SECURITIES
      PURCHASE AGREEMENT

     

    THIS
      SECURITIES PURCHASE AGREEMENT
      (this
“Agreement”),
      dated
      as of May 4, 2006, by and among THE
      AMERICAN ENERGY GROUP, LTD.,
      a
      Nevada corporation
      with its
      principal offices
      at
120
      Post
      Road West, Suite 202, Westport, Connecticut 06880 (the “Company”),
      and
      the investors listed on the Schedule of Investors attached hereto as
      Exhibit
      A (individually,
      an “Investor”
and,
      collectively, the “Investors”).
      

     

    RECITALS

     

    A. The
      Company and each Investor is executing and delivering this Agreement in reliance
      upon the exemption from registration afforded by Section 4(2) of the
      Securities Act of 1933, as amended (the “Securities
      Act”),
      and
      Rule 506
      of
      Regulation D
      (“Regulation
      D”)
      as
      promulgated by the United States Securities and Exchange Commission (the
“SEC”)
      under
      the Securities Act. 

     

    B. Each
      Investor, severally and not jointly, wishes to purchase, and the Company wishes
      to sell, upon the terms and conditions stated in this Agreement, (i) that
      aggregate number of shares of the Common Stock, par value $.001 per share,
      of
      the Company (the “Common
      Stock”),
      set
      forth opposite such Investor’s name under the heading “Common Shares” in
Exhibit
      A
      (which
      aggregate amount for all Investors together shall be 2,323,530 shares of Common
      Stock) and (ii) a Warrant (as defined below) entitling such Investor to
      subscribe for and purchase such number of Warrant Shares (as defined below)
      set
      forth opposite such Investor’s name under the heading “Warrant Shares” in
Exhibit
      A.
      The
      Common Shares (as defined below) and the Warrant Shares issued under this
      Agreement shall collectively be referred to herein as the “Shares.”
      The
      Shares and the Warrants shall collectively be referred to herein as the
“Securities.”

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and the Investors agree as
      follows:

     

    ARTICLE
      I

    DEFINITIONS

     

    1.1  Definitions.
      In
      addition to the terms defined elsewhere in this Agreement, the following terms
      have the meanings indicated:

     

    “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 144.

     

    “Agent”
has
      the
      meaning set forth in Section
      3.1(l).

     

    “Agreement”
has
      the
      meaning set forth in the introductory paragraph of this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Business
      Day”
means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    “Closing”
means
      the closing of the purchase and sale of the Securities pursuant to Section 2.1.

     

    “Closing
      Date”
means
      the date and time of the Closing and shall be 10:00 a.m., Eastern Daylight
      Time,
      on May ___, 2006 (or such other date and time as is mutually agreed to by the
      Company and each Investor).

     

    “Closing
      Price”
means,
      for any date, the closing price per share of the Common Stock for such date
      (or
      the nearest preceding date) on the primary Eligible Market or exchange or
      quotation system on which the Common Stock is then listed or
      quoted.

     

    “Common
      Stock”
has
      the
      meaning set forth in the Recitals to this Agreement.

     

    “Common
      Shares”
means
      an aggregate of 2,323,530 shares of Common Stock, which are being issued and
      sold by the Company to the Investors at the Closing,
      together with any securities issued or issuable upon
      any
      stock split, subdivision, dividend or distribution payable in shares of Common
      Stock (or other securities or rights convertible into, or entitling the holder
      thereof to receive directly or indirectly shares of Common Stock), combination
      or other similar recapitalization or event occurring after the date
      hereof.

     

    “Company” has
      the
      meaning set forth in
      the
      introductory paragraph of this Agreement.

     

    “Company
      Counsel”
means
      James
      M.
      Hughes, Attorney at Law or such other counsel designated by
      Company.

     

    “Disclosure
      Materials”
has
      the
      meaning set forth in Section 3.1(g).

     

    “Effective
      Date”
means
      the date that the Registration Statement is first declared effective by the
      SEC.

     

    “Effectiveness
      Period”
has
      the
      meaning set forth in Section 6.1(b).

     

    “8-K
      Filing”
has
      the
      meaning set forth in Section
      4.5. 

     

    “Eligible
      Market”
means
      any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq
      National Market or the Nasdaq Capital Market.

     

    “Environmental
      Laws”
has
      the
      meaning set forth in Section
      3.1(aa).
      

     

    “Event
      Payments”
has
      the
      meaning set forth in Section 6.1(d).

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    “Excluded
      Investors”
      means
      the Agent and its Affiliates.

     

    
      
        
        

      

      
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    “Filing
      Date”
      means
      the date
      that is 60 days after the Closing Date. 

     

    “GAAP”
has
      the
      meaning set forth in Section
      3.1(g).
      

     

    “Hazardous
      Materials”
has
      the
      meaning set forth in Section
      3.1(aa).
      

     

    “Indemnified
      Party”
has
      the
      meaning set forth in Section 6.4(c).

     

    “Indemnifying
      Party”
has
      the
      meaning set forth in Section 6.4(c).

     

    “Intellectual
      Property Rights”
has
      the
      meaning set forth in Section 3.1(s).

     

    “Investor”
has
      the
      meaning set forth in the
      introductory paragraph of this Agreement. 

     

    “Lien”
means
      any lien, charge, claim, security interest, encumbrance, right of first refusal
      or other restriction.

     

    “Losses”
means
      any and all losses, claims, damages, liabilities, settlement costs and expenses,
      including, without limitation, and reasonable attorneys’ fees.

     

    “Material
      Adverse Effect”
has
      the
      meaning set forth in Section 3.1(b).

     

    “Person”
means
      any individual or corporation, partnership, trust, incorporated or
      unincorporated association, joint venture, limited liability company or joint
      stock company. 

     

    “Proceeding”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, or a partial proceeding, such as a deposition), whether commenced
      or
      threatened in writing. 

     

    “Prospectus”
means
      the prospectus included in the Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430B
      promulgated by the SEC pursuant to the Securities Act), as amended or
      supplemented by any prospectus supplement, with respect to the terms of the
      offering of any portion of the Registrable Securities covered by the
      Registration Statement, and all other amendments and supplements to the
      Prospectus including post-effective amendments, and all material incorporated
      by
      reference or deemed to be incorporated by reference in such
      Prospectus.

     

    “Registrable
      Securities”
means
      the Common Shares and the Warrant Shares.

     

    “Registration
      Statement”
means
      each registration statement required to be filed under Article VI,
      including (in each case) the Prospectus, amendments and supplements to such
      registration statement or the Prospectus, including pre- and post-effective
      amendments, all exhibits thereto and all material incorporated by reference
      or
      deemed to be incorporated by reference in such registration statement or the
      Prospectus.

     

    “Regulation
      D”
has
      the
      meaning set forth in the Recitals to this Agreement. 

     

    
      
        
        

      

      
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    “Rule 144,”
      “Rule 415”
and
      “Rule 424”
means
      Rule 144,
      Rule 415
      and
      Rule 424,
      respectively, promulgated by the SEC pursuant to the Securities Act, as such
      Rules may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the SEC having substantially the same effect as such
      Rule.

     

    “SEC”
      has the
      meaning set forth in the Recitals
      to this Agreement.

     

    “SEC
      Reports”
has
      the
      meaning set forth in Section 3.1(g).

     

    “Securities”
has
      the
      meaning set forth in the Recitals to this Agreement.

     

    “Shares” has
      the
      meaning set forth in the Recitals to this Agreement.

     

    “Securities
      Act”
has
      the
      meaning set forth in the Recitals to this Agreement. 

     

    “Short
      Sales”
has
      the
      meaning set forth in Section
      3.2(i).
      

     

    “Subsidiary”
means
      any
      Affiliate of the Company that, directly or indirectly through one or more
      intermediaries, is controlled by the Company.

     

    “Trading
      Day”
means
      (a) any day on which the Common Stock is listed or quoted and traded on its
      primary Trading Market, (b) if the Common Stock is not then listed or
      quoted and traded on any Eligible Market, then a day on which trading occurs
      on
      the Nasdaq National Market (or any successor thereto) or (c) if trading
      ceases to occur on the Nasdaq National Market (or any successor thereto), any
      Business Day.

     

    “Trading
      Market”
means
      the
      Nasdaq National Market or
      any
      other Eligible Market, or any national securities exchange, market or trading
      or
      quotation facility on which the Common Stock is then listed or
      quoted.

     

    “Transaction
      Documents”
means
      this Agreement, including the schedules and exhibits attached hereto, and the
      Warrants.

     

    “Transfer
      Agent”
means
      Computershare
      Trust Co., Inc., 350 Indiana, Suite 800, Golden, Colorado 80401, or any
      successor transfer agent for the Company.

     

    “Transfer
      Agent Instructions”
means,
      with respect to the Company, the Irrevocable Transfer Agent Instructions, in
      the
      form of Exhibit D,
      executed by the Company and delivered to and acknowledged in writing by the
      Transfer Agent.

     

    “Warrant”
means
      the warrants to purchase the Warrant Shares in the form and substance attached
      hereto as Exhibit
      E
      issued
      to the Investors pursuant to the terms hereof.

     

    “Warrant
      Shares”
means
      shares of the Common Stock issuable upon exercise of or otherwise pursuant
      to
      the Warrants,
      together with securities issued or issuable upon any stock split, subdivision,
      dividend or distribution payable in shares of Common Stock (or other securities
      or rights convertible into, or entitling the holder thereof to receive directly
      or indirectly shares of Common Stock), combination or other similar
      recapitalization or event occurring after the date hereof.

     

    
      
        
        

      

      
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    ARTICLE
      II

    PURCHASE
      AND SALE

     

    2.1  Closing.
      

     

    Subject
      to the terms and conditions set forth in this Agreement, at the Closing the
      Company shall issue and sell to each Investor, and each Investor shall,
      severally and not jointly, purchase from the Company, (a) such number of Common
      Shares set forth opposite such Investor’s name on Exhibit
      A
      under
      the heading “Common Shares” and (b) a Warrant entitling
      such Investor to subscribe for and purchase such number of Warrant Shares set
      forth opposite such Investor’s name on Exhibit
      A
      under
      the heading“Warrant
      Shares.” The date and time of the Closing and shall be 10:00 a.m., New York City
      Time, on the Closing Date. The Closing shall take place at the offices of
      Company Counsel. 

     

    2.2  Closing
      Deliveries.

     

    (a)  At
      the
      Closing, the Company shall deliver or cause to be delivered to each Investor
      the
      following:

     

    (i)  
      either
      (x) one or more stock certificates, free and clear of all restrictive and other
      legends (except as expressly provided in Section 4.1(b)),
      evidencing such number of Common Shares set forth opposite such Investor’s name
      on Exhibit
      A
      under
      the heading “Common Shares,” registered in the name of such Investor or (y) a
      letter of instruction to the Company’s Transfer Agent instructing the Transfer
      Agent to issue to each investor such number of Common Shares set forth opposite
      such investor’s name on Exhibit
      A
      under
      the heading “Common Shares”;

     

    (ii)  a
      duly
      executed Warrant entitling such Investor to subscribe for and purchase such
      number of Warrant Shares set forth opposite such Investor’s name on Exhibit
      A
      under
      the heading “Warrant Shares”;

     

    (iii)  a
      legal
      opinion of Company Counsel as to the matters set forth in Exhibit C,
      executed by such counsel and delivered to the Investors and the Agent;
      and

     

    (iv)  duly
      executed Transfer Agent Instructions acknowledged by the Transfer
      Agent.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (b)  At
      the
      Closing, each Investor shall deliver or cause to be delivered to the
      Company the purchase price set forth opposite such Investor’s name on
Exhibit
      A
      under
      the heading “Purchase Price” in United States dollars and in immediately
      available funds, by wire transfer to an account designated in writing to such
      Investor by the Company for such purpose.

     

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1  Representations
      and Warranties of the Company. 
      The
      Company hereby represents and warrants to the Investors as follows:

     

    (a)  Subsidiaries.
      The
      Company has no Subsidiaries other than those listed in Schedule 3.1(a).
      Except
      as disclosed in Schedule 3.1(a),
      the
      Company owns, directly or indirectly, all of the capital stock or comparable
      equity interests of each Subsidiary free and clear of any Lien and all the
      issued and outstanding shares of capital stock or comparable equity interests
      of
      each Subsidiary are validly issued and are fully paid, nonassessable and free
      of
      preemptive and similar rights.

     

    (b)  Organization
      and Qualification.
      Each of
      the Company and the Subsidiaries is an entity duly organized, validly existing
      and in good standing under the laws of the jurisdiction of its incorporation
      or
      organization (as applicable), with the requisite legal authority to own and
      use
      its properties and assets and to carry on its business as currently conducted.
      Neither the Company nor any Subsidiary is in violation of any of the provisions
      of its respective certificate or articles of incorporation, bylaws or other
      organizational or charter documents. Each of the Company and the Subsidiaries
      is
      duly qualified to do business and is in good standing as a foreign corporation
      or other entity in each jurisdiction in which the nature of the business
      conducted or property owned by it makes such qualification necessary, except
      where the failure to be so qualified or in good standing, as the case may be,
      could not, individually or in the aggregate, (i) have or result in a
      material adverse effect on the results of operations, assets, business or
      financial condition of the Company and the Subsidiaries, taken as a whole on
      a
      consolidated basis, or (ii) materially and adversely impair the Company’s
      ability to perform its obligations under any of the Transaction Documents
      (either of clause (i) or (ii), a “Material
      Adverse Effect”).

     

    (c)  Authorization;
      Enforcement.
      The
      Company has the requisite corporate authority to enter into and to consummate
      the transactions contemplated by each of the Transaction Documents to which
      it
      is a party and otherwise to carry out its obligations hereunder and thereunder.
      The execution and delivery of each of the Transaction Documents to which it
      is a
      party by the Company and the consummation by it of the transactions contemplated
      hereby and thereby have been duly authorized by all necessary action on the
      part
      of the Company and no further consent or action is required by the Company,
      its
      Board of Directors or its stockholders. Each of the Transaction Documents to
      which it is a party has been, or upon delivery will be, duly executed by the
      Company and is, or when delivered in accordance with the terms hereof will
      constitute, the valid and binding obligation of the Company enforceable against
      the Company in accordance with its terms, except as may be limited by
      (i) applicable bankruptcy, insolvency, reorganization or other laws of
      general application relating to or affecting the enforcement of creditors rights
      generally and (ii) the effect of rules of law governing the availability of
      specific performance and other equitable remedies.

     

    
      
        
        

      

      
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    (d)  No
      Conflicts.
      The
      execution, delivery and performance by the Company of the Transaction Documents
      to which it is a party and the consummation by the Company of the transactions
      contemplated hereby and thereby do not, and will not, (i) conflict with or
      violate any provision of the Company’s or any Subsidiary’s certificate or
      articles of incorporation, bylaws or other organizational or charter documents,
      (ii) conflict with, or constitute a default (or an event that 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 (with or without
      notice, lapse of time or both) of, any agreement, credit facility, debt or
      other
      instrument (evidencing a Company or Subsidiary debt or otherwise) or other
      understanding to which the Company or any Subsidiary is a party or by which
      any
      property or asset of the Company or any Subsidiary is bound, or affected, except
      to the extent that such conflict, default, termination, amendment, acceleration
      or cancellation right would not reasonably be expected to have a Material
      Adverse Effect, or (iii) result in a violation of any law, rule, regulation,
      order, judgment, injunction, decree or other restriction of any court or
      governmental authority to which the Company or a Subsidiary is subject
      (including federal and state securities laws and regulations and the rules
      and
      regulations of any self-regulatory organization to which the Company or its
      securities are subject, including all applicable Trading Markets), or by which
      any property or asset of the Company or a Subsidiary is bound or affected,
      except
      to
      the extent that such violation would not reasonably be expected to have a
      Material Adverse Effect.

     

    (e)  The
      Shares.
      The
      Common Shares are duly authorized and, when issued and paid for in accordance
      with the Transaction Documents, will be duly and validly issued, fully paid
      and
      nonassessable. Upon exercise of the Warrants in accordance with the terms
      thereof and the payment therefor, the Warrant Shares will be validly issued,
      fully paid and nonassessable. The issuance and delivery of the Common Shares
      and
      the Warrants are free and clear of all Liens and will not be subject to
      preemptive or similar rights of stockholders. The Company has reserved from
      its
      duly authorized capital stock the maximum number of shares of Common Stock
      issuable upon exercise of the Warrants.

     

    (f)  Capitalization.
      The
      aggregate number of shares and type of all authorized, issued and outstanding
      classes of capital stock, options and other securities of the Company (whether
      or not presently convertible into or exercisable or exchangeable for shares
      of
      capital stock of the Company) as of the date of this Agreement is set forth
      in
Schedule 3.1(f).
      All
      outstanding shares of capital stock are duly authorized, validly issued, fully
      paid and nonassessable and have been issued in compliance with all applicable
      securities laws. Except as disclosed in Schedule 3.1(f),
      the
      Company has not issued any other options, warrants, script rights to subscribe
      to, calls or commitments of any character whatsoever relating to, or securities,
      rights or obligations convertible into or exercisable or exchangeable for,
      or
      entered into any agreement giving any Person any right to subscribe for or
      acquire, any shares of Common Stock, or securities or rights convertible or
      exchangeable into shares of Common Stock. Except as set forth on Schedule
      3.1(f),
      and
      except for customary adjustments as a result of stock dividends, stock splits,
      combinations of shares, reorganizations, recapitalizations, reclassifications
      or
      other similar events, there are no anti-dilution or price adjustment provisions
      contained in any security issued by the Company (or in any agreement providing
      rights to security holders) and the issuance and sale of the Common Shares
      and
      the Warrants will not obligate the Company to issue shares of Common Stock
      or
      other securities to any Person (other than pursuant to the terms of the
      Transaction Documents) and will not result in a right of any holder of
      securities to adjust the exercise, conversion, exchange or reset price under
      such securities. To the knowledge of the Company, except as specifically
      disclosed in the SEC Reports or in Schedule
      3.1(f),
      no
      Person or group of related persons beneficially owns (as determined pursuant
      to
      Rule 13d-3 under the Exchange Act), or has the right to acquire, by agreement
      with or by obligation binding upon the Company, beneficial ownership of in
      excess of 5% of the outstanding Common Stock, ignoring for such purposes any
      limitation on the number of shares of Common Stock that may be owned at any
      single time.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (g)  Confidential
      Offering Memorandum.
      All
      statements made by the Company in the Confidential Offering Memorandum
      distributed to Holders in connection with the sale of the Securities are
      accurate and complete. The Confidential Offering Memorandum does not omit to
      state a material fact required to be stated or that is necessary to make a
      statement not misleading.

     

    


    (h)  SEC
      Reports; Financial Statements.
      The
      Company has filed all reports required to be filed by it under the Exchange
      Act,
      including pursuant to Section 13(a) or 15(d) thereof (the foregoing
      materials being collectively referred to herein as the “SEC
      Reports”
and,
      together with this Agreement and the Schedules to this Agreement, the
“Disclosure
      Materials”),
      on a
      timely basis or has received a valid extension of such time of filing for any
      of
      the SEC Reports and has filed any such SEC Reports prior to the expiration
      of
      any such extension. As of their respective dates, the SEC Reports complied
      in
      all material respects with the requirements of the Securities Act and the
      Exchange Act and the rules and regulations promulgated by the SEC thereunder,
      and none of the SEC Reports, when filed, contained any untrue statement of
      a
      material fact or omitted to state a material fact required to be stated therein
      or necessary in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading. The financial
      statements of the Company included in the SEC Reports comply in all material
      respects with applicable accounting requirements and the rules and regulations
      of the SEC with respect thereto as in effect at the time of filing. Such
      financial statements have been prepared in accordance with United States
      generally accepted accounting principles applied on a consistent basis during
      the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto, and fairly present in all material respects the consolidated financial
      position of the Company and its consolidated subsidiaries as of and for the
      dates thereof and the results of operations and cash flows for the periods
      then
      ended, subject, in the case of unaudited statements, to normal, year-end audit
      adjustments. All material agreements to which the Company or any Subsidiary
      is a
      party or to which the property or assets of the Company or any Subsidiary are
      subject are included as part of or specifically identified in the SEC Reports,
      to the extent such agreements are required to be included or identified pursuant
      to the rules and regulations of the SEC.

     

    (i)  Material
      Adverse Change.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in the SEC Reports, (i) there has
      been no event, occurrence or development in the business, financial condition
      or
      results of operations of the Company and its subsidiaries taken as a whole
      that,
      individually or in the aggregate, has had or that could result in a Material
      Adverse Effect, (ii) neither the Company nor any Subsidiary has incurred
      any material liabilities other than (A) trade payables and accrued expenses
      incurred in the ordinary course of business consistent with past practice and
      (B) liabilities not required to be reflected in the Company’s financial
      statements pursuant to GAAP or required to be disclosed in filings made with
      the
      SEC, (iii) the Company has not altered its method of accounting or changed
      its auditors, (iv) the Company has not declared or made any dividend or
      distribution of cash or other property to its stockholders, in their capacities
      as such, or purchased, redeemed or made any agreements to purchase or redeem
      any
      shares of its capital stock (except for repurchases by the Company of shares
      of
      capital stock held by employees, officers, directors or consultants pursuant
      to
      an option of the Company to repurchase such shares upon the termination of
      employment or services) and (v) the Company has not issued any equity
      securities to any officer, director or Affiliate. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (j)  Absence
      of Litigation.
      Except
      as disclosed in the SEC Reports or in Schedule 3.1(i), there is no action,
      suit,
      claim or proceeding, or, to the Company’s knowledge, inquiry or investigation,
      before or by any court, public board, government agency, self-regulatory
      organization or body pending or, to the knowledge of the Company, threatened
      against or affecting the Company or any of the Subsidiaries that could,
      individually or in the aggregate, challenge the Company’s rights in connection
      with its 18% royalty asset in Yasin Block (2768-7) in the Republic of Pakistan
      or its working interests and overriding royalty interests in oil and gas leases
      in Galveston County, Texas or have a Material Adverse Effect.

     

    (k)  Enforceability.
      The
      Company’s rights in its 18% royalty asset in Yasin Block (2768-7) in the
      Republic of Pakistan and its working interests and overriding royalty interests
      in oil and gas leases in Galveston County, Texas are legal, valid, binding
      and
      enforceable under applicable federal, state and foreign laws and no claims
      exist
      against such rights by any third party or governmental entity.

     

     

    (l)  Compliance.
      Neither
      the Company nor any Subsidiary, except in each case as would not, individually
      or in the aggregate, reasonably be expected to have or result in a Material
      Adverse Effect, (i) is in default under or in violation of (and no event
      has occurred that has not been waived that, with notice or lapse of time or
      both, would result in a default by the Company or any Subsidiary under), nor
      has
      the Company or any Subsidiary received written notice of a claim that it is
      in
      default under or that it is in violation of, any indenture, loan or credit
      agreement or any other agreement or instrument to which it is a party or by
      which it or any of its properties is bound (whether or not such default or
      violation has been waived), (ii) is in violation of any order of any court,
      arbitrator or governmental body or (iii) is or has been in violation of any
      statute, rule or regulation of any governmental authority, except to the extent
      that any such default or violation would not reasonably be expected to have
      a
      Material Adverse Effect. 

     

    (m)  Title
      to Assets.
      Except
      as specifically disclosed in the SEC Reports, the Company and the Subsidiaries
      have good and marketable title in fee simple to, or have valid rights to lease
      or otherwise use, all items of real or personal property that are material
      to
      the business of the Company and the Subsidiaries taken as a whole, in each
      case
      free and clear of all liens, encumbrances, claims and defects that would have
      a
      Material Adverse Effect.

     

    (n)  No
      General Solicitation; Placement Agent’s Fees.
      Neither
      the Company, nor any of its affiliates, nor any Person acting on its or their
      behalf (other than the Agent), has engaged in any form of general solicitation
      or general advertising (within the meaning of Regulation D) in connection
      with the offer or sale of the Common Shares or the Warrants. The Company shall
      be responsible for the payment of any placement agent’s fees, financial advisory
      fees, or brokers’ commission (other than for persons engaged by any Investor or
      its investment advisor) relating to or arising out of the issuance of the Common
      Shares and the Warrants pursuant to this Agreement. The Company shall pay,
      and
      hold each Investor harmless against, any liability, loss or expense (including,
      without limitation, reasonable attorney’s fees and out-of-pocket expenses)
      arising in connection with any such claim for fees arising out of the issuance
      of the Common Shares and the Warrants pursuant to this Agreement. The Company
      acknowledges that it has engaged Dahlman, Rose & Co., LLC Inc. as its
      exclusive placement agent (the “Agent”)
      in
      connection with the sale of the Common Shares and the Warrants. In
      consideration of the Agent’s services rendered to the Company as its exclusive
      placement agent in connection with the sale of the Common Shares and Warrants,
      the Company will pay the Agent a fee equal to 6% of the gross proceeds received
      by the Company from Investors at the time of Closing, and will reimburse the
      Agent for its reasonable out-of-pocket expenses incurred from time to time
      in
      connection therewith. The Company shall also issue to the Placement Agent 0.12
      Warrants for each Dollar ($1.00) of proceeds to the Company, net of
      commissions.

     

    
      
        
        

      

      
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    (o)   Private
      Placement.
      Neither
      the Company nor any of its Affiliates nor any Person acting on the Company’s
      behalf has, directly or indirectly, at any time within the past six months,
      made
      any offer or sale of any security or solicitation of any offer to buy any
      security under circumstances that would eliminate the availability of the
      exemption from registration under Regulation D in connection with the offer
      and sale by the Company of the Securities as contemplated hereby. The Company
      is
      not required to be registered as, and is not an Affiliate of, an “investment
      company” within the meaning of the Investment Company Act of 1940, as amended.
      The Company is not required to be registered as, a United States real property
      holding corporation within the meaning of the Foreign Investment in Real
      Property Tax Act of 1980.

     

    (p)  Listing
      and Maintenance Requirements.
      The
      Company has not, in the 12 months preceding the date hereof, received notice
      (written or oral) from any Trading Market on which the Common Stock is or has
      been listed or quoted to the effect that the Company is not in compliance with
      the listing or maintenance requirements of such Trading Market. The Company
      is
      in compliance in all material respects with all such listing and maintenance
      requirements.

     

    (q)  Registration
      Rights.
      Except
      as set forth in Schedule 3.1(o), no Person has any rights (including
“piggy-back” registration rights) to have any securities of the Company
      registered with the SEC under the Securities Act because of the filing or
      effectiveness of the Registration Statement or otherwise in connection with
      the
      issuance of the Securities other than pursuant to this Agreement. 

     

    (r)  Application
      of Takeover Protections.
      Except
      as described in Schedule
      3.1(p),
      there is
      no control share acquisition, business combination, poison pill (including
      any
      distribution under a rights agreement) or other similar anti-takeover provision
      under the Company’s charter documents or the laws of its state of incorporation
      that is or could become applicable to any of the Investors as a result of the
      Investors and the Company fulfilling their obligations or exercising their
      rights under the Transaction Documents, including, without limitation, as a
      result of the Company’s issuance of the Securities and the Investors’ ownership
      of the Securities.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (s)  Disclosure.
       The
      Company confirms that neither it nor any of its officers, directors or
      Affiliates, has provided any of the Investors (other than Excluded Investors)
      or
      their agents or counsel with any information that constitutes or might
      constitute material, nonpublic information (other than the existence and terms
      of the issuance of Securities, as contemplated by this Agreement).  The
      Company confirms that neither it nor any officers, directors or Affiliates,
      has
      provided any of the Investors (other than Excluded Investors or other Investors
      who have executed a Non-Disclosure Agreement with the Agent) or their agents
      or
      counsel with any information that constitutes or might constitute material,
      nonpublic information (other than the existence and terms of the issuance of
      Securities, as contemplated by this Agreement). The Company understands and
      confirms that each of the Investors will rely on the foregoing representations
      in effecting transactions in securities of the Company (other than Excluded
      Investors). All disclosure provided by the Company to the Investors regarding
      the Company, its business and the transactions contemplated hereby, including
      the Schedules to this Agreement, furnished by or on the behalf of the Company
      are true and correct in all material respects and do not contain any untrue
      statement of a material fact or omit to state any material fact necessary in
      order to make the statements made therein, in the light of the circumstances
      under which they were made, not misleading. To the Company’s knowledge, no event
      or circumstance has occurred or information exists with respect to the Company
      or any of the Subsidiaries or its or their business, properties, operations
      or
      financial conditions, which, under applicable law, rule or regulation, requires
      public disclosure or announcement by the Company but which has not been so
      publicly announced or disclosed. The Company acknowledges and agrees that no
      Investor (other than Excluded Investors) makes or has made any representations
      or warranties with respect to the transactions contemplated hereby other than
      those specifically set forth in the Transaction Documents. 

     

    (t)  Acknowledgment
      Regarding Investors’ Purchase of Securities.
      Based
      upon the assumption that the transactions contemplated by this Agreement are
      consummated in all material respects in conformity with the Transaction
      Documents, the Company acknowledges and agrees that each of the Investors (other
      than Excluded Investors) is acting solely in the capacity of an arm’s length
      purchaser with respect to the Transaction Documents and the transactions
      contemplated hereby and thereby. The Company further acknowledges that no
      Investor (other than Excluded Investors) is 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
      any
      Investor (other than Excluded Investors) or any of their respective
      representatives or agents in connection with the Transaction Documents and
      the
      transactions contemplated hereby and thereby is merely incidental to the
      Investors’ purchase of the Securities. The Company further represents to each
      Investor that the Company’s decision to enter into this Agreement has been based
      solely on the independent evaluation of the transactions contemplated hereby
      by
      the Company and its representatives and upon the representations, warranties
      and
      covenants of the Investors made in this Agreement.

     

    (u)  Patents
      and Trademarks.
      To its
      knowledge, the Company and the 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 other
      intellectual property rights (the “Intellectual
      Property Rights”)
      necessary to conduct their respective businesses
      as now
      conducted. The Company does not have any knowledge of any infringement by the
      Company or the Subsidiaries of the Intellectual Property Rights of others,
      except for such as would as would not reasonably be expected to have a Material
      Adverse Effect. There is no claim, action or proceeding being made or brought,
      or to the knowledge of the Company being threatened, against the Company or
      the
      Subsidiaries regarding the Intellectual Property Rights, which could reasonably
      be expected to have a Material Adverse Effect. 

     

    
      
        
        

      

      
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    (v)  Insurance.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses and location in which the Company and the
      Subsidiaries are engaged. 

     

    (w)  Regulatory
      Permits.
      The
      Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses as described in
      the
      SEC Reports, except where the failure to possess such certificates,
      authorizations and permits does not, individually or in the aggregate, have
      or
      result in a Material Adverse Effect, and neither the Company nor any Subsidiary
      has received any written notice of proceedings relating to the revocation or
      modification of any certificates, authorizations and permits, except where
      such
      revocation or modification would not, singularly or in the aggregate, have
      a
      Material Adverse Effect.

     

    (x)  Transactions
      With Affiliates and Employees.
      Except
      as set forth in the SEC Reports, none of the officers, directors or employees
      of
      the Company is presently a party to any transaction that would be required
      to be
      disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC under
      the Securities Act. 

     

    (y)  Internal
      Accounting Controls.
      The
      Company and the 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, (iii) access to assets is permitted
      only in accordance with management’s general or specific authorization, and
      (iv) the recorded accountability for assets is compared with the existing
      assets at reasonable intervals and appropriate action is taken with respect
      to
      any differences.

     

    (z)  Sarbanes-Oxley
      Act.
      The
      Company is in compliance with applicable requirements of the Sarbanes-Oxley
      Act
      of 2002 and applicable rules and regulations promulgated by the SEC thereunder,
      except where such noncompliance would not have, individually or in the
      aggregate, a Material Adverse Effect.

     

    (aa)  Foreign
      Corrupt Practices.
      Neither
      the Company nor any of the Subsidiaries nor, to the knowledge of the Company,
      any director, officer, agent, employee or other Person acting on behalf of
      the
      Company or any of the Subsidiaries has, in the course of its actions for, or
      on
      behalf of, the Company (i) used any corporate funds for any unlawful
      contribution, gift, entertainment or other unlawful expenses relating to
      political activity; (ii) made any direct or indirect unlawful payment to any
      foreign or domestic government official or employee from corporate funds; (iii)
      violated or is in violation of any provision of the U.S. Foreign Corrupt
      Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
      payoff, influence payment, kickback or other unlawful payment to any foreign
      or
      domestic government official or employee.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (bb)  Employee
      Relations.
      No
      labor
      disturbance by the employees of the Company or any of the Subsidiaries exists
      or, to the best of the Company’s knowledge, is imminent that might be expected
      to have a Material Adverse Effect. The Company is not aware that any key
      employee or significant group of employees of the Company or any subsidiary
      plans to terminate employment with the Company or any such
      subsidiary.

     

    (cc)  Environmental
      Laws.
      The
      Company and the Subsidiaries (i) are in compliance with any and all
      Environmental Laws (as hereinafter defined), (ii) have received all permits,
      licenses or other approvals required of them under applicable Environmental
      Laws
      to conduct their respective businesses and (iii) are in compliance with all
      terms and conditions of any such permit, license or approval where, in each
      of
      the foregoing clauses (i), (ii) and (iii), the failure to so comply would be
      reasonably expected to have, individually or in the aggregate, a Material
      Adverse Effect. The term “Environmental
      Laws”
means
      all federal, state, local or foreign laws relating to pollution or protection
      of
      human health or the environment (including, without limitation, ambient air,
      surface water, groundwater, land surface or subsurface strata), including,
      without limitation, laws relating to emissions, discharges, releases or
      threatened releases of chemicals, pollutants, contaminants, or toxic or
      hazardous substances or wastes (collectively, “Hazardous
      Materials”)
      into
      the environment, or otherwise relating to the manufacture, processing,
      distribution, use, treatment, storage, disposal, transport or handling of
      Hazardous Materials, as well as all authorizations, codes, decrees, demands
      or
      demand letters, injunctions, judgments, licenses, notices or notice letters,
      orders, permits, plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    (dd)  Tax
      Status. The
      Company and the Subsidiaries each (i) has filed all necessary federal, state
      and
      foreign income and franchise tax returns which are due, (ii) has paid all
      federal state, local and foreign taxes due and payable for which it is liable
      and (iii) does not have any tax deficiency or claims outstanding or assessed
      or,
      to the best of the Company’s knowledge, proposed against it that would have a
      Material Adverse Effect.

     

    3.2  Representations
      and Warranties of the Investors. 
      Each
      Investor hereby, as to itself only and for no other Investor, represents and
      warrants to the Company as follows:

     

    (a)  Organization;
      Authority.
      Such
      Investor is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with the requisite
      corporate or partnership power and authority to enter into and to consummate
      the
      transactions contemplated by the Transaction Documents and otherwise to carry
      out its obligations hereunder and thereunder. The purchase by such Investor
      of
      the Securities hereunder has been duly authorized by all necessary action on
      the
      part of such Investor. This Agreement has been duly executed and delivered
      by
      such Investor and constitutes the valid and binding obligation of such Investor,
      enforceable against it in accordance with its terms, except as may be limited
      by
      (i) applicable bankruptcy, insolvency, reorganization or other laws of
      general application relating to or affecting the enforcement of creditors rights
      generally and (ii) the effect of rules of law governing the availability of
      specific performance and other equitable remedies.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (b)  No
      Public Sale or Distribution; Investment Intent.
      Such
      Investor recognizes that the Securities have not been registered under the
      Securities Act or any state securities laws. Such Investor is acquiring the
      Securities in the ordinary course of business for its own account as principal
      and not with a view towards, or for resale in connection with, the public sale
      or distribution thereof, except pursuant to sales registered under the
      Securities Act or under an exemption from such registration and in compliance
      with applicable federal and state securities laws, and such Investor does not
      have a present arrangement to effect any distribution of the Securities to
      or
      through any person or entity; provided,
      however,
      that by
      making the representations herein, such Investor does not agree to hold any
      of
      the Securities for any minimum or other specific term and reserves the right
      to
      dispose of the Securities at any time in accordance with or pursuant to a
      registration statement or an exemption under the Securities Act. Such Investor
      will not, directly or indirectly, offer, sell, pledge, transfer or otherwise
      dispose of (or solicit any offers to buy, purchase or otherwise acquire or
      take
      a pledge of) any of the Securities except in compliance with the Securities
      Act
      and the rules and regulations promulgated thereunder.

     

    (c)  Investor
      Status.
      At the
      time such Investor was offered the Securities, it was, and at the date hereof
      it
      is, an “accredited investor” as defined in Rule 501(a) under the Securities
      Act.

     

    (d)  Experience
      of Such Investor.
      Such
      Investor, either alone or together with its representatives, has such knowledge,
      sophistication and experience in business and financial matters so as to be
      capable of evaluating the merits and risks of the prospective investment in
      the
      Securities, and has so evaluated the merits and risks of such investment. Such
      Investor understands that it must bear the economic risk of this investment
      in
      the Securities indefinitely, and is able to bear such risk and is able to afford
      a complete loss of such investment.

     

    (e)  Access
      to Information.
      Such
      Investor acknowledges that it has reviewed the Disclosure Materials and has
      been
      afforded: (i) the opportunity to ask such questions as it has deemed
      necessary of, and to receive answers from, representatives of the Company
      concerning the terms and conditions of the offering of the Securities and the
      merits and risks of investing in the Securities; (ii) access to information
      (other than material non-public information) about the Company and the
      Subsidiaries and their respective financial condition, results of operations,
      business, properties, management and prospects sufficient to enable it to
      evaluate its investment; and (iii) the opportunity to obtain such
      additional information that the Company possesses or can acquire without
      unreasonable effort or expense that is necessary to make an informed investment
      decision with respect to the investment. Neither such inquiries nor any other
      investigation conducted by or on behalf of such Investor or its representatives
      or counsel shall modify, amend or affect such Investor’s right to rely on the
      truth, accuracy and completeness of the Disclosure Materials and the Company’s
      representations and warranties contained in the Transaction
      Documents.

     

    (f)   Company’s
      Option to Redeem Warrant.
      Such
      Investor understands that, if the Company’s stock price has a closing bid price
      above $2.50 per share, subject to adjustment as set forth in the Warrant, for
      twenty (20) consecutive Trading Days, the Company may, after providing the
      Investor thirty (30) day’s written notice, redeem the outstanding Warrants, in
      whole and not in part. Upon receipt of such a redemption notice, Investor must
      exercise the Warrant and pay the Exercise Price for the Warrant within the
      30-day notice period in order to avoid the cancellation of the Warrants by
      the
      Company. A copy of the Warrant Certificate is attached hereto as Exhibit
      E.
      

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (g)  No
      Governmental Review.
      Such
      Investor understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities or the fairness or suitability of the investment
      in the Securities nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.

     

    (h)  No
      Conflicts.
      The
      execution, delivery and performance by such Investor of this Agreement and
      the
      consummation by such Investor of the transactions contemplated hereby will
      not
      (i) result in a violation of the organizational documents of such Investor,
      (ii) conflict with, or constitute a default (or an event which with notice
      or lapse of time or both would become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation of, any
      agreement, indenture or instrument to which such Investor is a party or
      (iii) result in a violation of any law, rule, regulation, order, judgment
      or decree (including federal and state securities laws) applicable to such
      Investor, except in the case of clauses (ii) and (iii) above, for such that
      are
      not material and do not otherwise affect the ability of such Investor to
      consummate the transactions contemplated hereby.

     

    (i)  Illegal
      Transactions.
      Neither
      such Investor, directly or indirectly, nor any Person acting on behalf of or
      pursuant to any understanding with such Investor, has engaged in any
      transactions in the securities of the Company (including, without limitation,
      any Short Sales (as defined below) involving any of the Company’s securities)
      since the time that such Investor was first contacted by the Company, the Agent
      or any other Person regarding an investment in the Company. Such Investor
      covenants that neither it nor any Person acting on behalf or pursuant to any
      understanding with such Investor will engage, directly or indirectly, in any
      transactions in the Company’s securities, including Short Sales, prior to the
      time that the transactions contemplated by this Agreement are publicly
      disclosed. Such
      Investor further covenants that from and after the date of such disclosure,
      and
      for so long as such Investor owns any Securities purchased hereunder, neither
      it
      nor any Person acting on behalf of or pursuant to any understanding with such
      Investor will engage
      in
      any Short Sales at a time when it has no equivalent offsetting long position
      in
      shares of Common Stock and otherwise covenants to conduct all its trading in
      the
      Company’s securities in compliance with applicable securities laws. For purposes
      of determining whether or not such Investor has such an equivalent offsetting
      long position, shares of Common Stock that such Investor would otherwise be
      entitled to receive upon conversion or exercise of the Company’s convertible
      securities (including the Warrant held by such Investor) will be included as
      if
      held long by such Investor (regardless of any limitation upon such conversion
      or
      exercise). For purposes hereof, “Short
      Sales”
      include, without limitation, all “short sales” as defined in Rule 200
      promulgated by the SEC under Regulation SHO under the Exchange Act and all
      types
      of direct and indirect stock pledges, forward sale contracts, options, puts,
      calls, short sales, swaps,
      derivatives
      and
      similar arrangements (including on a total return basis) and sales and other
      transactions through non-U.S. broker-dealers or foreign regulated
      brokers. 

     

    (j)  No
      Legal, Tax or Investment Advice.
      Such
      Investor under-stands that nothing in this Agreement or any other materials
      presented by or on behalf of the Company to the Investor in connection with
      the
      purchase of the Securities constitutes legal, tax or investment advice. Such
      Investor has consulted such legal, tax and investment advisors as it, in its
      sole discretion, has deemed necessary or appropriate in con-nection with its
      purchase of the Securities. Such Investor understands that the Agent has acted
      solely as the agent of the Company in this placement of the Common Shares and
      the Warrants and that the Agent makes no representation or warranty with regard
      to the merits of this transaction or as to the accuracy of any information
      such
      Investor may have received in connection therewith. Such Investor acknowledges
      that it has not relied on any information or advice furnished by or on behalf
      of
      the Agent.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (k)  Confidentiality. 
      Such Investor
      will hold in confidence all information concerning this Agreement and the
      placement of the Common Shares and the Warrants hereunder until the earlier
      of
      such time as (a) the Company has made a public announcement concerning the
      Agreement and the placement of the Common Shares and the Warrants hereunder
      and
      (b) this Agreement is terminated.

     

    ARTICLE
      IV

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1  Transfer
      Restrictions.

     

    (a)  Each
      Investor covenants that the Securities will only be disposed of pursuant to
      an
      effective registration statement under, and in compliance with the requirements
      of, the Securities Act or pursuant to an available exemption from the
      registration requirements of the Securities Act, and in compliance with any
      applicable state securities laws, including, in the case of any transfer of
      Securities by such Investor pursuant to the Registration Statement, that such
      Investor will deliver a current prospectus (unless such a prospectus is deemed
      to have been delivered pursuant to Rule 172 under the Securities Act) and,
      in
      the case of any such transfer pursuant to Rule 144, that such Investor will
      comply with the requirements of Rule 144. In connection with any transfer
      of Securities (other than any such transfer (i) pursuant to an effective
      registration statement, (ii) pursuant to Rule 144(k) or (iii) to the Company),
      the Company shall require the transferor to provide to the Company an opinion
      of
      counsel selected by the transferor, the form and substance of which opinion
      shall be reasonably satisfactory to the Company, to the effect that such
      transfer does not require registration under the Securities Act or is exempt
      from such registration. Notwithstanding the foregoing, the Company hereby
      consents to and agrees to register on the books of the Company and with the
      Transfer Agent, without any such legal opinion, except to the extent that the
      Transfer Agent requests such legal opinion, any transfer of Securities by an
      Investor to an Affiliate of such Investor, provided that the transferee
      certifies to the Company that it is an “accredited investor” as defined in Rule
      501(a) under the Securities Act and provided that such Affiliate does not
      request any removal of any existing legends on any certificate evidencing the
      Securities.

     

    (b)  The
      Investors agree to the imprinting, so long as is required by this Section
      4.1(b),
      of the
      following legend on any certificate evidencing Securities: 

     

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      OR
      ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR
      SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
      ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
      TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
      APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. 

     

    
      
        
        

      

      
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    Certificates
      evidencing Securities shall not be required to contain such legend or any other
      legend (i) after the Securities have been sold pursuant to a Registration
      Statement that is effective under the Securities Act covering the resale of
      such
      Securities, (ii) following any sale of such Securities pursuant to Rule
      144
      if
      the
      holder provides the Company with a legal opinion providing reasonable assurances
      that the Securities can be sold under Rule 144, (iii) if the holder provides
      the
      Company with a certificate providing reasonable assurances that the
      Securities are eligible for sale under Rule 144(k) or (iv) if the
      holder provides the Company with a legal opinion providing reasonable assurances
      that such
      legend
      is not required under applicable requirements of the Securities Act (including
      controlling judicial interpretations and pronouncements issued by the Staff
      of
      the SEC). The Company shall cause its counsel to issue the confirmation included
      in the Transfer Agent Instructions to the Transfer Agent on the Effective Date.
      Following the Effective Date or at such earlier time as a legend is no longer
      required for certain Securities, the Company will, no later than three
      Trading
      Days following the delivery by an Investor to the Company or the Transfer Agent
      of a certificate bearing restrictive legend representing such Securities and
      an
      opinion of counsel to the extent required by Section
      4.1(a),
      deliver
      or cause to be delivered to such Investor a certificate representing such
      Securities that is free from all restrictive and other legends. The Company
      may
      not make any notation on its records or give instructions to the Transfer Agent
      that enlarge the restrictions on transfer set forth in this Section
      4.1(b).

     

    4.2  Furnishing
      of Information.
      As
      long
      as any Investor owns Securities, the Company covenants to use its commercially
      reasonable efforts to timely file (or obtain extensions in respect thereof
      and
      file within the applicable grace period) all reports required to be filed by
      the
      Company after the date hereof pursuant to the Exchange Act. The Company further
      covenants that it will take such further action as any holder of Securities
      may
      reasonably request to satisfy the provisions of this Section
      4.2.
      As long
      as any Investor owns Securities, such Investor covenants and agrees (a) to
      provide the Company with such information regarding such Investor’s ownership of
      its Securities and the plan of distribution thereof as shall be reasonably
      required for the timely preparation and filing of the Registration statement
      and
      (b) that, notwithstanding anything herein to the contrary, the Company shall
      not
      be required to register any of such Investor’s Securities under the Registration
      Statement if such information, to the extent not provided at the Closing, is
      not
      provided to the Company within 15 days of the Closing Date. 

     

    4.3  Integration.
      The
      Company shall not, and shall use its commercially reasonably efforts to ensure
      that no Affiliate thereof shall, sell, offer for sale or solicit offers to
      buy
      or otherwise negotiate in respect of any security (as defined in Section 2
      of the Securities Act) that would be integrated with the offer or sale of the
      Securities in a manner that would require the registration under the Securities
      Act of the sale of the Securities to the Investors or that would be integrated
      with the offer or sale of the Securities for purposes of the rules and
      regulations of any Trading Market.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    4.4  Reservation
      of Securities.
      The
      Company shall maintain a reserve from its duly authorized shares of Common
      Stock
      for issuance pursuant to the Transaction Documents in such amount as may be
      required to fulfill its obligations to issue such Shares under the Transaction
      Documents. In the event that at any time the then authorized shares of Common
      Stock are insufficient for the Company to satisfy its obligations to issue
      such
      Shares under the Transaction Documents, the Company shall promptly take such
      actions as may be required to increase the number of authorized
      shares.

     

    4.5  Securities
      Laws Disclosure; Publicity.
      The
      Company shall, on or before 8:30 a.m., New York time, on the first Trading
      Day
      following execution of this Agreement, issue a press release acceptable to
      the
      Investors disclosing all material terms of the transactions contemplated hereby.
      On the Closing Date, the Company shall file a Current Report on Form 8-K with
      the SEC (the “8-K
      Filing”)
      describing the terms of the transactions contemplated by the Transaction
      Documents and including as exhibits to such Current Report on Form 8-K this
      Agreement, in the form required by the Exchange Act. Thereafter, the Company
      shall timely file any filings and notices required by the SEC or applicable
      law
      with respect to the transactions contemplated hereby and provide copies thereof
      to the Investors promptly after filing. The Company shall not publicly disclose
      the name of any Investor or include the name of any Investor in any press
      release without the prior written consent of such Investor, unless otherwise
      required by law. The Company shall not, and shall cause each of the Subsidiaries
      and its and each of their respective officers, directors, employees and agents
      not to, provide any Investor with any material nonpublic information regarding
      the Company or any of the Subsidiaries from and after the issuance of the above
      referenced press release without the express written consent of such
      Investor.

     

               4.6    
       Use
      of
      Proceeds. The
      Company intends to use the net proceeds from the sale of the Common Shares
      and
      the Warrants and the exercise of the Warrants for the acquisition of additional
      oil and gas interests (overriding royalties and working interests, as available)
      in Pakistan and to fund its working capital needs. The acquisitions may be
      directly from the Pakistan government through existing bidding processes or
      through private negotiation with current license holders. The proceeds will
      also
      be used for general corporate purposes. 

     

    ARTICLE
      V

    CONDITIONS

     

    5.1  Conditions
      Precedent to the Obligations of the Investors.
      The
      obligation of each Investor to acquire Securities at the Closing is subject
      to
      the satisfaction or waiver by such Investor, at or before the Closing, of each
      of the following conditions:

     

    (a)  Representations
      and Warranties.
      The
      representations and warranties of the Company contained herein shall be true
      and
      correct in all material respects as of the date when made and as of the Closing
      Date as though made on and as of the Closing Date and so certified;
      and

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (b)  Performance.
      The
      Company and each other Investor shall have performed, satisfied and complied
      in
      all material respects with all covenants, agreements and conditions required
      by
      the Transaction Documents to be performed, satisfied or complied with by it
      at
      or prior to the Closing Date and so certified.

     

    (c)  Deliveries.
      The
      Company shall have fulfilled its obligations under Section 2.2 of this Agreement
      and delivered to the Investors a certificate in form and substance satisfactory
      to Investors executed by an authorized executive officer of the Company
      confirming that the conditions in Section 5.1(a),(b) and (c) have been
      satisfied.

     

    


    5.2  Conditions
      Precedent to the Obligations of the Company.
      The
      obligation of the Company to sell the Securities at the Closing is subject
      to
      the satisfaction or waiver by the Company, at or before the Closing, of each
      of
      the following conditions:

     

    (a)  Representations
      and Warranties.
      The
      representations and warranties of the Investors contained herein shall be true
      and correct in all material respects as of the date when made and as of the
      Closing Date as though made on and as of the Closing Date; and

     

    (b)  Performance.
      The
      Investors shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by the Transaction
      Documents to be performed, satisfied or complied with by the Investors at or
      prior to the Closing Date, including, without limitation, completing
      and delivering to the Company the Instruction Sheet for Investors attached
      hereto as Exhibit
      B.
      

     

    (c)  Deliveries.
      The
      Investors shall have delivered to the Company: (i) the Purchase Price by wire
      transfer of immediately available funds to a bank account designated by the
      Company; (ii) a completed Stock Certificate Questionnaire as set forth in
      Exhibit B-1; (iii) a completed Registration Statement Questionnaire as set
      forth
      in Exhibit B-2; and (iv) a completed Certificate for Corporate, Partnership,
      Limited Liability Company, Trust, Foundation and Joint Investors, as set forth
      in Exhibit B-3, as applicable.

     

    ARTICLE
      VI

    MISCELLANEOUS

     

    6.1  Termination.
      This
      Agreement may be terminated by the Company or any Investor, by written notice
      to
      the other parties, if the Closing has not been consummated by the third Business
      Day following the date of this Agreement; provided,
      however,
      that no
      such termination will affect the right of any party to sue for any breach by
      the
      other party (or parties).

     

    6.2  Fees
      and Expenses.
      Except
      as
      expressly set forth in the Transaction Documents to the contrary, each party
      shall pay the fees and expenses of its advisers, counsel, accountants and other
      experts, if any, and all other expenses incurred by such party incident to
      the
      negotiation, preparation, execution, delivery and performance of this Agreement.
      The Company shall pay all Transfer Agent fees, stamp taxes and other taxes
      and
      duties levied in connection with the sale and issuance of their applicable
      Securities.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    6.3  Entire
      Agreement. The
      Transaction Documents, together with the Exhibits and Schedules thereto, contain
      the entire understanding of the parties with respect to the subject matter
      hereof and supersede all prior agreements and understandings, oral or written,
      with respect to such matters, which the parties acknowledge have been merged
      into such documents, exhibits and schedules. At or after the Closing Date,
      and
      without further consideration, the Company will execute and deliver to the
      Investors such further documents as may be reasonably requested in order to
      give
      practical effect to the intention of the parties under the Transaction
      Documents.

     

    6.4  Notices.
      Any
      and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number specified
      in
      this Section
      6.4 prior
      to
      6:30 p.m. (Eastern Standard Time) on a Trading Day, (b) the next Trading
      Day after the date of transmission, if such notice or communication is delivered
      via facsimile at the facsimile number specified in this Section
      6.4
      on a day
      that is not a Trading Day or later than 6:30 p.m. (Eastern Standard Time) on
      any
      Trading Day, (c) the Trading Day following the date of deposit with a
      nationally recognized overnight courier service and (d) upon actual receipt
      by the party to whom such notice is required to be given. The addresses and
      facsimile numbers for such notices and communications are those set forth on
      the
      signature pages hereof, or such other address or facsimile number as may be
      designated in writing hereafter, in the same manner, by any such
      Person.

     

    6.5  Amendments;
      Waivers.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed, in the case of an amendment, by the Company and each of
      the
      Investors or, in the case of a waiver, by the party against whom enforcement
      of
      any such waiver is sought. No waiver of any default with respect to any
      provision, condition or requirement of this Agreement shall be deemed to be
      a
      continuing waiver in the future or a waiver of any subsequent default or a
      waiver of any other provision, condition or requirement hereof, nor shall any
      delay or omission of either party to exercise any right hereunder in any manner
      impair the exercise of any such right. 

     

    6.6  Construction.
      The
      headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof. The language used in this Agreement will be deemed to be the language
      chosen by the parties to express their mutual intent, and no rules of strict
      construction will be applied against any party.

     

    6.7  Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company may not assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of the Investors. Any Investor may assign its rights under this
      Agreement to any Person to whom such Investor assigns or transfers any
      Securities, provided such transferee agrees in writing to be bound, with respect
      to the transferred Securities, by the provisions hereof that apply to the
“Investors,” and that such assignment complies with the transfer restrictions
      set forth in Article
      IV
      hereof.
      Notwithstanding anything to the contrary herein, Securities may be assigned
      to
      any Person in connection with a bona fide margin account or other loan or
      financing arrangement secured by such Securities.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    6.8  No
      Third-Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      successors and permitted assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    6.9  Governing
      Law; Venue; Waiver of Jury Trial.
      THE
      CORPORATE LAWS OF THE STATE OF NEVADA SHALL GOVERN ALL ISSUES CONCERNING THE
      RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING
      THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
      SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
      OF
      THE STATE OF TEXAS. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO
      THE
      EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS SITTING IN THE CITY OF HOUSTON,
      COUNTY OF HARRIS, FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY
      OR
      ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION
      CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE
      ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE,
      AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY
      OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
      OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH
      PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO
      PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
      THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE
      OF
      DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
      AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
      SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED
      TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
      THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY
      JURY.

     

    6.10  Survival.
      The
      representations and warranties, agreements and covenants contained herein shall
      survive the Closing.

     

    6.11  Execution.
      This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) with the same
      force and effect as if such facsimile signature page were an original
      thereof.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    6.12  Severability.
      If
      any
      provision of this Agreement is held to be invalid or unenforceable in any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefor, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

     

    6.13  Rescission
      and Withdrawal Right.
      Notwithstanding
      anything to the contrary contained in (and without limiting any similar
      provisions of) the Transaction Documents, whenever any Investor exercises a
      right, election, demand or option owed to such Investor by the Company under
      a
      Transaction Document and the Company does not timely perform its related
      obligations within the periods therein provided, then, prior to the performance
      by the Company of the Company’s related obligation, such Investor may rescind or
      withdraw, in its sole discretion from time to time upon written notice to such
      Investor, any relevant notice, demand or election in whole or in part without
      prejudice to its future actions and rights.

     

    6.14  Replacement
      of Securities.
      If
      any
      certificate or instrument evidencing any Securities is mutilated, lost, stolen
      or destroyed, the Company shall issue or cause to be issued in exchange and
      substitution for and upon cancellation thereof, or in lieu of and substitution
      therefor, a new certificate or instrument, but only upon receipt of evidence
      reasonably satisfactory to the Company of such loss, theft or destruction and
      the execution by the holder thereof of a customary lost certificate affidavit
      of
      that fact and an agreement to indemnify and hold harmless the Company for any
      losses in connection therewith. The applicants for a new certificate or
      instrument under such circumstances shall also pay any reasonable third-party
      costs associated with the issuance of such replacement Securities and any bond
      that may be required for such indemnity.

     

    6.15  Remedies.
      In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, each of the Investors and the Company will
      be entitled to seek specific performance under the Transaction Documents. The
      parties agree that monetary damages may not be adequate compensation for any
      loss incurred by reason of any breach of obligations described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation (other than in connection with any action for temporary
      restraining order) the defense that a remedy at law would be adequate.


     

    6.16  Adjustments
      in Share Numbers and Prices.
      In
      the
      event of any stock split, subdivision, dividend or distribution payable in
      shares of common stock (or other securities or rights convertible into, or
      entitling the holder thereof to receive directly or indirectly shares of common
      stock), combination or other similar recapitalization or event occurring after
      the date hereof, each reference in any Transaction Document to a number of
      shares or a price per share shall be amended to appropriately account for such
      event.

     

    6.17  Independent
      Nature of Investors’ Obligations and Rights.
      The
      obligations of each Investor under any Transaction Document are several and
      not
      joint with the obligations of any other Investor, and no Investor shall be
      responsible in any way for the performance of the obligations of any other
      Investor under any Transaction Document. The decision of each Investor to
      purchase Securities pursuant to this Agreement has been made by such Investor
      independently of any other Investor and independently of any information,
      materials, statements or opinions as to the business, affairs, operations,
      assets, properties, liabilities, results of operations, condition (financial
      or
      otherwise) or prospects of the Company or any Subsidiary that may have been
      made
      or given by any other Investor or by any agent or employee of any other
      Investor, and no Investor or any of its agents or employees shall have any
      liability to any other Investor (or any other person) relating to or arising
      from any such information, materials, statements or opinions. Nothing contained
      herein or in any Transaction Document, and no action taken by any Investor
      pursuant thereto, shall be deemed to constitute the Investors as a partnership,
      an association, a joint venture or any other kind of entity, or create a
      presumption that the Investors are in any way acting in concert or as a group
      with respect to such obligations or the transactions contemplated by the
      Transaction Document. Each Investor acknowledges that no other Investor has
      acted as agent for such Investor in connection with making its investment
      hereunder and that no other Investor will be acting as agent of such Investor
      in
      connection with monitoring its investment hereunder. Each Investor shall be
      entitled to independently protect and enforce its rights, including, without
      limitation, the rights arising out of this Agreement or out of the other
      Transaction Documents, and it shall not be necessary for any other Investor
      to
      be joined as an additional party in any proceeding for such
      purpose.

     

    [SIGNATURE
      PAGES TO FOLLOW]

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.

     

    
      	 	 	 
	 	THE
              AMERICAN ENERGY GROUP, LTD.
	 
 	 
 	 
 
	 	By:  	 
	 	 	
              
 
	 	Name:	Pierce Onthank 
	 	Title:	President and CEO 
	 	 
	 	Address  for
              Notice:
	 	 	 
	 	120
              Post Road West, Suite 202
	 	Westport, Connecticut 06880
              
	 	 
	 	Facsimile: 203-226-6222
	 	Telephone: 203-222-7315
	 	
            


    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    Investor
      Signature Page

     

    By
      its
      execution and delivery of this signature page, the undersigned Investor hereby
      joins in and agrees to be bound by the terms and conditions of the Securities
      Purchase Agreement dated as of May 3, 2006 (the “Purchase
      Agreement”)
      between The American Energy Group, Ltd. and each of such Investors (as defined
      therein), as to the number of shares of Common Stock and the number of their
      Warrant Shares set forth on Exhibit
      A
      hereto
      and authorizes this signature page to be attached to the Purchase Agreement
      or
      counterparts thereof.

     

    
      	 	 	 
	 	 
	 
 	Name
              of
              Investor:
  

              

            
	 	 	 
	 	By:  	 
	 	
              
Name:
	 	Title:


    

    
      
        	 	 	 
	 	 
	 
 	
                Address:_____________________________
________________________________

                ________________________________ 


              
	 	Telephone No.:
                _____________________________ 
	 	 
	 	Facsimile No.:
                ______________________________ 
	 	 
	 	Number of Securities:
                ________________________ 
	 	 
	 	Aggregate Purchase Price:
                $____________________
	 	  	 


      

    

     

    Agreed
      to
      and accepted this

    ___
      day
      of May, 2006

     

    THE
      AMERICAN ENERGY GROUP, LTD.

     

    


     

    By:
      _______________________________   

        
Name:
      Pierce Onthank

          
Title:
      President and CEO

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibits:

     

    
      	A	Schedule
              of Investors
	B	Instruction Sheet for Investors
	C	Opinion of Company Counsel
	D	Transfer Agent Instructions
	E	Form
              of Warrant


    

     

    Schedules:

     

    
       

      
        	3.1(a)	Subsidiaries
	3.1(f)	Capitalization
	3.1(h)	Material Changes
	3.1(i)	Litigation
	3.1(o)	Additional
                Securities with Piggy-Back Registration
                Rights


      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

       


    Exhibit
      A

     

    Schedule
      of Investors

    


    
      	
              Investor

            	
              Mailing
                Address

            	
              Common
                Shares 

            	
              Warrant

              Shares

            	
              Purchase
                Price

            
	
               

               

               

            	 	 	 	 
	
               

               

               

            	 	 	 	 
	
               

               

               

            	 	 	 	 
	
              TOTAL

            	
               

            	 	 	 


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit B

     

    INSTRUCTION
      SHEET FOR INVESTOR

     

    (to
      be
      read in conjunction with the entire Securities Purchase Agreement)

     

    A.    
      Complete
      the following items in the Securities Purchase Agreement:

     

    1.    
      Complete
      and execute the Investor Signature Page. The Agreement must be executed by
      an
      individual authorized to bind the Investor.

     

    2.    
      Exhibit B-1
      - Stock Certificate Questionnaire:

     

    Provide
      the information requested by the Stock Certificate Questionnaire; 

     

    3.    
      Exhibit B-2
      - Registration Statement Questionnaire:

     

    Provide
      the information requested by the Registration Statement Questionnaire.


     

    4.    
      Exhibit B-3
      - Investor Certificate:

     

    Provide
      the information requested by the Certificate for Corporate, Partnership, Trust,
      Foundation and Joint Investors (B-3).

     

    5.    
      Return,
      via facsimile, the signed Securities Purchase Agreement, including the properly
      completed Exhibits B-1 through B-3, to:

     

    THE
      AMERICAN ENERGY GROUP, LTD.

    120
      Post
      Road West, Suite 202

    Westport,
      Connecticut 06880 

    Facsimile:
      203-226-6222

    Telephone:
      203-222-7315

    Attn:
      President

    


    with
      copies to:

    


    [_______]

    Facsimile:
      

    Telephone:
      

    Attn:
      

    


    and:

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    [_______]

    Facsimile:
      

    Telephone:
      

    Attn:
      

    


    


    
      	 	
              6.

            	
              After
                completing instruction number 5 above, deliver the original signed
                Securities Purchase Agreement including the properly completed Exhibits
                 B-1
                through B-3 to:

            


    

    


    THE
      AMERICAN ENERGY GROUP, LTD.

    120
      Post
      Road West, Suite 202

    Westport,
      Connecticut 06880 

    Facsimile:
      203-226-6222

    Telephone:
      203-222-7315

    Attn:
      President

    


    with
      copies to:

    


    [_______]

    Facsimile:
      

    Telephone:
      

    


    Attn:

    


    and:

     

    [_______]

    Facsimile:
      

    Telephone:

    Attn:

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	
              B.

            	
              Instructions
                regarding the transfer of funds for the purchase of Securities
                are:

            


    

    


    Account
      Name: The American Energy Group, Ltd.

    Bank: Bank
      of America, Westport, CT 06880

    ABA:
      026009593

    Account
      Number: 0094973-98245

    


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Exhibit B-1

     

    THE
      AMERICAN ENERGY GROUP, LTD.

     

    STOCK
      CERTIFICATE QUESTIONNAIRE

     

    


    
      	 	
              Please
                provide us with the following information:

            	 
	 	 	 
	
              1.

            	
              The
                exact name that the Securities are to be registered in (this is the
                name
                that will appear on the stock certificate(s)). You may use a nominee
                name
                if appropriate:

            	 _________________________
	 	 	 
	
              2.

            	
              The
                relationship between the Investor of the Securities and the Registered
                Holder listed in response to item 1 above:

            	 _________________________
	 	 	 
	
              3.

            	
              The
                mailing address, telephone and telecopy number of the Registered
                Holder
                listed in response to item 1 above:

            	 _________________________
	 	 	 _________________________
	 	 	 _________________________
	 	 	 _________________________
	 	 	 _________________________
	 	 	 
	
              4.

            	
              The
                Tax Identification Number of the Registered Holder listed in response
                to
                item 1 above:

            	 _________________________


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit B-2

     

    THE
      AMERICAN ENERGY GROUP, LTD.

     

    REGISTRATION
      STATEMENT QUESTIONNAIRE

     

    In
      connection with the Registration Statement, please provide us with the following
      information regarding the Investor.

     

    1.  Please
      state your organization’s name exactly as it should appear in the Registration
      Statement:

     

    ______________________________________________________________________

     

    Except
      as
      set forth below, your organization does not hold any equity securities of the
      Company on behalf of another person or entity.

     

    State
      any
      exceptions here:

     

    ______________________________________________________________________

     

    2.
      Address
      of your organization:

     

    ______________________________________________________

     

    ______________________________________________________

     

    Telephone:
      ___________________________

     

    Fax:
      ________________________________

     

    Contact
      Person: _______________________

     

    3.
      Have
      you
      or your organization had any position, office or other material relationship
      within the past three years with the Company or its affiliates?
      (Include
      any relationships involving you or your affiliates, officers, directors, or
      principal equity holders (5% or more) that has held any position or office
      or
      has had any other material relationship with the Company (or its predecessors
      or
      affiliates) during the past three years.)

     

    Yes
      _____
      No _____ 

     

    If
      yes,
      please indicate the nature of any such relationship below:

     

    4.
      Are
      you
      the beneficial owner of any other securities of the Company?
      (Include
      any equity securities that you beneficially own or have a right to acquire
      within 60 days after the date hereof, and as to which you have sole voting
      power, shared voting power, sole investment power or shared investment
      power.)

     

    Yes
      _____
      No _____ 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    If
      yes,
      please describe the nature and amount of such ownership
      as of a
      recent date.

     

    ______________________________________________________________________

     

    ______________________________________________________________________

     

    5.
      If you
      are an entity, does any natural person have voting or investment power over
      the
      shares held by you?

     

    _______
       Yes   _______
       No

     

    If
      so,
      please state the person’s or persons’ names(s):

     

    ______________________________________________________________________

     

    ______________________________________________________________________

     

    ______________________________________________________________________

     

    6.
      Except
      as set forth below, you wish that all the shares of the Company’s common stock
      beneficially owned by you or that you have the right to acquire from the Company
      in connection with the Securities Purchase Agreement be offered for your account
      in the Registration Statement.

     

    State
      any
      exceptions here:

     

    ______________________________________________________________________

     

    ______________________________________________________________________

     

    7.
      Have
      you
      made or are you aware of any arrangements relating to the distribution of the
      shares of the Company pursuant to the Registration Statement?

     

    Yes
      _____
      No _____ 

     

    If
      yes,
      please describe the nature and amount of such arrangements.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    NASD
      Questions

     

    1. Are
      you (i) a “member”1 
      of the
      National Association of Securities Dealers, Inc. (the “NASD”),
      (ii) an “affiliate”2 
      of a
      member of the NASD, (iii) a “person associated with a member” or an
“associated person of a member”3 
      of the
      NASD or (iv) an immediate family member4 
      of any
      of the foregoing persons? If yes, please identify the member and describe such
      relationship (whether direct or indirect), and please respond to Question Number
      2 below; if no, please proceed directly to Question Number 3. 

     

    2. If
      you answered “yes” to Question Number 1, please furnish any information as to
      whether any such member intends to participate in any capacity in the private
      placement, including the details of such participation: 

     

    ___________________

      1  NASD
        defines a “member” as any broker or dealer admitted to membership in the NASD,
        or any officer or partner or branch manager of such a member, or any person
        occupying a similar status or performing a similar function for such a
        member.

       

      2  The
        term
“affiliate” means a person that directly, or indirectly through one or more
        intermediaries, controls, or is controlled by, or is in common control with,
        the
        person specified. Persons who have acted or are acting on behalf of or for
        the
        benefit of a person include, but are not necessarily limited to, directors,
        officers, employees, agents, consultants and sales representatives. The
        following should apply for purposes of the foregoing:

       

        (i)
         
        a person
        should be presumed to control a Member if the person beneficially owns 10%
        or
        more the outstanding voting securities of a Member which is a corporation,
        or
        beneficially owns a partnership interest in 10% or more of the distributable
        profits or losses of a Member which is a partnership; 

       

        (ii)
         
        a Member
        should be presumed to control a person if the Member and Persons Associated
        With
        a Member beneficially own 10% or more of the outstanding voting securities
        of a
        person which is a corporation, or beneficially own a partnership interest
        in 10%
        or more of the distributable profits or losses of a person which is a
        partnership; 

       

        (iii)
         
        a person
        should be presumed to be under common control with a Member if:

       

        (1)
        the
        same person controls both the Member and another person by beneficially owning
        10% or more of the outstanding voting securities of a Member or person which
        is
        a corporation, or by beneficially owning a partnership interest in 10% or
        more
        of the distributable profits or losses of a Member or person which is a
        partnership; or 

       

        (2)
        a
        person having the power to direct or cause the direction of the management
        or
        policies of the Member or such person also has the power to direct or cause
        the
        direction of the management or policies of the other entity in
        question.

       

      3  The
        NASD
        defines a “person associated with a member” or an “associated person of a
        member” as being every sole proprietor, partner, equity owner, officer, director
        or branch manager of any member, or any natural person occupying a similar
        status or performing similar functions, or any natural person engaged in
        the
        investment banking or securities business who directly or indirectly controls
        or
        is controlled by such member (for example, any employee), whether or not
        any
        such person is registered or exempt from registration with the
        NASD.

       

      4  Immediate
        family includes parents, mother-in-law, father-in-law, husband or wife, brother
        or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law,
        and
        children, or any other person who is supported, directly or indirectly, to
        a
        material extent, by a person associated with a member of the NASD or any
        other
        broker/dealer.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

     

    Description:
      

     

    ______________________________________________________________________

     

    ______________________________________________________________________

     

    3. Are
      you or have you been an “underwriter or related person”5 
      or a
      person associated with an underwriter or related person, including, without
      limitation, with respect to the proposed public offering? If yes, please
      identify the underwriter or related person and describe such relationship
      (whether direct or indirect). 

     

    Yes
      _____
      No _____ 

     

    Description:
      

     

    ______________________________________________________________________

     

    ______________________________________________________________________

     

    4. If
      known, please describe in detail any underwriting compensations, arrangements
      or
      dealings entered into during the previous twelve months, or proposed to be
      consummated in the next twelve months, between (i) any underwriter or
      related person, member of the NASD, affiliate of a member of the NASD, person
      associated with a member or associated person of a member of the NASD or any
      immediate family member thereof, on the one hand, and (ii) the Company, or
      any director, officer or stockholder thereof, on the other hand, which provides
      for the receipt of any item of value and/or the transfer of any warrants,
      options or other securities from the Company to any such person (other than
      the
      information relating to the arrangements with any investment firm or
      underwriting organization which may participate in the proposed public
      offering). 

     

    Description:
      

     

    ______________________________________________________________________

     

    ______________________________________________________________________

     

    5. Have
      you purchased the securities in the ordinary course of business? 

     

    Yes
      _____
      No _____ 

     

    

      ___________________

      5  The
        term
“underwriter or related person” includes underwriters, underwriters’ counsel,
        financial consultants and advisors, finders, members of the selling or
        distribution group, and any and all other persons associated with or related
        to
        any of such persons, including members of the immediate family of such
        persons.

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    ACKNOWLEDGEMENT

     

    The
      undersigned hereby agrees to notify the Company promptly of any changes in
      the
      foregoing information which should be made as a result of any developments,
      including the passage of time. The undersigned also agrees to provide the
      Company and the Company’s counsel any and all such further information regarding
      the undersigned promptly upon request in connection with the preparation,
      filing, amending, and supplementing of the Registration Statement (or any
      prospectus contained therein). The undersigned hereby consents to the use of
      all
      such information in the Registration Statement.

     

    The
      undersigned understands and acknowledges that the Company will rely on the
      information set forth herein for purposes of the preparation and filing of
      the
      Registration Statement.

     

    The
      undersigned understands that the undersigned may be subject to serious civil
      and
      criminal liabilities if the Registration Statement, when it becomes effective,
      either contains an untrue statement of a material fact or omits to state a
      material fact required to be stated in the Registration Statement or necessary
      to make the statements in the Registration Statement not misleading. The
      undersigned represents and warrants that all information it provides to the
      Company and its counsel is currently accurate and complete and will be accurate
      and complete at the time the Registration Statement becomes effective and at
      all
      times subsequent thereto and agrees to notify the Company immediately of any
      misstatement of a material fact in the Registration Statement or the omission
      of
      any material fact necessary to make the statements contained therein not
      misleading.

     

    Dated:
      __________

    ______________________________

    Name
      

    ______________________________

    Signature

    ______________________________

    Name
      and
      Title of Signatory

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Exhibit B-3

     

    THE
      AMERICAN ENERGY GROUP, LTD.

     

    CERTIFICATE
      FOR CORPORATE, PARTNERSHIP, LIMITED LIABILITY COMPANY,

    TRUST,
      FOUNDATION AND JOINT INVESTORS

     

    If
      the
      investor is a corporation, partnership, limited liability company, trust,
      pension plan, foundation, joint Investor (other than a married couple) or other
      entity, an authorized officer, partner, or trustee must complete, date and
      sign
      this Certificate.

     

    CERTIFICATE

     

    The
      undersigned certifies that the representations and responses below are true
      and
      accurate:

     

    (a) The
      investor has been duly formed and is validly existing and has full power and
      authority to invest in the Company. The person signing on behalf of the
      undersigned has the authority to execute and deliver the Securities Purchase
      Agreement on behalf of the Investor and to take other actions with respect
      thereto.

     

    (b) Indicate
      the form of entity of the undersigned: 

     

    ____ Limited
      Partnership 

     

    ____ General
      Partnership 

     

    ____ Limited
      Liability Company

     

    ____ Corporation

     

    ____ Revocable
      Trust (identify each grantor and indicate under what circumstances the trust
      is
      revocable by the
      grantor):______________________________________________________________________

    _______________________________________________________________________________

    _______________________________________________________________________________

    _______________________________________________________________________________ 

    (Continue
      on a separate piece of paper, if necessary.)

     

    ____ Other
      type of Trust (indicate type of trust and, for trusts other than pension trusts,
      name the grantors and beneficiaries): 

    _______________________________________________________________________________

    
      _______________________________________________________________________________

      _______________________________________________________________________________ 

    

    (Continue
      on a separate piece of paper, if necessary.)

     

    ____ Other
      form of organization (indicate form of organization
      (__________________________________________).

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (c) Indicate
      the approximate date the undersigned entity was formed:
      _______________.

     

    (d) In
      order
      for the Company to offer and sell the Securities in conformance with state
      and
      federal securities laws, the following information must be obtained regarding
      your investor status. Please initial
      each category
      applicable to you as an investor in the Company.

     

    ___ 1. a
      bank as
      defined in Section 3(a)(2) of the Securities Act, or any savings and loan
      association or other institution as defined in Section 3(a)(5)(A) of the
      Securities Act whether acting in its individual or fiduciary
      capacity;

     

    ___ 2. a
      broker
      or dealer registered pursuant to Section 15 of the Exchange
      Act;

     

    ___ 3. an
      insurance company as defined in Section 2(13) of the Securities
      Act;

     

    ___ 4. an
      investment company registered under the Investment Company Act of 1940, as
      amended, or a business development company as defined in Section 
2(a)(48)
      of such Act;

     

    ___ 5. a
      Small
      Business Investment Company licensed by the U.S. Small Business Administration
      under Section 301(c) or (d) of the Small Business Investment Act of
      1958;

     

    ___ 6. a
      plan
      established and maintained by a state, its political subdivisions, or any agency
      or instrumentality of a state or its political subdivisions, for the benefit
      of
      its employees, if such plan has total assets in excess of
      $5,000,000;

     

    ___ 7. an
      employee benefit plan within the meaning of the Employee Retirement Income
      Security Act of 1974, if the investment decision is made by a plan fiduciary,
      as
      defined in Section 3(21) of such Act, which is either a bank, savings and
      loan association, insurance company, or registered investment advisor, or if
      the
      employee benefit plan has total assets in excess of $5,000,000 or, if a
      self-directed plan, with investment decisions made solely by persons that are
      accredited investors;

     

    ___ 8. a
      private
      business development company as defined in Section 202(a)(22) of the
      Investment Advisers Act of 1940, as amended;

     

    ___ 9. an
      organization described in Section 501(c)(3) of the Internal Revenue Code,
      corporation, Massachusetts or similar business trust, or partnership, not formed
      for the specific purpose of acquiring the Securities, with total assets in
      excess of $5,000,000;

     

    ___ 10. a
      trust,
      with total assets in excess of $5,000,000, not formed for the specific purpose
      of acquiring the Securities, whose purchase is directed by a sophisticated
      person as described in Rule  506(b)(2)(ii) under
      the Exchange Act;

     

    ___ 11. an
      entity
      in which all of the equity owners qualify under any of the above subparagraphs.
      If the undersigned belongs to this investor category only, list the equity
      owners of the undersigned, and the investor category which each such equity
      owner satisfies:
      _______________________________________________________________________________

                                    
      _______________________________________________________________________________

                                    
      _______________________________________________________________________________

                                                   
      (Continue on a separate piece of paper, if necessary.)

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    Please
      set forth in the space provided below the (i) states, if any, in the U.S.
      in which you maintained your principal office during the past two years and
      the
      dates during which you maintained your office in each state, (ii) state(s),
      if any, in which you are incorporated or otherwise organized and
      (iii) state(s), if any, in which you pay income taxes.

    ___________________________________________________________________________

    ___________________________________________________________________________

    ___________________________________________________________________________

    


     

    Dated:________________________________________
       ,
      2006

     

    _______________________________________

    Name
      of
      investor

     

    _______________________________________

    Signature
      and title of authorized officer, partner or trustee

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    Exhibit C

     

    OPINION
      OF COMPANY COUNSEL

     

    1. The
      Company is duly
      incorporated,
      validly
      existing and in good standing under the
      Nevada Revised Statutes and has the corporate power
      to
      own and lease the properties it purports to own and lease, to conduct the
      business in which it is engaged and
      to
      execute and deliver, and to perform its obligations under, this
      Agreement, including to
      issue
      and deliver the Common Shares and the Warrants hereunder.

     

    2. This
      Agreement has been duly authorized, executed and delivered by the
      Company.

     

    3. The
      Common Shares have been duly authorized and, upon issuance and delivery thereof
      and payment therefor pursuant to this Agreement, will be validly issued, fully
      paid and non-assessable. The Warrants have been duly authorized, executed and
      delivered by the Company and constitute legal, valid and binding obligations
      of
      the Company. The Warrant Shares have been duly authorized, and if issued upon
      the exercise of the Warrants in accordance with the terms of the Warrants,
      and
      after payment therefore, the Warrant Shares would be validly issued,
      outstanding, fully paid and nonassessable.

     

    4. The
      issuance of the Common Shares will not be subject to any preemptive or similar
      rights of any security holder of the Company under the Nevada Revised Statutes
      or the Articles of Incorporation of the Company or any contract known to counsel
      to which the Company is a party or to which its assets are bound.

     

    5. Neither
      the execution and delivery of, nor the performance of the Company’s obligations
      under, this Agreement, including the issuance and delivery of the Common Shares,
      Warrants and the Warrant Shares upon exercise of the Warrants, by
      the
      Company will
      violate or conflict with, result in a breach of, or constitute a default under,
      (a) the
      Articles of Incorporation or the By-Laws of
      the
      Company or (b) any federal law of the United States of America or the
      Nevada Revised Statutes applicable to the Company that in our experience is
      generally applicable to transactions of the type contemplated by this Agreement
      or any contract known to counsel. 

     

    6. Except
      for compliance with the securities or blue sky laws of the
      State
      of Nevada, as
      to
      which we express no opinion, and registration of the Shares under the Securities
      Act, no approval, authorization or other action by any governmental authority
      of
      the United States of America or filing with any such authority (other than
      any
      filing solely for information purposes or to obtain action that is not the
      subject of governmental discretion) that has not been obtained or accomplished
      is required by the Company for the valid execution and delivery of, or the
      performance of its obligations under, this Agreement, by the Company, including
      the issuance and delivery of the Common Shares and the Warrants by the Company
      thereunder.

     

    7. Based
      in
      part on the representations and warranties, covenants and other agreements
      of
      the of the Investors set forth in Article IV of this Agreement, the offer and
      sale of the Common Shares and the Warrants pursuant to the terms of this
      Agreement are exempt from the regitration requirements of the Securities
      Act.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    8.
      There
      is no action, suit claim or proceeding pending, or threatened against the
      Company or its subsidiaries which, if determined adversely against the Company
      or its subsidiaries could have a Material Adverse Effect (as defined in the
      Securities Purchase Agreement) on the business, property, assets, rights or
      condition (financial or otherwise) of the Company.

     

    9.
      The
      Company’s working interests and overriding royalty interests in oil and gas
      leases in Galveston County, Texas are legal, valid, binding and enforceable
      under applicable federal and state laws and no claims exist against such rights
      by any third party or governmental entity.

     

    10.
      To
      the knowledge of counsel, the Confidential Offering Memorandum, when distributed
      to Investors, did not contain an untrue statement of material fact or fail
      to
      state a material fact required to be stated therein or necessary to make the
      statements therein not misleading. 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Exhibit D

     

    TRANSFER
      AGENT INSTRUCTIONS

     

    _____________________,
      2006

    


    Computershare
      Trust Co., Inc.

    Attn: 
      Nicole Hunt

    350
      Indiana, Suite. 850

    Golden,
      CO  80401

    


    Ladies
      and Gentlemen: 

    


    Reference
      is made to that certain Securities Purchase Agreement, dated as of May____,
      2006,
      (the
“Agreement”),
      by and
      among The American Energy Group, Ltd., a Nevada corporation
      (the “Company”),
      and
      the investors named on Exhibit A attached thereto (collectively, the
“Holders”),
      pursuant to which the Company is issuing shares of its Common Stock, par value
      $[__]
      per
      share (the “Common
      Stock”),
      and
      warrants to purchase shares of Common Stock (the “Warrants”)
      to the
      Holders. 

    


    This
      letter shall serve as our irrevocable authorization and direction to you
      (provided that you are the transfer agent of the Company at such time) to
      issue certificates representing (a) the shares of the Common Stock issued
      pursuant to the Agreement (the “Common
      Shares”)
      upon
      transfer or resale thereof
      in
      accordance with the terms thereof and (b) the shares of the Common Stock issued
      upon the exercise of the Warrants (the “Warrant
      Shares”)
      to or
      upon the order of a Holder from time to time upon delivery to you of a properly
      completed and duly executed Notice of Exercise, in the form attached to the
      Warrants, which has been acknowledged by the Company as indicated by the
      signature of a duly authorized officer of the Company thereon.

     

    You
      acknowledge and agree that so long as you have previously received
      (a) written confirmation from the Company’s legal counsel that either
      (i) a registration statement covering the resale of the Common Shares and
      the Warrant Shares has been declared effective by the Securities and Exchange
      Commission (the “SEC”)
      under
      the Securities Act of 1933, as amended (the “Securities
      Act”),
      or
      (ii) sales of the Common Shares or the Warrant Shares may be made in
      conformity with Rule 144 under the Securities Act (“Rule 144”),
      (b) if applicable, a copy of such registration statement and
      (c) notice from legal counsel to the Company or any Holder that a transfer
      of Common Shares or the Warrant Shares has been effected either pursuant to
      such
      registration statement (and a prospectus delivered to the transferee,
unless
      such a prospectus is deemed to have been delivered pursuant to Rule 172 under
      the Securities Act)
      or
      pursuant to Rule 144, then, unless otherwise required by law, within three
      (3) business days of your receipt of the notice referred to in clause (c) above,
      you shall issue the certificates representing the Common Shares or the Warrant
      Shares, as the case may be, so sold to the transferees registered in the names
      of such transferees, and such certificates shall not bear any legend restricting
      transfer of the Common Shares or the Warrant Shares, as the case may be, thereby
      and should not be subject to any stop-transfer restriction. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    A
      form of
      written confirmation (to be used in connection with any sale) from the Company’s
      legal counsel that a registration statement covering resales of the Common
      Shares and the Warrant Shares has been declared effective by the SEC under
      the
      Securities Act is attached hereto as Annex
      I.
      

     

    Please
      be
      advised that the Holders are relying upon this letter as an inducement to enter
      into the Agreement and, accordingly, each Holder is a third-party beneficiary
      to
      these instructions. 

     

    Please
      execute this letter in the space indicated to acknowledge your agreement to
      act
      in accordance with these instructions. 

     

    
      	 	 	 
	 	Very truly yours,
	 	 
	 	THE
              AMERICAN ENERGY GROUP, LTD.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:

	 	Title:


    

     

     

    THE
      FOREGOING INSTRUCTIONS ARE

    ACKNOWLEDGED
      AND AGREED TO 

    this
      ___
      day of _________, 2006

     

    COMPUTERSHARE
      TRUST CO., INC.

     

    By:
      __________________________________  

    Name:
      ___________________________ 

    Title: ____________________________

     

    Enclosures
      

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Annex
      I

     

    FORM
      OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT

    


    [_____],
      2006

    


    Computershare
      Trust Co., Inc.

    Attn: 
      Nicole Hunt

    350
      Indiana, Suite. 850

    Golden,
      CO  80401

    


    Ladies
      and Gentlemen: 

    


    Reference
      is made to that certain Securities Purchase Agreement, dated as of
      May____,
      2006
      (the
“Agreement”),
      by and
      among The American Energy Group, Ltd., a Nevada corporation
      (the “Company”),
      and
      the investors named on Exhibit A attached thereto (collectively, the
“Holders”),
      pursuant to which the Company is issuing shares of its Common Stock, par value
      $[__]
      per
      share (the “Common
      Stock”),
      and
      warrants to purchase shares of the Common Stock (the “Warrants”)
      to the
      Holders. 

     

    Pursuant
      to the Agreement, the Company has agreed, among other things, to register the
      resale of the Registrable Securities (as defined in the Agreement), including
      the shares of Common Stock issuable upon exercise of the Warrants under the
      Securities Act of 1933, as amended (the “Securities
      Act”).
      In
      connection with such agreement, on [_____], 2006, the Company filed a
      Registration Statement on Form _____ (File No. 333-[_____]) (the “Registration
      Statement”)
      with
      the Securities and Exchange Commission (the “SEC”)
      relating to the Registrable Securities, which names each of the Holders (or
      transferees thereof) as a selling stockholder thereunder. 

     

    In
      connection with the foregoing, I advise you that a member of the SEC’s staff has
      advised us by telephone that the SEC has entered an order declaring the
      Registration Statement effective under the Securities Act at [_____] on [_____],
      2006, and I have no knowledge, after telephonic inquiry of a member of the
      SEC’s
      staff, that any stop order suspending its effectiveness has been issued or
      that
      any proceedings for that purpose are pending before, or threatened by, the
      SEC
      and the Registrable Securities are available for resale under the Securities
      Act
      pursuant to the Registration Statement.

     

    Very
      truly yours,

     

    [Legal
      Counsel]

     

    By:_____________________

     

    cc:
      [List
      Names of Holders]

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    Exhibit
      E

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      3.1(a)

    [Subsidiaries]

     

     

    The
      Company has the following Subsidiaries (with its percentage ownership of equity
      interests specified):

    


    


    The
      American Energy Operating Corp., a Texas corporation - $100%

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      3.1(f)

    [Capitalization]

    


    The
      Company’s authorized capital stock consists of 80,000,000 shares of common
      stock, par value $.001 per share, and 20,000,000 shares of preferred stock,
      par
      value $.001 per share. The transfer agent and registrar for the Company’s Common
      Stock is Computershare Trust Co., Inc., 350 Indiana, Suite 850, Golden, Colorado
      80401.

     

    As
      of
      April 28, 2006 there were 27,535,876 shares of common stock outstanding. At
      the
      closing of the Offering, there will be 29,859,406 shares of common stock
      outstanding assuming all of the Shares offered hereby are sold (and including
      all shares issued pursuant to prior private placements but excluding
      in-the-money warrants). There are no outstanding shares of Preferred Stock.
      The
      rights of all holders of the common stock are identical in all respects. The
      holders of the common stock are entitled to receive ratably such dividends,
      if
      any, as may be declared by the Board of Directors out of legally available
      funds. Upon liquidation, dissolution or winding up of the Company, the holders
      of the common stock are entitled to share ratably in all aspects of the Company
      that are legally available for distribution, after payment of or provision
      for
      all debts and liabilities and after preferences are afforded to the holders
      of
      the preferred shares. The Preferred shares have preference over the Common
      Stock
      in the event of liquidation of the Company.

     

    


     

    As
      of
      April 28, 2006, the following warrants to purchase shares of the Company’s
      common stock were outstanding:

     

    
      	
              Strike
                Price

            	 	
               Number
                of Warrants

            	 	
              Expiration
                Date

            
	 	 	 	 	
               

            
	
              $
                0.75

            	 	
              1,000,000

            	 	
              04/12/2010

            
	
              $
                1.00

            	 	
              500,000

            	 	
              04/12/2010

            
	
              $
                1.50

            	 	
              660,000

            	 	
              04/12/2010
                (500,000)

            
	
              $
                1.75

            	 	
              100,000

            	 	
              09/12/2008
                (60,000)

              09/30/2008
                (100,000)

            
	 	 	 	 	 


    

     

    TOTAL          
      2,260,000

    


    After
      the
      Offering, there will be 3,867,325 Warrants issued and outstanding.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    


    SCHEDULE
      3.1(h)

    [Material
      Changes]

    
 

    


    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      3.1(i)

    [Litigation]

     

     

    The
      Company, together with its subsidiary, The American Energy Operating Corp.,
      were
      joined as defendants in a new lawsuit initiated on January 12, 2006, in the
      281st
      Judicial
      District Court of Harris County, Texas. The suit is titled: M.S.
      Moin Hussain, Saleem Z. Khan and Khan & Piracha vs. The American Energy
      Group, Ltd., The American Energy Operating Corp., Hycarbex-American Energy,
      Inc.
      f/k/a Hycarbex, Inc., Pierce Onthank, Iftikhar Ahmed Zahid and Georg Friedher
      Von Canal.
      The
      other named defendants are Hycarbex-American Energy, Inc., Pierce Onthank and
      Iftikhar Zahid. The plaintiffs are Moin Hussain, who originally incorporated
      Hycarbex, Inc. (“Hycarbex”) in 1985, and Saleem Khan and Khan & Piracha,
      Pakistan-based attorneys. According to the plaintiffs’ pleadings, the plaintiffs
      allege that in 1995, shortly after the petroleum exploration license covering
      the Jacobabad Block 2768-4 was awarded to Hycarbex, the Company acquired all
      of
      the outstanding stock of Hycarbex. The plaintiffs further state in their
      pleadings that consideration for the sale of the stock included a 1% overriding
      royalty assigned to Hussain, and that Hussain subsequently assigned two tenths
      of one percent of same to Saleem Khan. Plaintiffs further assert that in
      connection with the subsequent acquisition by Hycarbex of the Yasin block in
      2001, Khan & Piracha assisted in the acquisition and were promised by
      Hycarbex, according to Plaintiffs, twenty percent of the Yasin concession.
      The
      plaintiffs allege that the several defendants have failed to honor the alleged
      commitments without identifying the specific party responsible for the alleged
      obligation. The Company has filed its response to the pleadings and intends
      to
      defend the allegations. It is the Company’s position that it has no liability to
      the named plaintiffs and that the dispute, if any, should lie entirely between
      the plaintiffs and Hycarbex. The outcome of the lawsuit is not expected to
      have
      an adverse effect upon the Company because Hycarbex has provided a written
      affirmation to the Company that the Company will continue to hold its 18%
      royalty in the Yasin Block despite the outcome of the lawsuit. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    


    SCHEDULE
      3.1(o)

    [Others
      with Piggy Back Registration Rights]

     

    Calvert
      D. Crary - 60,000 Warrants

     

    John
      S.
      Gebhardt - 100,000 Warrants

     

    Maximillian
      Gebhardt - 100,000 Warrants

     

    Pierce
      Onthank, Director - 1,000,000 Warrants

     

    Iftikhar
      Zahid, Director - 1,000,000 Warrants

     

    
      
        
        

      

      
        3