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SECURITIES PURCHASE AGREEMENT
 
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of May 21, 2008,
by and among Energy Group, Inc, a Delaware corporation, with headquarters
located at 14850 Montfort Drive, Suite 131, Dallas, Texas 75254 (the “Company”),
and Trafalgar Capital Specialized Investment Fund, Luxembourg   ( “Buyer”).
 
 
WITNESSETH:
 
WHEREAS, the Company and the Buyer are executing and delivering this Agreement
in reliance upon an exemption from securities registration pursuant to Section
4(2) and/or Rule 506 of Regulation D (“Regulation D”) as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended (the “1933 Act”);
 
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Buyer, as provided
herein, and the Buyer shall purchase Four Million Six Hundred Thousand Dollars
($4,600,000) of a secured promissory note that is convertible to shares of the
Company’s common stock in accordance with its terms (the “Note”), which shall be
convertible into shares of the Company’s common stock, par value $.001 (the
“Common Stock”) (as converted, the “Conversion Shares”) of which Two Million
Three Hundred Thousand Dollars ($2,300,000) shall be funded on the date hereof
(the “First Closing”), and the balance to be funded upon the Buyer’s consent
(the “Second Closing”) (each individually referred to as a “Closing”
collectively referred to as the “Closings”), for a total purchase price of up to
Four Million Six Hundred Thousand Dollars ($4,600,000), (the “Purchase Price”)
Buyer; and
 
WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit A (the “Investor
Registration Rights Agreement”) pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated there under, and applicable state securities laws; and
 
WHEREAS, the proceeds of the sale of the Note contemplated hereby shall be held
in escrow pursuant to the terms of an escrow agreement substantially in the form
of the Escrow Agreement attached hereto as Exhibit B (the “Escrow Agreement”);
and
 
WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering Irrevocable Transfer Agent
Instructions substantially in the form attached hereto as Exhibit C (the
“Irrevocable Transfer Agent Instructions”); and
 
WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Security Agreement
substantially in the form attached hereto as Exhibit D (the “Security
Agreement”) pursuant to which the Company has agreed to provide the Buyer a
security interest in Pledged Collateral (as this term is defined in the Security
Agreement dated the date hereof) to secure Company’s obligations under this
Agreement, the Note, the Investor Registration Rights Agreement, the Irrevocable
Transfer Agent Instructions and the Security Agreement (collectively, the
“Transaction Documents”) or any other obligations of the Company to the Buyer;
and
 
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NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Buyer hereby agree as follows:
 
PURCHASE AND SALE OF NOTE.
 
Purchase of Note.  Subject to the satisfaction (or waiver) of the terms and
conditions of this Agreement, Buyer agrees to purchase at the Closings (as
defined herein below) and the Company agrees to sell and issue to Buyer, at such
Closings, Notes in an aggregate amount of up to Four Million Six Hundred
Thousand Dollars ($4,600,000.00) (the “Purchase Price”), as follows:  (i) Two
Million Three Hundred Thousand Dollars ($2,300,000.00) shall be funded at the
First Closing, and the balance to be funded at the Second Closing.  Prior to
execution hereof by the Buyer, the Buyer shall wire transfer the portion of the
Purchase Price required for the First Closing to “James G. Dodrill II, P.A. as
Escrow Agent for Platina Energy/Trafalgar Capital Investment Fund”, which amount
shall be held in escrow pursuant to the terms of the Escrow Agreement (as
hereinafter defined) and disbursed in accordance therewith.  Buyer shall wire
transfer the portion of the Purchase Price required for the Second Closing prior
to the occurrence of the Second Closing.
 
Closing Date.  The First Closing of the purchase and sale of the Note shall take
place at 10:00 a.m. Eastern Standard Time on the date hereof, subject to
notification of satisfaction of the conditions to the Closing set forth herein
and in Sections 6 and 7 below (or such later date as is mutually agreed to by
the Company and the Buyer) (the “First Closing Date”), and the Second Closing of
the purchase and sale of the Note shall take place at Buyer’s consent, subject
to notification of satisfaction of the conditions to the Second Closing set
forth herein and in Sections 6 and 7 below (or such later date as is mutually
agreed to by the Company and the Buyer(s)) (the “Second Closing Date”)
(collectively referred to as the “Closing Dates”).  The Closings shall occur on
the Closing Dates at the offices of James G. Dodrill II, P.A., 5800 Hamilton
Way, Boca Raton, FL  33496 (or such other place as is mutually agreed to by the
Company and the Buyer).
 
Escrow Arrangements; Form of Payment.  The full amount of the portion of the
Purchase Price for the interests in the Note to be purchased in the First
Closingshall be deposited in an escrow account with James G. Dodrill II, P.A.,
as escrow agent (the “Escrow Agent”) prior to the execution hereof.  Such
portion of the Purchase Price for the interests in the Note to be purchased in
the other Closings shall be deposited into the Escrow Account prior to such
applicable Closing Date.  Subject to the satisfaction of the terms and
conditions of this Agreement, on the Closing Dates, (i) the Escrow Agent shall
deliver to the Company in accordance with the terms of the Escrow Agreement that
portion of the Escrow Funds (as that term is defined in the Escrow Agreement)
equal to the gross amount of the Note being purchased by such Buyer as set forth
on Schedule I (the fees and expenses as set forth herein which shall be paid
directly from the Escrow Fundsat the Closing)by wire transfer of immediately
available funds and (ii) the Company shall deliver to Buyer, the Note as
applicable which such Buyer is purchasing in amounts indicated opposite such
Buyer’s name on Schedule I, duly executed on behalf of the Company. This Section
only applies to non U.S Buyer.
 
(d)                 The Debentures shall contain provisions that provide that in
the event the Euro strengthens against the U.S. Dollar during the life of the
Debenture, the Buyer shall be afforded an adjustment to compensate for any such
movement in either conversions or redemptions.
 
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BUYER’S REPRESENTATIONS AND WARRANTIES.
 
Buyer represents and warrants, severally and not jointly, that:
 
(a) Investment Purpose.  Buyer is acquiring their interest in the  Note and,
upon conversion of such interest in the Note, the Buyer will acquire the
Conversion Shares then issuable, for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, such
Buyer reserves the right to dispose of the Conversion Shares at any time in
accordance with or pursuant to an effective registration statement covering such
Conversion Shares or an available exemption under the 1933 Act.
 
(b) Accredited Investor Status.  Buyer is an “Accredited Investor” as that term
is defined in Rule 501(a)(3) of Regulation D.
 
(c) Reliance on Exemptions.  Buyer understands that the interests in the Note
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
Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
 
(d) Information.  Buyer and its advisors and counsel, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and information deemed by such Buyer to be material to making an
informed investment decision regarding the purchase of their interest in the
Note and the Conversion Shares, which have been requested by such Buyer.  Buyer
and its advisors, if any, have been afforded the opportunity to ask questions of
the Company and its management.  Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained in Section 3 below.  Buyer
understands that its investment in the Note and the Conversion Shares involves a
high degree of risk.  Buyer is in a position regarding the Company, which, based
upon employment, family relationship or economic bargaining power, enabled and
enables such Buyer to obtain information from the Company in order to evaluate
the merits and risks of this investment.  Buyer has sought such accounting,
legal and tax advice, as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Note and
the  Conversion Shares.
 
(e) No Governmental Review.  Buyer 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 Note or the Conversion Shares, or
the fairness or suitability of the investment in the Note or the Conversion
Shares, nor have such authorities passed upon or endorsed the merits of the
offering of the Note or the Conversion Shares.
 
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(f) Transfer or Resale.  Buyer understands that except as provided in the
Investor Registration Rights Agreement: (i) the interests in the  have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, or (B) such Buyer shall have delivered to
the Company an opinion of counsel selected by Buyer, in a generally acceptable
form, to the effect that such securities to be sold, assigned or transferred may
be sold, assigned or transferred pursuant to an exemption from such registration
requirements; (ii) any sale of such securities made in reliance on Rule 144
under the 1933 Act (or a successor rule thereto) (“Rule 144”) may be made only
in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.  The Company reserves the right to place stop transfer instructions
against the shares and certificates for the  Conversion Shares.
 
(g) Legends.  Buyer understands that the certificates or other instruments
representing the interests in the Note and or the  Conversion Shares shall bear
a restrictive legend in substantially the following form (and a stop ­transfer
order may be placed against transfer of such stock certificates):
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.
 
The legend set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of
the  Conversion Shares upon which it is stamped, if, unless otherwise required
by state securities laws, (i) in connection with a sale transaction, provided
the  Conversion Shares are registered under the 1933 Act or (ii) in connection
with a sale transaction, after such holder provides the Company with an opinion
of counsel, which opinion shall be in form, substance and scope reasonably
acceptable to counsel for the Company, to the effect that a public sale,
assignment or transfer of the  Conversion Shares may be made without
registration under the 1933 Act.
 
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(h) Authorization, Enforcement.  This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
 
(i) Receipt of Documents.  Buyer and his or its counsel has received and read in
their entirety:  (i) this Agreement and each representation, warranty and
covenant set forth herein, the Security Agreement, the Investor Registration
Rights Agreement, the Escrow Agreement, and the Irrevocable transfer Agent
Instructions; (ii) all due diligence and other information necessary to verify
the accuracy and completeness of such representations, warranties and covenants;
and (iii) answers to all questions Buyer submitted to the Company regarding an
investment in the Company; and Buyer has relied on the information contained
therein and has not been furnished any other documents, literature, memorandum
or prospectus.
 
(j) Due Formation of Corporate and Other Buyer.  If the Buyer is a corporation,
trust, partnership or other entity that is not an individual person, it has been
formed and validly exists and has not been organized for the specific purpose of
purchasing the Note and is not prohibited from doing so.
 
(k) No Legal Advice From the Company.  Buyer acknowledges, that it had the
opportunity to review this Agreement and the transactions contemplated by this
Agreement with his or its own legal counsel and investment and tax
advisors.  Buyer is relying solely on such counsel and advisors and not on any
statements or representations of the Company or any of its representatives or
agents for legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
 
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
 
The Company represents and warrants as of the date hereof and as of the Closing
Date to each of the Buyer that:
 
(a) Organization and Qualification.  The Company and its subsidiaries are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted.  Each of the Company and its subsidiaries is duly qualified as
a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
 
(b) Authorization, Enforcement, Compliance with Other Instruments.  (i) The
Company has the requisite corporate power and authority to enter into and
perform the Transaction Documents, and any related agreements, and to issue the
Note and the  Conversion Shares in accordance with the terms hereof and thereof,
(ii) the execution and delivery of the Transaction Documents and any related
agreements by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Note, the  Conversion Shares  and the reservation for issuance and the
issuance of the  Conversion Shares issuable upon  conversion or exercise
thereof, have been duly authorized by the Company’s Board of Directors and no
further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) the Transaction Documents and any related
agreements have been duly executed and delivered by the Company, (iv) the
Transaction Documents and any related agreements constitute the valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors’ rights and remedies.  The Company knows of no reason
why the Company cannot file the registration statement as required under the
Investor Registration Rights Agreement or perform any of the Company’s other
obligations to the Buyer.
 
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(c) Capitalization.  The authorized capital stock of the Company consists of
500,000,000 shares of Common Stock, par value $.001 per share, 20,000,000 shares
of Preferred Stock, par value $.001 per share.  As of the date hereof, the
Company has ,934,258 shares of Common Stock and 285,354 shares of Preferred
Stock issued and outstanding. All of such outstanding shares have been validly
issued and are fully paid and nonassessable.  No shares of Common Stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company.  As of the date of this
Agreement, (i) except as set forth on Schedule II attached hereto, including
specifically the transactions with LaJolla Cove Investors, Inc., 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, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) except
as set forth on Schedule II attached hereto, including specifically the
transactions with LaJolla Cove Investors, Inc., there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to the Registration Rights
Agreement) and (iv) there are no outstanding registration statements and there
are no outstanding comment letters from the SEC or any other regulatory
agency.  There are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Note as
described in this Agreement.  The Company has furnished to the Buyer true and
correct copies of the Company’s Certificate of Incorporation, as amended and as
in effect on the date hereof (the “Certificate of Incorporation”), and the
Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto other than stock
options issued to employees and consultants.
 
(d) Issuance of Securities.  The Note is duly authorized and, when issued and
paid for in accordance with the terms hereof, shall be duly issued, fully paid
and nonassessable, are free from all taxes, liens and charges with respect to
the issue thereof.  The Conversion Shares issuable upon conversion of the Note
have been duly authorized and reserved for issuance.  Upon conversion or
exercise in accordance with the Note the Conversion Shares will be duly issued,
fully paid and nonassessable.
 
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(e) No Conflicts.  The execution, delivery and performance of this Agreement and
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby will not (i) result in a violation of the
Articles of Incorporation or the By-laws or (ii), to the knowledge of the
Company, 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 the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including United States federal and state securities
laws and regulations and the rules and regulations of The National Association
of Securities Dealers Inc.’s OTC Bulletin Board on which the Common Shares may
be quoted) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected.  To the best knowledge of the Company, neither the Company nor its
subsidiaries is in violation of any term of or in default under its Articles of
Incorporation or By-laws or their organizational charter or by-laws,
respectively, or, any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries.  The business of the
Company and its subsidiaries is not being conducted, and shall not be conducted
in violation of any material law, ordinance, or regulation of any governmental
entity.  Except as specifically contemplated by this Agreement and as required
under the 1933 Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement in accordance with the terms hereof.  All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof, except for any required post-Closing notice filings under
applicable United States federal or state securities laws, if any.
 
(f) SEC Documents: Financial Statements.  The Company has filed or furnished, as
applicable, all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under of the Securities Exchange Act of
1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date
hereof or amended after the date hereof and all exhibits and schedules included
therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the “SEC
Documents”).  The Company has delivered to the Buyer or their representatives,
or made available through the SEC’s website at http://www.sec.gov, true and
complete copies of the SEC Documents.  As of their respective dates, the
financial statements of the Company included in the SEC Documents (the
“Financial Statements”) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto as in effect at the time of filing.  Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such Financial Statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and, fairly
present in all material respects the financial position of the Company as of the
dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
 
(g)  No Material Misstatement or Omission.  None of the Company’s SEC Documents
at the time of filing and none of the representation and warranties made in this
Agreement or any of the other  Transaction Documents include any untrue
statements of material fact, nor do the Company’s SEC Documents at the time of
filing and none of the representations and warranties made in this Agreement or
any of the other Transaction Documents omit to state any material fact required
to be stated therein necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.
 
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(h) Absence of Litigation.  There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable
decision, ruling or finding would (i) have a material adverse effect on the
transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein,
or (iii) except as expressly disclosed in the SEC Documents, have a material
adverse effect on the business, operations, properties, financial condition or
results of  operations of the Company and its subsidiaries taken as a whole.
 
(i) Acknowledgment Regarding Buyer’s Purchase of the Interest in the Note.  The
Company acknowledges and agrees that the Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby.  The Company further acknowledges that the Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by the Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such Buyer’s purchase of its
interest in the Note or the  Conversion Shares.  The Company further represents
to the Buyer that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation by the Company and its
representatives.
 
(j) No General Solicitation.  Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the 1933 Act) in connection with the offer or sale of the Note or
the  Conversion Shares.
 
(k) No Integrated Offering.  Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Note or
the  Conversion Shares under the 1933 Act or cause this offering of the Note or
the  Conversion Shares to be integrated with prior offerings by the Company for
purposes of the 1933 Act.
 
(l) Employee Relations.  Neither the Company nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened.  None of the Company’s or its
subsidiaries’ employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are good.
 
(m) Intellectual Property Rights.  The Company and its subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted.  The Company and its subsidiaries do not have any knowledge of any
infringement by the Company or its subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, trade secret or other similar rights of
others, and, to the knowledge of the Company there is no claim, action or
proceeding being made or brought against, or to the Company’s knowledge, being
threatened against, the Company or its subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service mark registrations, trade secret or other infringement;
and the Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.
 
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(n) Environmental Laws.  The Company and its subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
 
(o) Title.  Any real property and facilities held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
 
(p) Insurance.  The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its subsidiaries are engaged.  Neither the
Company nor any such subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.
 
(q) Regulatory Permits.  The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
 
(r) Internal Accounting Controls.  The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
and (iii) the recorded amounts for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
 
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(s) No Material Adverse Breaches, etc.  Neither the Company nor any of its
subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a material adverse
effect on the business, properties, operations, financial condition, results of
operations or prospects of the Company or its subsidiaries.  Neither the Company
nor any of its subsidiaries is in breach of any contract or agreement which
breach, in the judgment of the Company’s officers, has or is expected to have a
material adverse effect on the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries.
 
(t) Tax Status.  The Company and each of its subsidiaries has made and filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only to the
extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply.  There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.
 
(u) Certain Transactions.   Except for arm’s length transactions pursuant to
which the Company makes payments in the ordinary course of business for an
amount less than fifty thousand dollars ($50,000) and which are upon terms no
less favorable than the Company could obtain from third parties and other than
the grant of stock options disclosed in the SEC Documents, none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
 
(v) Fees and Rights of First Refusal.  The Company is not obligated to offer the
securities offered hereunder on a right of first refusal basis or otherwise to
any third parties including, but not limited to, current or former shareholders
of the Company, underwriters, brokers, agents or other third parties except a
first right of refusal regarding financing by La Jolla Cove Investors, Inc.
 
(w) Schedule of Indebtedness.  The schedule of the Company’s debt and other
liabilities included on Schedule 4(j) attached hereto is complete and accurate.
 
4,                 COVENANTS.
 
(a) Best Efforts.  Each party shall use its best efforts timely to satisfy each
of the conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.
 
(b) Form D.  The Company agrees to file a Form D with respect to the  Conversion
Shares as required under Regulation D and to provide a copy thereof to Buyer
promptly after such filing.  The Company shall, on or before the applicable
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the  Conversion Shares, or obtain an exemption for
the  Conversion Shares for sale to the Buyer at the Closing pursuant to this
Agreement under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of any such action so taken to the
Buyer on or prior to the applicable Closing Date.
 
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(c) Reporting Status.  Until the earlier of (i) the date as of which the Buyer
may sell all of the  Conversion Shares without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date
on which (A) the Buyer shall have sold all the  Conversion Shares and (B) none
of the Note are outstanding (the “Registration Period”), the Company shall file
in a timely manner all reports required to be filed with the SEC pursuant to the
1934 Act and the regulations of the SEC thereunder, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would otherwise
permit such termination.
 
(d) Use of Proceeds.  The Company will use the proceeds from the sale of the
Note for working capital purposes at the Tennessee Prospect.
 
(e) Reservation of Shares.  The Company shall take all action reasonably
necessary to at all times have authorized, and reserved for the purpose of
issuance, such number of shares of Common Stock as shall be necessary to effect
the issuance of the  Conversion Shares.  If at any time the Company does not
have available such shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of the  Conversion Shares of the
Company, the Company, within ten (10) business days for the sole purpose of
increasing the number of shares authorized shall either (i) obtain sufficient
written consents from the Company’s shareholders and file an Information
Statement with the Securities and Exchange Commission (the “SEC”) or (ii) file a
preliminary proxy statement with the SEC and shall call and hold a special
meeting of the shareholders as soon as practicable after such occurrence..  The
Company’s management shall recommend to the shareholders to vote in favor of
increasing the number of shares of Common Stock authorized.  Management shall
also vote all of its shares in favor of increasing the number of authorized
shares of Common Stock. Notwithstanding the foregoing, the Buyer hereby
acknowledge that the Company currently does not have sufficient shares of its
Common Stock authorized as shall be necessary to effect the issuance of the
Conversion Shares, but has obtained the written consent of a sufficient number
of votes of its shareholders to authorize such increase and has filed an
Information Statement with the SEC reflecting such approval.
 
(f) Fees and Expenses.  Other than as set forth herein, each of the Company and
the Buyer shall pay all costs and expenses incurred by such party in connection
with the negotiation, investigation, preparation, execution and delivery of the
Transaction Documents and any other documents relating to this transaction.
 
(i) The Company shall pay the Buyer a commitment fee of seven percent (7%) of
the Purchase Price, which shall be paid directly from the proceeds of and
proportionally upon each Closing.
 
(ii) The Company has agreed to pay a structuring fee to Buyer of Seventeen
Thousand Five Hundred Dollars ($17,500), Ten Thousand Dollars ($10,000) of which
has been paid with the remaining amount paid directly from the proceeds of the
First Closing.
 
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(iii)  The Company shall pay the Buyer a Loan Commitment Fee of two percent (2%)
of the Purchase Price, which shall be paid directly from the proceeds of and
proportionally upon each Closing.
 
(iv) The exercise price of the warrants previously issued by the Company to the
Buyer shall be reset to fifteen cents ($0.15) for seven hundred fifty thousand
shares of Common Stock and twenty cents ($0.20) for seven hundred fifty thousand
shares of Common Stock.
 
(v) In lieu of issuing additional warrants to the Buyer, the Company shall issue
to the Buyer Two Million Three Hundred Thousand (2,300,000) shares of restricted
Common Stock for each Two Million Three Hundred Thousand Dollars ($2,300,000) of
Notes purchased.
 
(g) Corporate Existence.  So long as any of the interests in the Note remain
outstanding, the Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, reverse stock split consolidation, sale of all or
substantially all of the Company’s assets or any similar transaction or related
transactions (each such transaction, an “Organizational Change”) unless, prior
to the consummation an Organizational Change, the Company obtains the written
consent of Buyer which consent shall not be unreasonably withheld or
delayed.  In any such case, the Company will make appropriate provision with
respect to such holders’ rights and interests to insure that the provisions of
this Section 4(g) will thereafter be applicable to the Note.
 
(h)  Transactions With Affiliates.  So long as any Notes are outstanding, the
Company shall not, and shall cause each of its subsidiaries not to, enter into,
amend, modify or supplement, or permit any subsidiary to enter into, amend,
modify or supplement any agreement, transaction, commitment, or arrangement (an
“Affiliate Transaction”) with any of its or any subsidiary’s officers or
directors, or persons who were officers or directors of the Company at any time
during the previous two (2) years, stockholders who beneficially own five
percent (5%) or more of the Common Stock, or Affiliates (as defined below) or
with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a five
percent (5%) or more beneficial interest (each a “Related Party”) for an
aggregate amount for all Affiliate Transactions with such Related Party in
excess of fifty thousand dollars ($50,000), except for (a) customary employment
arrangements and benefit programs on reasonable terms, (b) any investment in an
Affiliate of the Company,  (c) any Affiliate Transaction on an arms-length basis
on terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, or (d) any Affiliate Transaction which is
approved by a majority of the disinterested directors of the Company, for
purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement.  “Affiliate” for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity.  “Control” or “controls”
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.  In the
event the Company wishes to engage in an Affiliate Transaction valued in excess
of fifty thousand dollars ($50,000) the Buyer and the Company shall agree upon
an independent third party who shall be engaged at the Company’s expense to
determine whether such Affiliate Transaction is permissible pursuant to one or
more of (a) through (d) of this paragraph.
 
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(i)                                Transfer Agent.  The Company covenants and
agrees that, in the event that the Company’s agency relationship with the
transfer agent should be terminated for any reason prior to a date which is two
(2) years after the Closing Date, the Company shall immediately appoint a new
transfer agent and shall require that the new transfer agent execute and agree
to be bound by the terms of the Irrevocable Transfer Agent Instructions (as
defined herein).
 
(j)                                Restriction on Issuance of the Capital Stock
and Incurrence of Debt. Except for the Securities Purchase Agreement dated the
date hereof between the Company and Trafalgar Capital Specialized Investment
Fund, Luxembourg, and except for shares of the Company’s common stock permitted
to be issued pursuant to the securities purchase agreement between the Company
and Buyer entered into as of December 31, 2007, so long as any of the principal
of or interest on the Note remains unpaid and unconverted, the Company shall
not, without the prior consent of the Buyer:  (i) issue or sell in excess of
fifty thousand dollars ($50,000) worth of Common Stock or Preferred Stock, none
of which shall be issued or sold without consideration or for a consideration
per share less than the bid price of the Common Stock determined immediately
prior to its issuance, (ii) issue or sell in excess of fifty thousand dollars
($50,000) worth of Preferred Stock, warrant, option, right, contract, call, or
other security or instrument granting the holder thereof the right to acquire
Common Stock, however no Preferred Stock or Common Stock shall be issued or sold
without consideration or for a consideration per share less than such Common
Stock’s bid price value determined immediately prior to its issuance, (iii)
enter into any security instrument granting the holder a security interest in
any of the assets of the Company, (iv) file any registration statement on Form
S-8 or (v) other than in the ordinary course of business consistent with past
practice, directly or indirectly permit, create, incur assume, permit to exist,
increase, renew or extend on or after the date hereof any additional debt or
permit any subsidiary of the Company to do or allow any of the foregoing without
the Buyer’s prior written consent beyond that which is set forth in Schedule
4(j) attached hereto.   In the event that Buyer does provide its consent
hereunder to issue any such securities described under (i), (ii) or (iv) of this
Section or the Company issues any of the Common Stock permitted to be issued
under the Prior Agreement, in either event if the Company defaults under the
Note, the Fixed Price under the Note shall be equal to the lesser of: (a) the
Fixed Price as defined therein and (b) eighty-five percent (85%) of the lowest
consideration paid per share for any such security issued by the Company.
 

 
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5.                  TRANSFER AGENT INSTRUCTIONS.
 
The Company shall issue the Irrevocable Transfer Agent Instructions to its
transfer agent irrevocably appointing James G. Dodrill II, P.A. as its agent for
purpose of having certificates issued, registered in the name of the Buyer or
its respective nominee(s), for the  Conversion Shares representing such amounts
of the Note as specified from time to time by the Buyer to the Company upon
conversion of the Note, for interest owed pursuant to the  Notes, and for any
and all Liquidated Damages (as this term is defined in the Investor Registration
Rights Agreement).  James G. Dodrill II, P.A. shall be paid a cash fee of One
Hundred Dollars ($100) for every occasion they act pursuant to the Irrevocable
Transfer Agent Instructions.  The Company shall not change its transfer agent
without the express written consent of the Buyer, which may be withheld by the
Buyer in its sole discretion.  Prior to registration of the Conversion Shares
under the 1933 Act, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement.  The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(g)
hereof (in the case of the Conversion Shares prior to registration of such
shares under the 1933 Act) will be given by the Company to its transfer agent
and that the  Conversion Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the Investor Registration Rights Agreement.  Nothing in this Section 5 shall
affect in any way the Buyer’s obligations and agreement to comply with all
applicable securities laws upon resale of  Conversion Shares.  If the Buyer
provides the Company with an opinion of counsel, in form, scope and substance
customary for opinions of counsel in comparable transactions and reasonably
acceptable to the Company’s counsel, to the effect that registration of a resale
by the Buyer of any of the Conversion Shares is not required under the 1933 Act,
the Company shall within two (2) business days instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by the Buyer.  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby.  Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that the
Buyer shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
 
6.                 CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.
 
The obligation of the Company hereunder to issue and sell the Note to the Buyer
at the Closings is subject to the satisfaction, at or before the Closing Dates,
of each of the following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion:
 
(a) Buyer shall have executed this Agreement, the Security Agreement, the Escrow
Agreement and the Investor Registration Rights Agreement and delivered the same
to the Company.
 
(b) The Buyer shall have delivered to the Escrow Agent the Purchase Price for
Note in respective amounts as set forth next to Buyer as outlined on Schedule I
attached hereto and the Escrow Agent shall have delivered the net proceeds to
the Company by wire transfer of immediately available U.S. funds pursuant to the
wire instructions provided by the Company.
 
(c) The representations and warranties of the Buyer shall be true and correct in
all material respects as of the date when made and as of the Closing Dates as
though made at that time (except for representations and warranties that speak
as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Dates.
 
(d) The Company shall have filed a form UCC-1 with regard to the Pledged
Property and Pledged Collateral as detailed in the Security Agreement dated the
date hereof and provided proof of such filing to the Buyer.
 
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7.                 CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE.
 
The obligation of the Buyer hereunder to purchase the Note at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions:
 
(a) The Company shall have executed this Agreement, the Security Agreement, the
Note in such amounts as purchased by Buyer hereunder), the Escrow Agreement, the
Irrevocable Transfer Instructions, the Warrant and the Investor Registration
Rights Agreement, and delivered the same to the Buyer.
 
(b) The trading in the Common Shares on the OTCBB shall not have been suspended
for any reason.
 
(c) The representations and warranties of the Company shall be true and correct
in all material respects (except to the extent that any of such representations
and warranties is already qualified as to materiality in Section 3 above, in
which case, such representations and warranties shall be true and correct
without further qualification) as of the date when made and as of the Closing
Dates as though made at that time (except for representations and warranties
that speak as of a specific date) and the Company shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Dates.  If requested by the
Buyer, the Buyer shall have received a certificate, executed by the President of
the Company, dated as of the Closing Dates, to the foregoing effect and as to
such other matters as may be reasonably requested by the Buyer including,
without limitation an update as of the Closing Dates regarding the
representation contained in Section 3(c) above.
 
(d) The Company shall have executed and delivered to the Buyer the Note in the
respective amounts set forth opposite Buyer name on Schedule I attached hereto.
 
(e) The Buyer shall have received an opinion of counsel from counsel to the
Company in a form satisfactory to the Buyer.
 
(f) The Company shall have provided to the Buyer a certificate of good standing
from the secretary of state from the state in which the Company is incorporated.
 
(g) As of the Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Note, shares of Common Stock to effect the conversion of all
of the Conversion Shares then outstanding.
 
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(h) The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer, shall have been delivered to and acknowledged in
writing by the Company’s transfer agent.
 
(i) The Company shall have provided to the Buyer an acknowledgement, to the
satisfaction of the Buyer, from the Company’s independent certified public
accountants as to its ability to provide all consents required in order to file
a registration statement in connection with this transaction.
 
(j) The Company shall have filed a form UCC-1 or such other forms as may be
required to perfect the Buyer’(s’) interest in the Pledged Property and Pledged
Collateral as detailed in the Security Agreement dated the date hereof and
provided proof of such filing to the Buyer.
 
(k) Buyer’s due diligence shall have been completed to Buyer’s satisfaction.
 
(l) If commercially available, the Company shall obtain business interruption
insurance and shall provide to the Buyer independent verification that the
revenues from the Hawkins County location will be available within sixty (60)
days pursuant to the completion of repairs to the surface gathering system.
 
8.                 INDEMNIFICATION.
 
(a) In consideration of the Buyer’s execution and delivery of this Agreement and
acquiring the Note and the Conversion Shares hereunder, and in addition to all
of the Company’s other obligations under this Agreement, the Company shall
defend, protect, indemnify and hold harmless the Buyer and each other holder of
the Note and the  Conversion Shares, and all of their officers, directors,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the “Buyer Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Buyer
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by the Buyer Indemnitees or any of them as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement,
the Note or the Investor Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in this Agreement, or
the Investor Registration Rights Agreement or any other certificate, instrument
or document contemplated hereby or thereby, or (c) any cause of action, suit or
claim brought or made against such Indemnitee by a third party and arising out
of or resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Indemnities, any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of
the Note or the status of the Buyer or holder of the Note  the  Conversion
Shares,  as a Buyer of Note in the Company.  To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities, which is permissible under applicable law.
 
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(b) In consideration of the Company’s execution and delivery of this Agreement,
and in addition to all of the Buyer’s other obligations under this Agreement,
the Buyer shall defend, protect, indemnify and hold harmless the Company and all
of its officers, directors, employees and agents (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the “Company Indemnitees”) from and against any and
all Indemnified Liabilities incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Buyer in this Agreement, the Note
or the Investor Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby executed by the Buyer, (b)
any breach of any covenant, agreement or obligation of the Buyer contained in
this Agreement, the Note, the Investor Registration Rights Agreement or any
other certificate, instrument or document contemplated hereby or thereby
executed by the Buyer, or (c) any cause of action, suit or claim brought or made
against such Company Indemnitee based on material misrepresentations or due to a
material breach and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement, the Note, the Investor
Registration Rights Agreement or any other certificate instrument, document or
agreement executed pursuant hereto by any of the Company Indemnities.  To the
extent that the foregoing undertaking by Buyer may be unenforceable for any
reason, Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
 
9.                 GOVERNING LAW: MISCELLANEOUS.
 
(a) Governing Law.  This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Florida without regard to the
principles of conflict of laws.  The parties further agree that any action
between them shall be heard in Broward County, Florida and expressly consent to
the jurisdiction and venue of the State Court sitting in Broward County, Florida
and the United States District Court for the Southern District of Florida for
the adjudication of any civil action asserted pursuant to this Paragraph.
 
(b) Counterparts.  This Agreement may be executed in two or more identical
counterparts, all of which 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.  In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
(4) additional original executed signature pages to be physically delivered to
the other party within five (5) days of the execution and delivery hereof.
 
(c) Recitals and Headings.  The recitals of this Agreement are an integral part
of this Agreement and shall be incorporated herein as if made a part of this
Agreement.  The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
 
(d) Severability.  If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
 
(e) Entire Agreement, Amendments.  This Agreement supersedes all other prior
oral or written agreements between the Buyer, the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters.  No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
 
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(f) Notices.  Any notices, consents, waivers, or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon confirmation of receipt, when sent by facsimile; (iii)
three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same.  The addresses and facsimile numbers for such communications
shall be:
 
If to the Company, to:
Blair Merriam, CEO
 
14850 Montfort Drive, Suite 131
 
Dallas, Texas 75254
 
Telephone: (303) 881-2604
 
Facsimile: (480)287-9560
   
With a copy to:
Michael J. Tauger, Esq.
 
5445 DTC Parkway, Suite 520
 
Greenwood Village, CO 80111
     
Telephone: (303) 713-0363
 
Facsimile: (720)489-1587
   
If to the Transfer Agent, to:
Corporate Stock Transfer, Inc.
 
3200 Cherry Creek Drive South, Suite 430
 
Denver, CO 80209
 
 
Attn: Carylyn Bell
 
Telephone: (303) 282-800
 
Facsimile: (303) 282-5800
   
With Copy to:
James G. Dodrill II, P.A.
 
5800 Hamilton Way
 
Boca Raton, FL  33496
 
Attention:                                  Jim Dodrill, Esq.
 
Telephone:                                  (561) 862-0529
 
Facsimile:                                  (561) 892-7787
   

If to the Buyer, to its address and facsimile number on Schedule I, with copies
to the Buyer’s counsel as set forth on Schedule I.  Each party shall provide
five (5) days’ prior written notice to the other party of any change in address
or facsimile number.
 
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(g) Successors and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns.  Neither
the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto.
 
(h) No Third Party Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
 
(i) Survival.  Unless this Agreement is terminated under Section 9(l), the
representations and warranties of the Company and the Buyer contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall survive the
Closing for a period of two (2) years following the date on which the Note are
converted in full.  The Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
 
(j) Publicity.  The Company and the Buyer shall have the right to approve,
before issuance any press release or any other public statement with respect to
the transactions contemplated hereby made by any party; provided, however, that
the Company shall be entitled, without the prior approval of the Buyer, to issue
any press release or other public disclosure with respect to such transactions
required under applicable securities or other laws or regulations (the Company
shall use its best efforts to consult the Buyer in connection with any such
press release or other public disclosure prior to its release and Buyer shall be
provided with a copy thereof upon release thereof).
 
(k) Further Assurances.  Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
 
(l) Termination.  In the event that the Closing shall not have occurred with
respect to the Buyer on or before five (5) business days from the date hereof
due to the Company’s or the Buyer’s failure to satisfy the conditions set forth
in Sections 6 and 7 above (and the non-breaching party’s failure to waive such
unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, that if this Agreement is terminated by the Company pursuant
to this Section 9(l), the Company shall remain obligated to pay the Buyer for
the structuring fee described in Section 4(g) above.
 
(m) No Strict Construction.  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.
 

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IN WITNESS WHEREOF, the Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
 

 
COMPANY:
 
PLATINA ENERGY GROUP, INC.
     
By: /s/ Blair Merriam
 
Name: Blair Merriam
 
Title:                 Chief Executive Officer
   

 
BUYER:
 
TRAFALGAR CAPITAL SPECIALIZED
 
INVESTMENT FUND, LUXEMBOURG
 
By:                 Trafalgar Capital Sarl
 
Its:                 General Partner
     
By: /s/ Andrew Garai
 
Name:                 Andrew Garai
 
Title:                 Chairman of the Board

 
20

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EXHIBIT A

 
FORM OF INVESTOR REGISTRATION RIGHTS AGREEMENT
 

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EXHIBIT B

 
FORM OF ESCROW AGREEMENT
 

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EXHIBIT C
 
TRANSFER AGENT INSTRUCTIONS
 

 
 

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EXHIBIT D

 
FORM OF SECURITY AGREEMENT
 

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SCHEDULE I
 
 
SCHEDULE OF BUYER
 

Name
Signature
Address/Facsimile
Number of Buyer
Amount of Subscription
   
8-10 Rue Mathias Hardt
 
Trafalgar Capital Specialized
By:                 Trafalgar Capital Sarl
BP 3023
$        4,600,000
Investment Fund, Luxembourg
Its:                 General Partner
L-1030 Luxembourg
     
Facsimile:
     
011-44-207-405-0161
   
By:
and
   
Name:                 Andrew Garai
001-786-323-1651
   
Its:                 Chairman of the Board
   

Buyer’s Counsel:

James G. Dodrill II, P.A.
5800 Hamilton Way
Boca Raton, FL  33496
Telephone: (561) 862-0529
Facsimile: (561) 892-7787

 
 

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SCHEDULE 4(j)

SCHEDULE OF INDEBTEDNESS
 

 

 

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SCHEDULE II
 
CURRENT OUTSTANDING RIGHTS TO ACQUIRE COMPANY
SECURITIES AND OUTSTANDING DEBT SECURITIES