
or (B) by falling below the minimum listing maintenance requirements of the
Trading Market.
 

 
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(e)           The Company shall have delivered to such Subscriber a certificate,
executed by the Secretary of the Company and dated as of the applicable Closing
Date, as to (i) the resolutions consistent with Section 3.2 as adopted by the
Company’s Board of Directors in a form reasonably acceptable to such Subscriber,
(ii) the Articles of Incorporation and (iii) the Bylaws, each as in effect at
the applicable Closing, in the form attached hereto as Exhibit C.
 
(f)           The representations and warranties of the Company shall be true
and correct in all material respects (except for those representations and
warranties that are qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respect) as of the date when made and as of the
applicable Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date which shall be true and correct
as of such specified date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the applicable Closing Date.  Such Subscriber shall have
received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the applicable Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Subscriber in the form
attached hereto as Exhibit D.
 
(g)           The Company shall have obtained all governmental, regulatory or
third party consents and approvals, if any, necessary for the sale of the
Securities.
 
Section 7.         Miscellaneous.
 
7.1           Any notice or other communication required, permitted or provided
for hereunder (each, a “Notice”) shall be effective as between the parties only
if given in writing and sent by (a) personal delivery, (b) registered or
certified mail (return receipt requested); (c) recognized express delivery
service or (d) e-mail, to the Company at 5700 W. Plano Parkway, Suite 3600,
Plano, Texas 75093, will@xtoginc.com, and to such Subscriber at the address and
e-mail address indicated on such Subscriber’s signature page of this
Subscription Agreement.  Notice shall be deemed to have been duly given and
received (i) if personally delivered, on the date of such delivery, (ii) if
mailed, on the date set forth on the return receipt, (iii) if delivered by
express delivery, on the date of such delivery (as evidenced by the receipt
provided to the express delivery service), (iv) if e-mailed, on the date such
e-mail was sent (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party).  If Notice
cannot be delivered because of a changed address of which no Notice was given,
or the refusal to accept delivery, the Notice shall be deemed received on the
date it is sent (as evidenced by the affidavit of the sender).
 
7.2           This Subscription Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns.  This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
 
7.3           Notwithstanding the place where this Subscription Agreement may be
executed by any of the parties hereto, the Company and the Subscribers hereby:
(a) agree that all questions concerning the construction, validity, enforcement
and interpretation of this Subscription Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof, and (b) all
legal proceedings concerning the interpretation, enforcement and defense of this
Subscription Agreement shall exclusively be commenced in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the “Courts”), (c)
irrevocably submit to the exclusive jurisdiction of the Courts for the
adjudication of any dispute hereunder (including with respect to the enforcement
of this Subscription Agreement); (d) irrevocably waive and agree not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any of such Courts, or that such suit, action or
proceeding is improper; (e) irrevocably waive personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to the other at the address in effect for notices to
it under this Subscription Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof (nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law); and (f) irrevocably waive, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Subscription Agreement or
the transactions contemplated hereby.
 
 
 
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7.4           This Subscription Agreement may be executed in counterparts, and
may be executed by facsimile or electronic signature with the same force and
effect as if executed by original signature.  Upon the execution and delivery of
this Subscription Agreement by such Subscriber, this Subscription Agreement
shall become a binding obligation of such Subscriber with respect to the
purchase of Units as herein provided.
 
7.5           If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the
parties.  The parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid provision(s), the
effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
 
7.6           No term or provision contained herein may be modified, amended or
waived except by written agreement or consent signed by the party or parties to
be bound thereby; provided, however, that any modification, amendment or waiver
of any provision set forth in Sections 2, 3 or 4.2 shall also require the
written agreement or consent signed by the Placement Agent.  It is agreed that a
waiver by either party of a breach of any provision of this Subscription
Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.  No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.
 
7.7           The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Subscription Agreement.
 
7.8           The obligations of each Subscriber under any Transaction Document
are several and not joint with the obligations of any other Subscriber, and no
Subscriber shall be responsible in any way for the performance of the
obligations of any other Subscriber under any Transaction Document.  The
decision of each Subscriber to purchase Shares pursuant to the Transaction
Documents has been made by such Subscriber independently of any other
Subscriber.  Nothing contained herein or in any Transaction Document, and no
action taken by any Subscriber pursuant thereto, shall be deemed to constitute
the Subscribers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Subscribers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents.  Each Subscriber
acknowledges that no other Subscriber has acted as agent for such Subscriber in
connection with making its investment hereunder and that no Subscriber will be
acting as agent of such Subscriber in connection with monitoring its investment
in the Shares or enforcing its rights under the Transaction Documents.  Each
Subscriber shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Subscriber to be joined as an additional party in any proceeding for such
purpose.  The Company acknowledges that each of the Subscribers has been
provided with the same Transaction Documents for the purpose of closing a
transaction with multiple Subscribers and not because it was required or
requested to do so by any Subscriber.  If any Subscriber is a corporation,
limited liability company, partnership, trust or two or more individuals
purchasing jointly, such Subscriber shall follow the specific instructions for
the Certificate of Corporate, Limited Liability Company, Partnership, Trust and
Joint Purchases at Page hereof.
 
 
 
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7.9.           Each Subscriber acknowledges that the subscription made hereby is
not binding upon the Company until the Company accepts it.  The Company has the
right to accept or reject this subscription in whole or in part in its sole and
absolute discretion.  If this subscription is rejected in whole, the Company
shall return the Purchase Price to the applicable Subscriber, without interest,
and the Company and such Subscriber shall have no further obligation to each
other by reason of this Subscription Agreement or the subscription made
hereby.  In the event of a partial rejection of this subscription, a
proportionate amount of the Purchase Price will be returned to such Subscriber,
without interest.
 
7.10           The Company hereby represents and warrants as of the date hereof
and covenants and agrees from and after the date hereof until the Additional
Closing Deadline that none of the terms offered to any Person with respect to
any issuance and sale of Warrants and/or Notes (each, an “Other Agreement”), is
or will be more favorable to such Person than those of the Subscribers and this
Agreement shall be, without any further action by the Subscribers or the
Company, deemed amended and modified in an economically and legally equivalent
manner such that the Subscribers shall receive the benefit of the more favorable
terms contained in such Other Agreement.  Notwithstanding the foregoing, the
Company agrees, at its expense, to take such other actions (such as entering
into amendments to the Transaction Documents) as any Subscriber may reasonably
request to further effectuate the foregoing.
 
7.11           The representations and warranties set forth in Sections 2 and 3
and the indemnification set forth in Section 4.2 are also for the benefit and
may be relied upon by the Placement Agent, which shall be a third party
beneficiary thereof.
 
[Remainder of Page Intentionally Blank, Signature Page Follows]
 
 
 
 
 
 
 
 
 
 

 
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SIGNATURE PAGE FOR INDIVIDUAL SUBSCRIBER
 
IN WITNESS WHEREOF, this Subscription Agreement has been executed by each
Subscriber and by the Company on the respective dates set forth below.
 
Signature
   
Signature (If Units Purchased Jointly)
             
Name
     
Name
         Please Print    
Please Print
             
Address
     
Address
                                             
Telephone #
   
Telephone #
               
Fax #
     
Fax #
                 
Email:
     
Email:
                 
Social Security #
   
Social Security #
               
Date:
     
Date:
   

                Number of Units Subscribed For:          

            Purchase Price:      (at $______ per unit)

Form of joint ownership of Units (if applicable):           o
JTTEN                      o JTWROS                      o JTTIC
 

Exact Name in Which Securities are to be Registered:  

 
Subscription Accepted:
 
XTREME OIL & GAS, INC.
 
 

By:           
 
            Name:                        Title:                      Date:      
       

                                                        

 
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SIGNATURE PAGE FOR PARTNERSHIP, CORPORATION,
LIMITED LIABILITY COMPANY OR TRUST
 
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on
the date set forth below.
 
Name of partnership, corporation, limited liability company or trust
                             
By:
   
Federal Tax ID Number
             
Name:
                   
Title:
   
State of Organization
             
Address:
                                         
Telephone:
                   
Fax:
                   
Email:
                   
Date:
                               
Number of Units Subscribed For:
                   
Purchase Price:
     (at $______ per unit)        
Exact Name in Which Securities are to be Registered: 
   

 
Subscription Accepted:
 
XTREME OIL & GAS, INC.
 

By:           
 
            Name:                        Title:                      Date:      
       

 

 
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ACCREDITED INVESTOR PROSPECTIVE PARTICIPANT QUESTIONNAIRE
 
_______________________
 
**ALL INFORMATION WILL BE HELD IN STRICTEST CONFIDENCE**
 
INSTRUCTIONS TO THE PROSPECTIVE INVESTOR: This Questionnaire is being sent to
each prospective participant that has indicated an interest in purchasing Units
of Xtreme Oil & Gas, Inc. (the “Company”). The purpose of this Questionnaire is
to assure the Company that each prospective subscriber to its Units
(“Subscriber”) will meet the standards imposed by Regulation D, promulgated
under the Securities Act of 1933, as amended and similar exemptions provided by
the applicable state securities laws and regulations promulgated there under
(the “Securities Laws”), since the Units will not be registered. Each Subscriber
must complete the following Questionnaire.
 
In subscribing for Units and furnishing the information requested in this
Questionnaire, the Subscriber understands that the Company will rely on the
information provided herein for purposes of such determinations. The Subscriber
understands that a false representation may constitute a violation of law and
that any person who suffers damage as a result of a false representation may
have a claim against the Subscriber for damages.
 
The information provided herein by Subscribers will be kept confidential.
However, by signing this Questionnaire, the Subscriber agrees that the Company
may present the completed document to such parties as it deems appropriate if
called upon to establish the availability under any Securities Laws.
 
In accordance with the foregoing, the following representations are hereby made
and the following information is furnished by the undersigned subscriber.
 
PART A. GENERAL INFORMATION
 

NAME(S) OF PROSPECTIVE SUBSCRIBER:                 Social Security Number or Tax
I.D. No.:            

 
PART B. INVESTOR INFORMATION
 
The prospective Participant certifies that it is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act because:
 
(Please initial as appropriate)
 
If the prospective Participant is an individual:
 
______
Initial
(a)
The prospective Participant has an individual net worth, or joint net worth with
his or her spouse, in excess of $1,000,000.  As used herein, “net worth” means
the excess of total assets at fair market value, including home furnishings and
automobiles (but excluding the value of the primary residence of the prospective
Participant), over total liabilities (excluding the indebtedness secured by the
primary residence of the prospective Participant up to its fair market value);
or

 
 
 
1

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______
Initial
(b)
The prospective Participant had individual income (exclusive of any income
attributable to his or her spouse) of more than $200,000 in each of the past two
years, or joint income with his or her spouse of more than $300,000 in each of
those years, and reasonably expects to reach the same income level in the
current year.*

 
If the prospective Participant is a corporation, partnership or limited
liability company:
 
______
Initial
(a)
The prospective Participant has total assets in excess of $5,000,000 and was not
formed for the specific purpose of acquiring the Units offered; or
______
Initial
(b).
Each of the prospective Participant’s equity owners is an accredited
investor.  The Managing Member, in its sole discretion, may request information
regarding the basis on which such equity owners are accredited.
______
Initial
(c)
The prospective Participant is an employee benefit plan within the meaning of
ERISA and has total assets in excess of $5,000,000; or

 
If the prospective Participant is an individual retirement account, Keogh plan
and other self-directed defined contribution plan:
 
______
Initial
 
The prospective Participant is an individual retirement account, Keogh Plan or
other self-directed defined contribution plan in which a participant may
exercise control over the investment of assets credited to his or her account
and the investing participant is an accredited investor because such participant
has a net worth of at least $1,000,000 or has had an individual income of at
least $200,000 (or a joint income with spouse of at least $300,000) in each of
the last two years and reasonably expects to reach the same income level in the
current year.  The Managing Member, in its sole discretion, may request
information regarding the basis on which such participants are accredited.

 
If the prospective Participant is a trust:
 
______
Initial
(a)
The prospective Participant has total assets in excess of $5,000,000, was not
formed for the specific purpose of acquiring the Interests offered and its
purchase is directed by a sophisticated person.  As used in the foregoing
sentence, a “sophisticated person” is one who has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the prospective investment; or
______
Initial
(b)
The prospective Participant is:  (a) a bank as defined in Section 3(a)(2) of the
Securities Act, a savings and loan association, or other institution as defined
in Section 3(a)(5)(A) of the Securities Act; (b) acting in a fiduciary capacity;
and (c) subscribing for the purchase of the interests being offered on behalf of
a trust account or accounts; or

 
 
 
2

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______
Initial
(c)
The prospective Participant is a revocable trust which may be amended or revoked
at any time by the grantors thereof and all of the grantors are accredited
investors as described herein.  The Managing Member, in its sole discretion, may
request information regarding the basis on which such equity owners are
accredited.

 
I REPRESENT THAT THE ABOVE INFORMATION IS CORRECT. I HEREBY AUTHORIZE THE
COMPANY TO VERIFY SUCH INFORMATION WITH MY ATTORNEY, BANKER, ACCOUNTANT OR OTHER
ADVISORS(S).
 
 
 

  Date:    
 
       
Subscriber’s Signature
                                               
Subscriber’s Signature

 
 
 
 
 
 
 
 
 
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