exhibit10_1.htm


    
      

      

    

    


      


       

      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.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      (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.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      (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.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      (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.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      (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.

       

      


       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      


       

      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.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      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.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      (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.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      (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.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      (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.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      (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.

       

      


      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]


      
        
           


        

        
          19

          
            

          

        

        
           


        

      


      


      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

          
            

          

        

        
           


        

      


      


      EXHIBIT
A

      


       

      FORM OF INVESTOR
REGISTRATION RIGHTS AGREEMENT

       

      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      


      EXHIBIT
B

      


       

      FORM OF ESCROW
AGREEMENT

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      


      


      


      EXHIBIT
C

       

      TRANSFER AGENT
INSTRUCTIONS

       

      



      
        
           


        

        
           


          
            

          

        

        
           


        

      


      


      EXHIBIT
D

      


      


       

      FORM OF SECURITY
AGREEMENT

       

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


       

      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

      


      


      



      
        
           


        

        
           


          
            

          

        

        
           


        

      


      


      SCHEDULE
4(j)

      


      SCHEDULE
OF INDEBTEDNESS

       

      
 

      


      


      
 

      


      


      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      


      


      


      


      


      


      


      


      


      


      


      


       

      SCHEDULE
II

       

      CURRENT
OUTSTANDING RIGHTS TO ACQUIRE COMPANY

      SECURITIES
AND OUTSTANDING DEBT SECURITIES