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EXHIBIT 10.15
 
[FORM OF]

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of _________,
2014, by and among Torchlight Energy Resources, Inc., a Nevada corporation (the
“Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “Purchaser” and collectively, the
“Purchasers”).
 
Recitals
 
A.          The Company and each Purchaser is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “Commission”) under the
Securities Act.
 
B.          Each Purchaser, severally and not jointly, wishes to purchase, and
the Company wishes to sell, upon the terms and conditions stated in this
Agreement, Units comprised of (i) one share of its common stock, par value $.001
per share (the “Common Stock” or “Shares”) and (ii) warrants in the form as
annexed hereto as Exhibit A (the “Warrants”) to purchase 1/4 share of Common
Stock at an exercise price of $6.00 per share (the “Warrant Shares”) at a
purchase price (the “Purchase Price”) of $4.00 per Unit (the “Unit”).
 
C.          The Shares, Warrants and Warrant Shares are sometimes collectively
referred to herein as the “Securities.”
 
D.          The Company has engaged National Securities Corporation as its
exclusive placement agent (the “Placement Agent”) for the offering of the Units
on a “best efforts” basis.
 
E.           Contemporaneously with the execution and delivery of this
Agreement, the Purchasers hereunder shall become parties to and bound as
Purchasers under that certain Registration Rights Agreement dated _________,
2014, attached hereto as Exhibit B (the “Registration Rights Agreement”),
pursuant to which, among other things, the Company will agree to use its best
efforts to file a Registration Statement (the “Registration Statement”) with
respect to the Shares and the Warrant Shares under the Securities Act and the
rules and regulations promulgated thereunder and applicable state securities
laws.
 
Now, Therefore, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers hereby
agree as follows:
 
ARTICLE 1

 
DEFINITIONS
 
1.1           Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
 
“Action” means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or, to the Company’s Knowledge, threatened in writing (or otherwise) against the
Company or any of its properties or any officer, director or employee of the
Company as of the date hereof acting in his or her capacity as an officer,
director or employee of the Company before or by any federal, state, county,
local or foreign court, arbitrator, governmental or administrative agency,
regulatory authority, stock market, stock exchange or trading facility.
 

 
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“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, Controls, is controlled by or
is under common control with such Person, as such terms are used in and
construed under Rule 144. With respect to a Purchaser, any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.
 
“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.
 
“Buy-In” has the meaning set forth in Section 4.1(f).
 
“Buy-In Price” has the meaning set forth in Section 4.1(f).
 
“Closing” means the closing of the purchase by the Purchasers listed on Annex A
hereto and sale by the Company of Units to such Purchasers pursuant to this
Agreement on the Closing Date as provided in Section 2.1 hereof.
 
“Closing Date” means the third (3rd) Trading Day after the date on which this
Agreement has been executed and delivered by all parties hereto or such earlier
date as the parties hereto shall mutually agree, unless on such date the
conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 (other than those to be
satisfied at the Closing) shall not have been satisfied or waived, in which case
the Closing Date shall be on the third (3rd) Trading Day after the date on which
the last to be satisfied or waived of the conditions set forth in Sections 2.1,
2.2, 5.1 and 5.2 (other than those to be satisfied at the Closing) shall have
been satisfied or waived.
 
“Common Stock” has the meaning set forth in the Recitals, and also includes any
securities into which the Common Stock may hereafter be reclassified or changed.
 
“Company Counsel” means Axelrod, Smith & Kirshbaum, P.C..
 
“Company Deliverables” has the meaning set forth in Section 2.2(a).
 
“Company’s Knowledge” means with respect to any statement made to the knowledge
of the Company, that the statement is based upon the actual knowledge of the
officers of the Company who, as of the date hereof, have responsibility for the
matter or matters that are the subject of the statement.
 
“Compliance Certificate” has the meaning set forth in Section 2.2(a)(vi).
 
“Control” (including the terms “controlling”, “controlled” by or “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
 
“Deadline Date” has the meaning set forth in Section 4.1(f).
 
“Disclosure Materials” has the meaning set forth in Section 3.1(h).
 
“Disclosure Schedule” has the meaning set forth in Section 3.1.
 
“DTC” has the meaning set forth in Section 4.1(c).
 
“Environmental Laws” has the meaning set forth in Section 3.1(l).
 

 
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“Evaluation Date” has the meaning set forth in Section 3.1(u).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.
 
“GAAP” means U.S. generally accepted accounting principles, as applied by the
Company.
 
“Indemnified Person” has the meaning set forth in Section 4.8(b).
 
“Intellectual Property” has the meaning set forth in Section 3.1(r).
 
“Irrevocable Transfer Agent Instructions” means, with respect to the Company,
the Irrevocable Transfer Agent Instructions, in the form of Exhibit C, executed
by the Company and delivered to and acknowledged in writing by the Transfer
Agent.
 
“Lien” means any material lien, charge, claim, encumbrance, security interest,
right of first refusal, preemptive right or other restrictions of any kind.
 
“Material Adverse Effect” means a material adverse effect on the results of
operations, assets, business or financial condition of the Company, except that
any of the following, either alone or in combination, shall not be deemed a
Material Adverse Effect:  (i) effects caused by changes or circumstances
affecting general market conditions in the U.S. economy or which are generally
applicable to the industry in which the Company operates provided that such
effects are not borne disproportionately by the Company, (ii) effects resulting
from or relating to the announcement or disclosure of the sale of the Securities
or other transactions contemplated by this Agreement, or (iii) effects caused by
any event, occurrence or condition resulting from or relating to the taking of
any action in accordance with this Agreement.
 
“Material Contract” means any contract of the Company that has been filed as an
exhibit to the SEC Reports pursuant to Item 601(b)(4) or Item 601(b)(10) of
Regulation S-K.
 
“Material Permits” has the meaning set forth in Section 3.1(p).
 
“New York Courts” means the state and federal courts sitting in the City of New
York, Borough of Manhattan.
 
“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.
 
“Principal Trading Market” means the Trading Market on which the Common Stock is
primarily listed on or quoted for trading, which, as of the date of this
Agreement and the Closing Date, shall be the NASDAQ Capital Market.
 
“Prior Financings” has the meaning set forth in Section 3.2(p).
 
 “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
 
“Purchase Price” means $4.00 per Unit.
 

 
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“Purchaser Deliverables” has the meaning set forth in Section 2.2(b).
 
“Purchaser Party” has the meaning set forth in Section 4.8(a).
 
“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale by the
Purchasers of the Registrable Securities (as defined in the Registration Rights
Agreement).
 
“Required Approvals” has the meaning set forth in Section 3.1(e).
 
 “Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“SEC Reports” has the meaning set forth in Section 3.1(h).
 
“Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(v).
 
“Short Sales” include, without limitation, (i) all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not
against the box, and all types of direct and indirect stock pledges, forward
sale contracts, options, puts, calls, short sales, swaps, “put equivalent
positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar
arrangements (including on a total return basis), and (ii) sales and other
transactions through non-U.S. broker dealers or foreign regulated brokers.
 
“Stock Certificates” has the meaning set forth in Section 2.2(a)(iv).
 
“Subscription Amount” has the meaning set forth in Section 2.1(a).
 
“Subscription Booklet” means the Omnibus Signature Page and Purchaser
Questionnaire provided by the Placement Agent to each Purchaser for completion
and execution in connection with the issuance and sale of Units hereunder.
 
“Subsidiary” means any entity in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest.
 
“Termination Date” means January 31, 2014 (subject to extension by the Company
until no later than February 28, 2014).
 
“Trading Affiliate” has the meaning set forth in Section 3.2(i).
 
“Trading Day” means (i) a day on which the Common Stock is listed or quoted and
traded on its Principal Trading Market (unless the Principal Trading Market is
the OTC Bulletin Board or the “pink sheets”), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board or the OTC QB, OTC
QX or “pink sheets” tier of the OTC Markets Group, Inc.), a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading Market
(other than the OTC QB, OTC QX or “pink sheets” tier of the OTC Markets Group,
Inc.), a day on which the Common Stock is quoted in the over-the-counter market
as reported by the OTC QB, OTC QX or “pink sheets” tier of the OTC Markets
Group, Inc. (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
 

 
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“Trading Market” means whichever of the New York Stock Exchange, the NYSE-MKT,
the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital
Market, the OTC Bulletin Board, the OTC QB, OTC QX or “pink sheets” tier of the
OTC Markets Group, Inc. (or any similar organization or agency succeeding to its
functions of reporting prices) on which the Common Stock is listed or quoted for
trading on the date in question.
 
“Transaction Documents” means this Agreement, the Registration Rights Agreement,
the annexes and exhibits attached hereto and thereto, the Irrevocable Transfer
Agent Instructions and any other documents or agreements executed in connection
with the transactions contemplated hereunder.
 
“Transfer Agent” means First American Stock Transfer., Inc., or any successor
transfer agent for the Company.
 
“Unlegended Certificate” has the meaning set forth in Section 4.1(f).
 
ARTICLE 2

 
PURCHASE AND SALE
 
2.1           Closing.
 
(a)           Amount. Subject to the terms and conditions set forth in this
Agreement, at the Closing, each Purchaser shall purchase and the Company shall
sell and issue to each Purchaser, Units comprised of the number of Shares and
Warrants set forth on Annex A hereto, issued in such Purchaser’s name, at a
Purchase Price of $4.00 per Unit, with a minimum purchase of 6,250 Units (the
“Subscription Amount”).
 
(b)           Closing.
 
(i)           Date and Time.  The sale of Units will take place in one or more
closings (“Closing”), subject to the satisfaction of all the parties hereto of
their obligations herein.  The Purchasers shall submit an executed copy of this
Agreement to the Company and the Placement Agent along with the Purchase Price
by bank wire (or, with the consent of the Company and the Placement Agent, by
check) directly to the Escrow Agent.  The Closing of the sale of Units
contemplated by this Agreement shall take place from time to time as
subscriptions are received, without any consent of, or notice to, Purchasers,
provided, however that the minimum offering amount of $2,000,000 has been
raised. Subscriptions that are not accepted will be returned with any funds. The
Closing shall take place at the offices of the Company or at such other place as
the Company and the Placement Agent shall agree in writing (each, a “Closing
Date”) on or before January 31, 2014 unless otherwise extended by the Company
until February 28, 2014 (the “Termination Date”). The Company shall cause to be
delivered to the Purchasers certificates evidencing the number of Shares such
Purchaser is purchasing and the Warrants within six (6) Business Days after the
Closing.
 
 

 
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(ii)         Escrow Agent. The Placement Agent and the Company have consented to
the appointment of Signature Bank as independent Escrow Agent (the “Escrow
Agent”) and have accepted the terms of the non-interest bearing Escrow
Agreement, in the form as annexed hereto as Exhibit D (the “Escrow Agreement”).
All amounts to be paid by Purchasers shall be deposited prior to the Closing
into the escrow account (the “Escrow”) maintained by the Escrow Agent pursuant
to the terms of an Escrow Agreement and may be immediately drawn upon at each
Closing; provided, however, that the minimum offering amount of $2,000,000 has
been raised.  Purchasers will not have an opportunity to approve of a Closing or
request refund of any moneys held in Escrow after a Closing has
occurred.  Purchasers acknowledge and agree that their subscriptions are
irrevocable and binding commitments on the part of the Purchaser and that once
their funds have been tendered into Escrow with the appropriate Subscription
Booklet and their Subscription Agreement received, the Escrow Agent may, at the
request of the Placement Agent and Company together, disburse funds from Escrow
and conduct a Closing without any consent or notice to Purchasers.  The
Placement Agent or Company may reject any subscriptions in whole or in part for
any reason or for no reason and shall cause the Escrow Agent to return funds to
the Purchaser to the extent of such non accepted funds, or, retains the right to
hold the same in Escrow for acceptance or rejection at a future Closing, until
the termination of the offering, at which time, any unused subscription funds
shall be returned to Purchaser.
 
2.2           Closing Deliveries.
 
(a)           On or prior to the Closing with respect to the Purchasers listed
on Annex A hereto, the Company shall issue, deliver or cause to be delivered to
such Purchaser the following (the “Company Deliverables”):
 
(i)           this Agreement, duly executed by the Company;
 
(ii)          a legal opinion of Company Counsel dated as of the Closing Date
and addressed to such Purchasers;
 
(iii)         the Registration Rights Agreement, duly executed by the Company;
 
(iv)          a copy of the duly executed Irrevocable Transfer Agent
Instructions delivered to and acknowledged in writing by the Transfer Agent
relating to the issuance of stock certificates, free and clear of all
restrictive and other legends except as provided in Section 4.1(b) hereof,
evidencing the Shares subscribed for by the Purchasers hereunder, to be
registered in the names provided by the Purchasers as set forth in Section 1 of
the Subscription Booklet (the “Stock Certificates”) delivered to the Company
pursuant to Section 2.2(b)(iii), with the original Stock Certificates to be
delivered to the addresses provided by the Purchasers in such Subscription
Booklet within six (6) Business Days following the Closing; provided, however
that the copy of the Irrevocable Transfer Agent Instructions and all attachments
thereto delivered to Purchasers in compliance with this Section 2.2(a)(iv) shall
be redacted to exclude the mailing address and tax identification number of each
such Purchaser.;
 
(v)           a certificate of the Secretary of the Company (the “Secretary’s
Certificate”), dated as of the Closing Date, (a) certifying the resolutions
adopted by the Board of Directors of the Company or a duly authorized committee
thereof approving the transactions contemplated by this Agreement and the other
Transaction Documents and the issuance of the Securities, (b) certifying the
current versions of the certificate of incorporation, as amended, and bylaws of
the Company and (c) certifying as to the signatures and authority of persons
signing the Transaction Documents and related documents on behalf of the
Company, in the form attached hereto as Exhibit E;
 
(vi)           a certificate (the “Compliance Certificate”), dated as of the
Closing Date and signed by the Company’s Chief Executive Officer or its Chief
Financial Officer, certifying to the fulfillment of the conditions specified in
Sections 5.1(a) and (b) in the form attached hereto as Exhibit F.
 

 
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(vii)         a certificate evidencing the formation and good standing of the
Company issued by the Secretary of State of the State of Nevada, as of a date
within five (5) days of the Closing Date.
 
(b)           On or prior to the Closing with respect to the Purchasers listed
on Annex A hereto, each Purchaser shall deliver or cause to be delivered to the
Company the following (the “Purchaser Deliverables”):
 
(i)           this Agreement, duly executed by such Purchaser by its execution
and delivery of the Omnibus Signature Page included in the Subscription Booklet;
 
(ii)          its Subscription Amount, in United States dollars and in
immediately available funds, by wire transfer to the Escrow maintained by the
Escrow Agent as previously provided to the Purchasers; and
 
(iii)         a Subscription Booklet that is fully completed and duly executed
by the Purchaser in all respects in accordance with the instructions set forth
in the Subscription Booklet.
 
ARTICLE 3

 
REPRESENTATIONS AND WARRANTIES
 
3.1           Representations and Warranties of the Company. The Company hereby
represents and warrants that the following statements are true and correct in
all material respects as of the date hereof and will be true and correct in all
material respects on the Closing Date (except for the representations and
warranties that speak as of a specific date, which shall be made as of such
date), to each of the Purchasers that, except as disclosed in the SEC Reports
and the disclosure schedules delivered by the Company hereunder (the “Disclosure
Schedules”), which shall be deemed a part hereof and shall qualify any
representations made by the Company herein to the extent of the applicable
disclosure:
 
(a)           Subsidiaries. The Company has no direct or indirect Subsidiaries
other than Torchlight Energy, Inc., a Nevada corporation, and Torchlight Energy
Operating, LLC, a Texas LLC.
 
(b)           Organization and Qualification. The Company is an entity duly
incorporated, validly existing and in good standing under the laws of the State
of Nevada, with the requisite corporate power and authority to own or lease and
use its properties and assets and to carry on its business as currently
conducted. The Company is not in violation of any of the provisions of its
certificate of incorporation or bylaws. The Company is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not have a Material
Adverse Effect.
 
(c)           Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents to which it is a
party and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents to which it is a
party by the Company and the consummation by it of the transactions contemplated
hereby and thereby (including, but not limited to, the sale and delivery of the
Securities) have been duly authorized by all necessary corporate action on the
part of the Company, and no further corporate action is required by the Company,
its Board of Directors or its stockholders in connection therewith other than in
connection with the Required Approvals. Each of the Transaction Documents to
which it is a party has been (or upon delivery will have been) duly executed by
the Company and is, or when delivered in accordance with the terms hereof, will,
constitute the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application or insofar as indemnification and contribution provisions may be
limited by applicable law.
 

 
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(d)            No Conflicts. The execution, delivery and performance by the
Company of the Transaction Documents to which it is a party and the consummation
by the Company of the transactions contemplated hereby or thereby (including,
without limitation, the issuance of the Securities) do not and will not
(i) conflict with or violate any provisions of the Company’s certificate of
incorporation or bylaws or otherwise result in a violation of the organizational
documents of the Company, (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
result in the creation of any Lien upon any of the properties or assets of the
Company or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any Material
Contract or (iii) subject to the Required Approvals, result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company is
subject (including federal and state securities laws and regulations and the
rules and regulations, assuming the correctness of the representations and
warranties made by the Purchasers herein, of any self regulatory organization to
which the Company or its securities are subject, including all applicable
Trading Markets), or by which any property or asset of the Company is bound or
affected), except in the case of clause (ii) and clause (iii) such as would not
individually have a Material Adverse Effect.
 
(e)            Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents
(including the issuance of the Securities), other than (i) the filing with the
Commission of one or more Registration Statements in accordance with the
requirements of the Registration Rights Agreement, (ii) filings required by
applicable state securities laws, (iii) the filing of a Notice of Sale of
Securities on Form D with the Commission under Regulation D of the Securities
Act, (iv) the filing of any requisite notices and/or application(s) to the
Principal Trading Market for the issuance and sale of the Shares and the listing
of the Shares for trading or quotation, as the case may be, thereon in the time
and manner required thereby, (v) the filings required in accordance with
Section 4.6 of this Agreement and (vi) those that have been made or obtained
prior to the date of this Agreement (collectively, the “Required Approvals”).
 
(f)            Issuance of the Securities. The Securities have been duly
authorized and, when issued and paid for in accordance with the terms of the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable and free and clear of all Liens suffered or permitted by the
Company, other than restrictions on transfer provided for in the Transaction
Documents or imposed by applicable securities laws, and shall not be subject to
preemptive or similar rights. Without consideration of the actions of the
Placement Agent, assuming the accuracy of the representations and warranties of
the Purchasers in this Agreement and the accuracy of the information disclosed
by each Purchaser in the Subscription Booklet delivered pursuant to Section
2.2(b)(iii) and Section 5.2(d), the Securities will be issued in compliance with
all applicable federal and state securities laws.
 
 
 

 
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(g)           Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) has been set forth in
the SEC Reports and has changed since the date set forth in the most recently
filed of the SEC Reports, as set forth in the Disclosure Schedules, and may
change thereafter to reflect stock issuances, convertible debt conversions,
stock option exercises and grants and warrant exercises and grants which will
not, individually or in the aggregate, have a material affect on the issued and
outstanding capital stock, options and other securities of the Company. All of
the outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid and non-assessable, have been issued in compliance in
all material respects with all applicable federal and state securities laws, and
none of such outstanding shares was issued in violation of any preemptive rights
or similar rights to subscribe for or purchase any capital stock of the
Company.  Except as set forth in the SEC Reports or the Disclosure Schedules:
(i) no shares of the Company’s capital stock are subject to preemptive rights or
any other similar rights or any Liens suffered or permitted by the Company;
(ii) except for the Transaction Documents or as a result of the performance by
the Company of the Transaction Documents, 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 contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company 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;
(iii) there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing indebtedness
of the Company or by which the Company is or may become bound in any material
amounts; (iv) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Company; (v) there are no agreements or arrangements under which the Company
is obligated to register the sale of any of their securities under the
Securities Act (except the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments of the Company or which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
redeem a security of the Company; (vii) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities; and (viii) the Company does not have any stock
appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement.
 
(h)           SEC Reports. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it under the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for twelve
(12) months preceding and including the date hereof (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the “SEC Reports” and together with
this Agreement, including the Disclosure Schedules hereto, the “Disclosure
Materials”). As of the date hereof, the Company has no Knowledge of any event
occurring on or prior to the Closing Date (other than the transactions
contemplated by the Transaction Documents) that requires the filing of a Current
Report on Form 8-K after the Closing.
 
(i)            Financial Statements. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with GAAP applied on a consistent basis during
the periods
 

 
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(i)           Financial Statements. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with 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 except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated
Subsidiaries taken as a whole 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.
 
(j)            Tax Matters. The Company (i) has prepared and filed all foreign,
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, with respect to which adequate reserves have been
set aside on the books of the Company and (iii) has set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply,
except where the failure to so pay or file or set aside provisions for any such
tax, assessment, charge or return would not have a Material Adverse Effect.
 
(k)           Material Changes. Since the date of the latest financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there have been no events, occurrences or developments that
have had or would reasonably be expected to have a Material Adverse Effect,
(ii) the Company has not incurred any material liabilities (contingent or
otherwise) other than (A) trade payables, accrued expenses and other liabilities
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or to be disclosed in filings made with the
Commission, (iii) the Company has not materially altered its method of
accounting or the manner in which it keeps its accounting books and records,
(iv) the Company has not declared or made any dividend or distribution of cash
or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock (other than in
connection with repurchases of unvested stock issued to employees of the
Company), (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except stock options issued in the ordinary course
pursuant to Company stock option or stock purchase plans or executive and
director corporate arrangements disclosed in the SEC Reports and (vi) there has
not been any material change or amendment to, or any waiver of any material
right under, any Material Contract under which the Company or any of its assets
is bound or subject. Except for the issuance of the Securities contemplated by
this Agreement, no event, liability or development has occurred or exists with
respect to the Company or its business, properties, operations or financial
condition that would be required to be disclosed by the Company under applicable
securities laws at the time this representation is made that has not been
publicly disclosed in the SEC Reports.
 
(l)            Environmental Matters. To the Company’s Knowledge, the Company
(i) is not in violation of any statute, rule, regulation, decision or order of
any governmental agency or body or any court, domestic or foreign, relating to
the use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), (ii) does not own or
operate any real property contaminated with any substance that is in violation
of any Environmental Laws, (iii) is not liable for any off-site disposal or
contamination pursuant to any Environmental Laws, and (iv) is not subject to any
claim relating to any Environmental Laws; which violation, contamination,
liability or claim has had or would have a Material Adverse Effect; and there is
no pending or, to the Company’s Knowledge, threatened investigation that might
lead to such a claim.
 

 
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(m)           Litigation. There is no Action which adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities.  Except as disclosed in the SEC Reports, there are
no pending actions, suits or proceedings against or affecting the Company or any
of its properties; and to the Company’s Knowledge, no such actions, suits or
proceedings are threatened or contemplated against the Company that reasonably
could, if there were an unfavorable decision, have a Material Adverse Effect.
 
(n)            Employment Matters. No material labor dispute exists or, to the
Company’s Knowledge, is imminent with respect to any of the employees of the
Company which would have a Material Adverse Effect. None of the Company’s
employees is a member of a union that relates to such employee’s relationship
with the Company, and the Company is not a party to a collective bargaining
agreement, and the Company believes that its relationship with its employees is
good.
 
(o)            Compliance. The Company (i) is not in default under or in
violation of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the Company), nor
has the Company received written notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other Material Contract (whether or not such default or violation has been
waived), (ii) is not in violation of any order of any court, arbitrator or
governmental body having jurisdiction over the Company or its properties or
assets.
 
(p)            Regulatory Permits. The Company possesses all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct its business as described in
the SEC Reports, except where the failure to possess such permits has not had
and would not have a Material Adverse Effect (“Material Permits”), and (i) the
Company has not received any notice of proceedings relating to the revocation or
modification of any such Material Permits and (ii) the Company has no Knowledge
of any facts or circumstances that the Company would reasonably expect to give
rise to the revocation or modification of any Material Permits.
 
(q)            Title to Assets. The Company does not own any real property,
except for interests in oil or gas properties that may be deemed real property
under state law. Except as disclosed in the SEC Reports, the Company has good
and marketable title to all tangible personal and real property owned by it
which is material to the business of the Company, in each case free and clear of
all Liens except such as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such
property by the Company and except for Liens for the payment of federal, state
or other taxes for which appropriate reserves have been made in accordance with
GAAP and the payment of which is not delinquent or subject to penalties. Any
real property and facilities held under lease by the Company are held by it
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made of such property and buildings
by the Company.
 
(r)            Intellectual Property. To the Company’s Knowledge, the Company or
its Subsidiaries owns, possesses, licenses or has other rights to use all
foreign and domestic patents, patent applications, trade and service marks,
trade and service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets, technology and other proprietary rights and processes
(collectively, the “Intellectual Property”) necessary for the conduct of its
businesses as now conducted and which the failure to so own, possess, license or
have other rights to use would not have a Material Adverse Effect. Except where
any such violations or infringements would not have a Material Adverse Effect,
to the Company’s Knowledge (i) the Company’s or its Subsidiaries’ use of any
such Intellectual Property in the conduct of its business as presently conducted
does not infringe upon the rights of any third parties; (ii) there is no
infringement by third parties of any such Intellectual Property; (iii) there is
no pending or threatened Action challenging the Company’s rights in or to any
such Intellectual Property; (iv) there is no pending or threatened Action
challenging the validity or scope of any such Intellectual Property; and (v)
there is no pending or threatened Action that the Company infringes or otherwise
violates any patent, trademark, copyright, trade secret or other proprietary
rights of others.
 

 
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(s)            Insurance. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
the Company believes to be prudent in the businesses and locations in which the
Company is engaged. The Company has not received any notice of cancellation of
any such insurance, nor does the Company have any Knowledge that it will be
unable to renew its existing insurance coverage for the Company as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.
 
(t)            Transactions With Affiliates and Employees. None of the officers
or directors of the Company and, to the Company’s Knowledge, none of the
employees of the Company, is presently a party to any transaction with the
Company or to a presently contemplated transaction (other than for services as
employees, officers and directors) that would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated under the Securities Act,
except as contemplated by the Transaction Documents or set forth in the SEC
Reports.
 
(u)            Internal Accounting Controls. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of
the Company as of the end of the period covered by the most recently filed
periodic report under the Exchange Act (such date, the “Evaluation Date”). The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no changes in the
internal control over financial reporting (as such term is defined in the
Exchange Act) of the Company that have adversely materially affected, or are
reasonably likely to adversely materially affect, the internal control over
financial reporting of the Company.
 
(v)            Sarbanes-Oxley; Disclosure Controls. The Company is in compliance
in all material respects with all of the provisions of the Sarbanes-Oxley Act of
2002 which are currently applicable to it, except where such non-compliance
could not have or reasonably be expected to result in a Material Adverse Effect.
 
(w)           Certain Fees. Other than the Placement Agent, no person or entity
will have, as a result of the transactions contemplated by this Agreement, any
valid right, interest or claim against or upon the Company or a Purchaser for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Company. The Company shall
indemnify, pay, and hold each Purchaser harmless against, any liability, loss or
expense (including, without limitation, attorneys’ fees and out-of-pocket
expenses) arising in connection with any such right, interest or claim.
 
(x)            Registration Rights. Other than each of the Purchasers, or
Purchasers in a Prior Financing, no Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the
Company.
 
(y)            No Directed Selling Efforts or General Solicitation. Neither the
Company nor, to its knowledge, any Person acting on its behalf has conducted any
“general solicitation” or “general advertising” (as those terms are used in
Regulation D) in connection with the offer or sale of any of the Securities.
 

 
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(z)            No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2 (without giving effect
to any materiality qualifiers therein), except as disclosed in the SEC Reports
and except for the Prior Financings, neither the Company nor any Person acting
on its behalf has, directly or indirectly, at any time within the past six (6)
months, made any offers or sales of any Company security or solicited any offers
to buy any security under circumstances that would (i) eliminate the
availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale by the Company of the
Securities as contemplated hereby or (ii) cause the offering of the Securities
pursuant to the Transaction Documents to be integrated with prior offerings by
the Company for purposes of any applicable law, regulation or shareholder
approval provisions, including, without limitation, under the rules and
regulations of any Trading Market on which any of the securities of the Company
are listed or designated.
 
(aa)          Listing and Maintenance Requirements. The Company’s Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to terminate the registration of the Common
Stock under the Exchange Act nor has the Company received any notification that
the Commission is contemplating terminating such registration.
 
(bb)          Investment Company. The Company is not required to be registered
as, and is not an Affiliate of, and immediately following the Closing will not
be required to register as, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.
 
(cc)          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 SEC Reports and is not so disclosed or that otherwise would have a
Material Adverse Effect.
 
(dd)          Acknowledgment Regarding the Purchasers’ Purchase of Securities.
The Company acknowledges and agrees that each of the Purchasers is acting solely
in the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by any
Purchaser or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to the Purchasers’ purchase of the Securities.
 
(ee)          Foreign Corrupt Practices. Neither the Company, nor to the
Company’s Knowledge, any agent or other person acting on behalf of the Company,
has: (i) directly or indirectly, used any funds 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 made by any person acting on its behalf of
which the Company is aware) which is in violation of law or (iv) violated in any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as
amended.
 
(ff)           No Additional Agreements. The Company does not have any agreement
or understanding with any Purchaser with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.
 
3.2           Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date in the case of the Purchasers listed on
Annex A hereto to the Company as follows:
 

 
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(a)            Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate, partnership,
limited liability company or other similar power and authority to enter into and
to consummate the transactions contemplated by the Transaction Documents to
which it is a party and otherwise to carry out its obligations hereunder and
thereunder. The execution, delivery and performance by such Purchaser of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate or, if such Purchaser is not a corporation, such
partnership, limited liability company or other applicable like action, on the
part of such Purchaser. Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application or insofar as indemnification
and contribution provisions may be limited by applicable law.
 
(b)            No Conflicts. The execution, delivery and performance by such
Purchaser of the Transaction Documents to which it is a party and the
consummation by such Purchaser of the transactions contemplated hereby and
thereby will not (i) result in a violation of the organizational documents of
such Purchaser, (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which such Purchaser is a party or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws) applicable to such
Purchaser, except in the case of clauses (ii) and (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 Purchaser to perform its obligations hereunder.
 
(c)            Investment Intent. Such Purchaser understands that the Securities
are “restricted securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Securities as
principal for its own account and not with a view to, or for distributing or
reselling such Securities or any part thereof in violation of the Securities Act
or any applicable state securities laws, provided, however, that by making the
representations herein, such Purchaser does not agree to hold any of the
Securities for any minimum period of time and reserves the right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant to
an effective registration statement under the Securities Act or under an
exemption from such registration and in compliance with applicable federal and
state securities laws. Such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business. Such Purchaser does not presently have any
agreement, plan or understanding, directly or indirectly, with any Person to
distribute or effect any distribution of any of the Securities (or any
securities which are derivatives thereof) to or through any person or entity;
such Purchaser is not a registered broker-dealer under Section 15 of the
Exchange Act or an entity engaged in a business that would require it to be so
registered as a broker-dealer.
 
(d)            Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) under the Securities Act.
 
(e)            Rule 144.  Such Purchaser understands that the Securities must be
held indefinitely unless such Securities are registered under the Securities Act
or an exemption from registration is available.  Such Purchaser acknowledges
that such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act (“Rule 144”),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Such Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
 

 
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(f)            General Solicitation. Such Purchaser acknowledges that the
Securities were not offered to such Purchaser by means of any form of general or
public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which such Purchaser was invited by any of the foregoing means of
communications.
 
(g)           Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.  Such Purchaser
acknowledges that an investment in the Securities is speculative and involves a
high degree of risk.
 
(h)           Access to Information. Such Purchaser acknowledges that it has had
the opportunity to and has reviewed the Disclosure Materials and has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and risks
of investing in the Securities; (ii) access to information about the Company and
its respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser’s right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company’s representations and
warranties contained in the Transaction Documents (as qualified by the
Disclosure Materials). Such Purchaser has sought such accounting, legal and tax
advice as it has considered necessary to make an informed decision with respect
to its acquisition of the Securities.
 
(i)            Certain Trading Activities. Other than with respect to the
transactions contemplated herein, since the time that such Purchaser was first
contacted by the Company or any other Person regarding the transactions
contemplated hereby, neither the Purchaser nor, to the knowledge of such
Purchaser, any Affiliate of such Purchaser which (i) had knowledge of the
transactions contemplated hereby, (ii) has or shares discretion relating to such
Purchaser’s investments or trading or information concerning such Purchaser’s
investments, including in respect of the Securities and (iii) is subject to such
Purchaser’s review or input concerning such Affiliate’s investments or trading
(collectively, “Trading Affiliates”) has directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser
or Trading Affiliate, effected or agreed to effect any transactions in the
securities of the Company (including, without limitation, any Short Sales
involving the Company’s securities). Notwithstanding the foregoing, in the case
of a Purchaser and/or Trading Affiliate that is, individually or collectively, a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s or Trading Affiliate’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser’s or Trading
Affiliate’s assets, the representation set forth above shall apply only with
respect to the portion of assets managed by the portfolio manager(s) that have
knowledge about the financing transaction contemplated by this Agreement. Other
than to other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with the
transactions contemplated hereby (including the existence and terms of such
transactions). Notwithstanding the foregoing, and except as otherwise provided
in Section 4.11, no Purchaser makes any representation, warranty or covenant
hereby that it will not engage in Short Sales in the securities of the Company
after the effectiveness of the Registration Statement as described in Section
4.11.
 

 
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(j)            Brokers and Finders. Other than the Placement Agent, no Person
will have, as a result of the transactions contemplated by this Agreement, any
valid right, interest or claim against or upon the Company or any Purchaser for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of such Purchaser.
 
(k)           Independent Investment Decision. Such Purchaser has independently
evaluated the merits of its decision to purchase Securities pursuant to the
Transaction Documents, and such Purchaser confirms that it has not relied on the
advice of any other Purchaser’s business and/or legal counsel in making such
decision. Such Purchaser understands that nothing in this Agreement or any other
materials presented by or on behalf of the Company to the Purchaser in
connection with the purchase of the Securities constitutes legal, tax or
investment advice. Such Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Securities.
 
(l)            Reliance on Exemptions. Such Purchaser understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Purchaser’s compliance with, the representations, warranties, agreements,
acknowledgements and understandings of such Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of such
Purchaser to acquire the Securities.
 
(m)           No Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
 
(n)            Regulation M. Such Purchaser is aware that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of Common Stock
and other activities with respect to the Common Stock by the Purchasers.
 
(o)            Residency. Such Purchaser’s principal executive offices are in
the jurisdiction set forth immediately below such Purchaser’s name on the
applicable signature page attached hereto.
 
(p)            Prior Financings. Such Purchaser acknowledges that the Company
has sold shares of Common Stock and/or securities exercisable for or convertible
into Common Stock in the aggregate amount of up to $6,803,973 within one hundred
eighty (180) days prior to the Closing Date in one or more financings (the
“Prior Financings”).
 
The Company and each of the Purchasers acknowledge and agree that no party to
this Agreement has made or makes any representations or warranties with respect
to the transactions contemplated hereby other than those specifically set forth
in this Article III and the Transaction Documents.
 

 
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ARTICLE 4

 
OTHER AGREEMENTS OF THE PARTIES
 
4.1           Transfer Restrictions.
 
(a)           Compliance with Laws. Notwithstanding any other provision of the
Transaction Documents, each Purchaser covenants that the Securities may be
disposed of only pursuant to an effective registration statement under, and in
compliance with the requirements of, the Securities Act, or pursuant to an
available exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, and in compliance with any applicable state
and federal securities laws. In connection with any transfer of the Securities
other than (i) pursuant to an effective registration statement, (ii) to the
Company, (iii) to an Affiliate of a Purchaser, (iv) pursuant to Rule 144
(provided that the Purchaser provides the Company with reasonable assurances (in
the form of seller and broker representation letters if required) that the
securities may be sold pursuant to such rule) or Rule 144A, (v) pursuant to
Rule 144 without the requirement that the Company be in compliance with the
current public information requirements of Rule 144 and without other
restriction following the applicable holding period or (vi) in connection with a
bona fide pledge, the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall agree in writing to
be bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement and the Registration Rights Agreement.
 
(b)           Legends. Certificates evidencing the Securities shall bear any
legend as required by the “Blue Sky” laws of any state and a restrictive legend
in substantially the following form until such time as they are not required
under Section 4.1(c) (and a stock transfer order may be placed against transfer
of the certificates for the Securities):
 
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY.
 
In addition, if any Purchaser is an Affiliate of the Company, certificates
evidencing the Securities issued to such Purchaser shall bear a customary
“affiliates” legend.
 
 
 

 
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(c)           Removal of Legends. Subject to the Company’s right to request an
opinion of counsel as set forth in Section 4.1(a), the legend set forth in
Section 4.1(b) above shall be removable and the Company shall issue or cause to
be issued a certificate without such legend or any other legend (except for any
“affiliates” legend as set forth in Section 4.1(b)) to the holder of the
applicable Shares upon which it is stamped or issue or cause to be issued to
such holder by electronic delivery at the applicable balance account at The
Depository Trust Company (“DTC”) as provided in this Section 4.1(c), if (i) such
Securities are registered for resale under the Securities Act (provided that, if
the Purchaser is selling pursuant to the effective registration statement
registering the Securities for resale, the Purchaser agrees to only sell such
Securities during such time that such registration statement is effective and
not withdrawn or suspended, and only as permitted by such registration
statement), (ii) such Securities are sold or transferred in compliance with Rule
144 (if the transferor is not an Affiliate of the Company), including without
limitation in compliance with the current public information requirements of
Rule 144 if applicable to the Company at the time of such sale or transfer, and
the holder and its broker have delivered customary documents reasonably
requested by the Transfer Agent and/or Company Counsel in connection with such
sale or transfer, or (iii) such Securities are eligible for sale under Rule 144
without the requirement that the Company be in compliance with the current
public information requirements of Rule 144 and without other restriction and
Company Counsel has provided written confirmation of such eligibility to the
Transfer Agent. Any fees (with respect to the Transfer Agent, Company Counsel or
otherwise) associated with the removal of such legend shall be borne by the
Company. Following the Effective Date (as defined in the Registration Rights
Agreement), or at such other time as a legend is no longer required for certain
Securities, the Company will no later than three (3) Trading Days following the
delivery by a Purchaser to the Company or the Transfer Agent (with concurrent
notice and delivery of copies to the Company) of a legended certificate
representing such Shares (endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect the reissuance and/or
transfer, and together with such other customary documents as the Transfer Agent
and/or Company Counsel shall reasonably request), deliver or cause to be
delivered to the transferee of such Purchaser or such Purchaser, as applicable,
a certificate representing such Securities that is free from all restrictive and
other legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 4.1. Certificates for Shares subject to legend removal
hereunder shall be transmitted by the Transfer Agent to the Purchasers, as
applicable, by crediting the account of the transferee’s Purchaser’s prime
broker with DTC.
 
(d)            Irrevocable Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its Transfer Agent, and any subsequent Transfer
Agent, in the form of Exhibit B attached hereto (the “Irrevocable Transfer Agent
Instructions”). The Company represents and warrants that no instruction other
than the Irrevocable Transfer Agent Instructions or instructions consistent
therewith or otherwise contemplated hereby or thereby or by the other
Transaction Documents or such other documents as the Transfer Agent may request
in connection with any such instructions will be given by the Company to its
Transfer Agent in connection with this Agreement, and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in and subject to the terms of this Agreement, the other
Transaction Documents and applicable law.
 
(e)            Acknowledgement. Each Purchaser hereunder acknowledges its
primary responsibilities under the Securities Act and accordingly will not sell
or otherwise transfer the Shares or any interest therein without complying with
the requirements of the Securities Act. While the Registration Statement remains
effective, each Purchaser hereunder may sell the Shares in accordance with the
plan of distribution contained in the Registration Statement and, if it does so,
it will comply therewith and with the related prospectus delivery requirements
unless an exemption therefrom is available. Each Purchaser, severally and not
jointly with the other Purchasers, agrees that if it is notified by the Company
in writing at any time that the Registration Statement registering the resale of
the Shares  is not effective or that the prospectus included in such
Registration Statement no longer complies with the requirements of Section 10 of
the Securities Act, the Purchaser will refrain from selling such Shares until
such time as the Purchaser is notified by the Company that such Registration
Statement is effective or such prospectus is compliant with Section 10 of the
Securities Act, unless such Purchaser is able to, and does, sell such Shares
pursuant to an available exemption from the registration requirements of Section
5 of the Securities Act. Each Purchaser acknowledges that the delivery of the
Irrevocable Transfer Agent Instructions and any removal of any legends from
certificates representing the Shares as set forth in this Section 4.1 is
predicated on the Company’s reliance upon the Purchaser’s acknowledgement in
this Section 4.1(e).
 

 
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(f)            Buy-In. If the Company shall fail for any reason or for no reason
to issue to a Purchaser a certificate not bearing the legend set forth in
Section 4.1(b) within three (3) Trading Days after receipt by the Company and
the Transfer Agent of all documents necessary for the removal of the legend as
set forth in Section 4.1(c) (the “Deadline Date”) (such certificate, the
“Unlegended Certificate”), then, in addition to all other remedies available to
such Purchaser, if on or after the Trading Day immediately following such three
(3) Trading Day period, such Purchaser purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
such Purchaser of the shares of Common Stock to be represented by the Unlegended
Certificate that such Purchaser anticipated receiving from the Company without
any restrictive legend as a result of such Purchaser’s full compliance with
Section 4.1(c) (a “Buy-In”), then the Company shall, within three (3) Trading
Days after such Purchaser’s request and in such Purchaser’s sole discretion,
either (i) pay cash to the Purchaser in an amount equal to such Purchaser’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate (and to issue such shares of Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to such
Purchaser a certificate or certificates representing such shares of Common Stock
and pay cash to the Purchaser in an amount equal to the excess (if any) of the
Buy-In Price over the product of (a) such number of shares of Common Stock,
times (b) the closing price of the Common Stock on the Deadline Date as reported
by the Principal Trading Market. The Purchaser of shares of Common Stock shall
provide the Company written notice indicating the amounts payable to such
Purchaser in respect of the Buy-In, together with applicable confirmations and
other evidence reasonably requested by the Company.
 
4.2           Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock.  The Company specifically acknowledges that its obligation to
issue the Warrant Shares upon exercise of the Warrants, in accordance with its
terms, is binding upon the Company and enforceable regardless of the dilution
such issuance may have on the ownership interest of other stockholders of the
Company or parties entitled to receive equity of the Company.
 
4.3           Furnishing of Information. In order to enable the Purchasers to
sell the Securities under Rule 144 of the Securities Act, for a period of one
year from the Closing Date, the Company shall use its commercially reasonable
efforts to timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company
after the date hereof pursuant to the Exchange Act. During such one year period,
if the Company is not required to file reports pursuant to such laws, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchasers to sell the
Shares under Rule 144.
 
4.4           Form D and Blue Sky. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Purchaser who requests a copy in writing promptly after
such filing. The Company shall take such action as the Company shall reasonably
determine is necessary in order to qualify the Securities for sale to the
Purchasers at the Closing pursuant to this Agreement under applicable securities
or “Blue Sky” laws of the states of the United States (or to obtain an exemption
from such qualification), which, subject to the accuracy of the Company’s and
the Purchaser’s representations and warranties set forth herein, shall consist
of the submission of all filings and reports relating to the offer and sale of
the Securities pursuant to Rule 506 of Regulation D required under applicable
securities or “Blue Sky” laws of the states of the United States following the
Closing Date, and shall provide evidence of any such action so taken to the
Purchasers who request in writing such evidence.
 

 
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4.5           No Integration. Except for the Prior Financings, the Company shall
not, and shall use its commercially reasonable efforts to ensure that the
Affiliates of the Company shall not, sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that will be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers, or that will be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
 
4.6           Securities Laws Disclosure; Publicity. Within the time required by
the Exchange Act, the Company will file a Current Report on Form 8-K with the
Commission describing the terms of the Transaction Documents (and including as
exhibits to such Current Report on Form 8-K the material Transaction Documents
(including, without limitation, this Agreement and the Registration Rights
Agreement)). Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser or an Affiliate of any Purchaser, or include
the name of any Purchaser or an Affiliate of any Purchaser in any press release
or filing with the Commission (other than the Registration Statement) or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in connection with
(A) any registration statement contemplated by the Registration Rights Agreement
and (B) the filing of final Transaction Documents (including signature pages
thereto) with the Commission or (ii) to the extent such disclosure is required
by law, request of the Staff of the Commission or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior written notice of
such disclosure permitted under this subclause (ii). From and after the issuance
of the Form 8-K, no Purchaser shall be in possession of any material, non-public
information received from the Company or any of its respective officers,
directors, employees or agents, that is not disclosed in the Form 8-K unless a
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. Each Purchaser, severally and not jointly with the
other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as
described in this Section 4.6, such Purchaser will maintain the confidentiality
of all disclosures made to it in connection with such transactions (including
the existence and terms of such transactions).
 
4.7           Non-Public Information. Except with respect to the material terms
and conditions of the transactions contemplated by the Transaction Documents,
the Company shall not and shall cause each of its officers, directors, employees
and agents, not to, provide any Purchaser with any information the Company
believes is material, non-public information regarding the Company from and
after the filing of the Press Release without the express written consent of
such Purchaser, unless prior thereto such Purchaser shall have executed a
written agreement regarding the confidentiality and use of such information.
 
 

 
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4.8          Indemnification.
 
(a)           Indemnification of the Purchasers. In addition to the indemnity
provided in the Registration Rights Agreement, subject to this Section 4.8, the
Company will indemnify and hold eachPurchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any other Persons
with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling Person (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur, as a
result of or relating to third party claims against such Purchaser relating to
any breach of any of the representations, warranties, covenants or agreements
made by the Company in this Agreement or in the other Transaction Documents,
provided that such a claim for indemnification relating to any breach of any of
the representations or warranties made by the Company in this Agreement is made
within one (1) year from the Closing. The Company will not be liable to any
Purchaser Party under this Agreement to the extent, but only to the extent that
a loss, claim, damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or agreements made
by such Purchaser Party in this Agreement or in the other Transaction Documents.
 
(b)            Conduct of Indemnification Proceedings. Promptly after receipt by
any Person (the “Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 4.8(a), such Indemnified Person shall promptly notify
the Company in writing and the Company shall have the right to assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Person and the assumption of the payment of all fees and
expenses; provided, however, that the failure of any Indemnified Person so to
notify the Company shall not relieve the Company of its obligations hereunder
except to the extent that the Company is actually and materially prejudiced by
such failure to notify. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless: (i) the
Company and the Indemnified Person shall have mutually agreed to the retention
of such counsel; (ii) the Company shall have failed promptly to assume the
defense of such proceeding and to employ counsel reasonably satisfactory to such
Indemnified Person in such proceeding; or (iii) in the reasonable judgment of
counsel to such Indemnified Person and counsel to the Company, representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them, in which case the Company shall be
responsible for the reasonable fees and expenses of no more than one such
separate counsel. The Company shall not be liable for any settlement of any
proceeding effected without its written consent, which consent shall not be
unreasonably withheld, delayed or conditioned. Without the prior written consent
of the Indemnified Person, which consent shall not be unreasonably withheld,
delayed or conditioned, the Company shall not effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is a
party, unless such settlement includes an unconditional release of such
Indemnified Person from all liability arising out of such Proceeding.
 
4.9           Listing of Securities. In the time and manner required by the
Principal Trading Market, the Company shall prepare and file with such Trading
Market any additional shares listing application that may be required by such
Trading Market covering all of the Shares and shall use its commercially
reasonable efforts to take all steps necessary to maintain, so long as any other
shares of Common Stock shall be so listed, such listing.
 

 
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4.10         Use of Proceeds. The Company intends to use the net proceeds from
the sale of the Securities hereunder for working capital and general corporate
purposes, which includes, without limitation, drilling capital and lease
acquisition capital.
 
4.11         Dispositions and Confidentiality After The Date Hereof. Each
Purchaser shall not, and shall cause its Trading Affiliates not to, prior to the
effectiveness of the Registration Statement: (a) sell, offer to sell, solicit
offers to buy, dispose of, loan, pledge or grant any right with respect to
(collectively, a “Disposition”) the Securities; or (b) engage in any hedging or
other transaction which is designed or could reasonably be expected to lead to
or result in a Disposition of the Securities by such Purchaser or a Trading
Affiliate, except, in each case, for Dispositions pursuant to an available
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, and in compliance with any applicable state
and federal securities laws. In addition, the Purchaser agrees that for so long
as it owns any Common Stock, it will not enter into any Short Sale of Shares
executed at a time when the Purchaser has no equivalent offsetting long position
in the Common Stock. For purposes of determining whether the Purchaser has an
equivalent offsetting long position in the Common Stock, shares that the
Purchaser is entitled to receive within sixty (60) days (whether pursuant to
contract or upon conversion or exercise of convertible securities) will be
included as if held long by the Purchaser. Such Purchaser covenants that neither
it nor any Person acting on its behalf or pursuant to any understanding with it
will engage in any transactions in the Company’s securities (including, without
limitation, any Short Sales involving the Company’s securities) during the
period from the date hereof until the earlier of such time as (i) the
transactions contemplated by this Agreement are first publicly announced as
described in Section 4.6 or (ii) this Agreement is terminated in full pursuant
to Section 6.17. Notwithstanding the foregoing, in the case of a Purchaser that
is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser’s assets, the representation set forth
above shall apply only with respect to the portion of assets managed by the
portfolio manager that have knowledge about the financing transaction
contemplated by this Agreement.  Each Purchaser understands and acknowledges,
severally and not jointly with any other Purchaser, that the Commission
currently takes the position that covering a short position established prior to
effectiveness of a resale registration statement with shares included in such
registration statement would be a violation of Section 5 of the Securities Act,
as set forth in Division of Corporation Financing Compliance and Disclosure
Interpretation 239.10 regarding short selling.
 
4.12         Subsequent Private Offering by the Company.  Until the first
anniversary of the Termination Date, Purchasers will have the right to
participate in up to 25%, in the aggregate, on a pro-rata basis, of any
subsequent private placement offerings by the Company of its securities on
identical terms and conditions as set forth in the private placement then being
offered.  By way of example only, if a Purchaser purchased Units amounting to
10% of the total number of Units sold hereunder, such Purchaser will have the
right to purchase up to 2.5% of the total maximum securities offered in the
subsequent private placement offering until the first anniversary date of the
Termination Date.  The Purchasers will have ten (10) days to subscribe to any
such offering once written notice of such offering is provided to the Purchaser.
 
ARTICLE 5

 
CONDITIONS PRECEDENT TO CLOSING
 
5.1           Conditions Precedent to the Obligations of the Purchasers to
Purchase Securities at the Closing. The obligation of each Purchaser listed on
Annex A hereto to acquire Securities at the Closing is subject to the
fulfillment to such Purchaser’s satisfaction, on or prior to the Closing Date,
of each of the following conditions, any of which may be waived by such
Purchaser (as to itself only):
 

 
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(a)            Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects (except for those representations and warranties which are
qualified as to materiality, in which case such representations and warranties
shall be true and correct in all respects) as of the date when made and as of
the Closing Date, as though made on and as of such date, except for such
representations and warranties that speak as of a different specified date.
 
(b)            Performance. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing.
 
(c)            No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents.
 
(d)            Consents. The Company shall have obtained in a timely fashion any
and all consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Securities at the Closing
(including all Required Approvals, except for those set forth in clauses (i),
(ii), (iii) and (v) of Section 3.1(e), which may be obtained after the Closing),
all of which shall be and remain so long as necessary in full force and effect.
 
(e)            No Suspensions of Trading in Common Stock. The Common Stock shall
not have been suspended, as of the Closing Date, by the Commission.
 
(f)            Company Deliverables. The Company shall have delivered the
Company Deliverables in accordance with Section 2.2(a).
 
(g)           Termination. This Agreement shall not have been terminated as to
such Purchaser in accordance with Section 6.17 herein.
 
(h)           Minimum and Maximum Raise.  The Company shall have raised gross
proceeds pursuant to the issuance and sale of Units under this Agreement of
(i) at least two million dollars ($2,000,000), and (ii) no more than five
million dollars ($5,000,000), subject to increase to no more than five million
six hundred thousand dollars ($5,600,000) upon the exercise of the Placement
Agent’s over-allotment option.
 
5.2           Conditions Precedent to the Obligations of the Company to sell
Securities at the Closing. The Company’s obligation to sell and issue the
Securities to each Purchaser listed on Annex A hereto at the Closing is subject
to the fulfillment to the satisfaction of the Company on or prior to the Closing
Date of the following conditions, any of which may be waived by the Company:
 
(a)            Representations and Warranties. The representations and
warranties made by such Purchaser in Section 3.2 hereof shall be true and
correct in all material respects (except for those representations and
warranties which are qualified as to materiality, in which case such
representations and warranties shall be true and correct in all respects) as of
the date when made, and as of the Closing Date as though made on and as of such
date, except for representations and warranties that speak as of a different
specified date.
 

 
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(b)            Performance. Such Purchaser shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by such Purchaser at or prior to the Closing Date.
 
(c)            No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents.
 
(d)            Purchaser Deliverables. Such Purchaser shall have delivered its
Purchaser Deliverables in accordance with Section 2.2(b).
 
(e)            Termination. This Agreement shall not have been terminated as to
such Purchaser in accordance with Section 6.17 herein.
 
ARTICLE 6

 
MISCELLANEOUS
 
6.1           Fees and Expenses. Except as expressly set forth in the
Transaction Documents to the contrary, the Company and the Purchasers shall each
pay the fees and expenses of their respective advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party in
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all Transfer Agent fees,
stamp taxes and other taxes and duties levied in connection with the sale and
issuance of the Securities to the Purchasers.
 
6.2           Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter thereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules. At or after the Closing, and without further
consideration, the Company and the Purchasers will execute and deliver to the
other such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction
Documents.
 
6.3           Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number specified in this Section prior to 5:00 p.m., New York City
time, on a Trading Day, provided that a copy is mailed by registered mail,
return receipt requested, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile
(provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section on a day that is
not a Trading Day or later than 5:00 p.m., New York City time, on any Trading
Day, provided that a copy is mailed by registered mail, return receipt
requested, (c) the Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service with next day delivery
specified, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
 
 

 If to the Company: Torchlight Energy Resources, Inc.
5700 Plano Parkway, Suite 3600
Plano, Texas 75093
Telephone No.: (214) 432-8002
Facsimile No.: (214) 432-8005
Attention: President

 
 

 
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With a copy to:
Axelrod, Smith & Kirshbaum
5300 Memorial Drive, Suite 1000
Houston, Texas 77007
Telephone No.: (713) 861-1996
Facsimile No.: (713) 552-0202
Attention: Robert D. Axelrod

 
If to a Purchaser:
To the address set forth under such Purchaser’s name on its signature page
hereof;

 
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
 
6.4           Amendments; Waivers; No Additional Consideration. No provision of
this Agreement may be waived or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers holding or having
the right to acquire at least a majority of the Securities to be purchased at
the Closing or then outstanding or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. No consideration shall be
offered or paid to any Purchaser to amend or consent to a waiver or modification
of any provision of any Transaction Document unless the same consideration is
also offered to all Purchasers who then hold Securities.
 
6.5           Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
 
6.6           Successors and Assigns. The provisions of this Agreement shall
inure to the benefit of and be binding upon the parties and their successors and
permitted assigns. This Agreement, or any rights or obligations hereunder, may
not be assigned by the Company without the prior written consent of the
Purchasers (other than by merger or consolidation or to an entity which acquires
the Company, including by way of acquiring all or substantially all of the
Company’s assets). Any Purchaser may assign its rights hereunder in whole or in
part to any Person to whom such Purchaser assigns or transfers any Securities in
compliance with the Transaction Documents and applicable law, provided such
transferee shall agree in writing to be bound, with respect to the transferred
Securities, by the terms and conditions of this Agreement that apply to the
“Purchasers”.
 
6.7           No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
 

 
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6.8           Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this 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. Each
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.  EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 
6.9           Survival. The representations and warranties contained herein
shall survive the Closing and the delivery of the Securities for a period of one
(1) year from the Closing Date. The agreements and covenants contained herein
shall survive for the applicable statute of limitations.
 
6.10         Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that the
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original
thereof.
 
6.11         Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor and achieves
that same or substantially the same effect or result, and upon so agreeing,
shall incorporate such substitute provision in this Agreement.
 
6.12         Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company and the Transfer Agent of such loss, theft or destruction and the
execution by the holder thereof of a customary lost certificate affidavit of
that fact and an agreement to indemnify and hold harmless the Company and the
Transfer Agent for any losses in connection therewith or, if required by the
Transfer Agent, a bond in such form and amount as is required by the Transfer
Agent. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Securities. If a replacement certificate or
instrument evidencing any Securities is requested due to a mutilation thereof,
the Company may require delivery of such mutilated certificate or instrument as
a condition precedent to any issuance of a replacement.
 

 
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6.13         Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate.
 
6.14         Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
 
6.15         Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be deemed to be amended to appropriately account for such event.
 
6.16         Independent Nature of the Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Securities pursuant to the Transaction Documents has been made by such
Purchaser independently of any other Purchaser and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or
given by any other Purchaser or by any agent or employee of any other Purchaser,
and no Purchaser and any of its agents or employees shall have any liability to
any other Purchaser (or any other Person) relating to or arising from any such
information, materials, statement or opinions. Nothing contained herein or in
any other Transaction Document, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers 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 Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no Purchaser will be acting as agent of such Purchaser in
connection with monitoring its investment in the Securities or enforcing its
rights under the Transaction Documents. Each Purchaser 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 Purchaser to be joined as an
additional party in any proceeding for such purpose. The Company acknowledges
that each of the Purchasers has been provided with the same Transaction
Documents for the purpose of closing a transaction with multiple Purchasers and
not because it was required or requested to do so by any Purchaser. The
Company’s obligations to each Purchaser under this Agreement and the other
Transaction Documents are identical to its obligations to each other Purchaser
other than such differences resulting solely from the number of Securities
purchased by such Purchaser.
 

 
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6.17         Termination.  This Agreement shall terminate upon the earlier of
(i) the maximum Securities under the Offering are sold to Purchasers; or
(ii)  5:00 p.m. New York time on January 31, 2014, unless extended by the
Company until no later than February 28, 2014 (the “Termination Date”).  If the
Company does not obtain the minimum amount of subscriptions prior to the
Termination Date, all subscriptions will be cancelled and all funds received
will be timely returned.
 
6.18         Independent Counsel. Each Purchaser acknowledges that: (a) it has
read this Agreement; (b) it has been represented in the preparation, negotiation
and execution of this Agreement by legal counsel of its own choice or has
voluntarily declined to seek such counsel; and (c) it understands the terms and
consequences of this Agreement and is fully aware of the legal and binding
effect of this Agreement.
 
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
 
 

  TORCHLIGHT ENERGY RESOURCES, INC.          
 
By:
/s/        Name: John Brda       Title: President          

 
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ANNEX A:   Schedule of Purchasers

EXHIBITS:
 
A:               Warrant Agreement
B:               Registration Rights Agreement
C:               Irrevocable Transfer Agent Instructions
D:               Escrow Agreement
E:               Form of Secretary’s Certificate
F:               Form of Compliance Certificate

 

 

 

 
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