Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - River Bank Resources Ltd. - Exhibit 10.1

 PURCHASE AND SALE AGREEMENT 

 

BETWEEN 

GUDMUND LOVANG 

AND 

 RIVERBANK RESOURCES LTD. 

 

 

 

Dated as of the 26th day of April, 2005 

 PURCHASE AND SALE AGREEMENT 

 THIS AGREEMENT made as of the 26th day of April, 2005

 AMONG: 

RIVERBANK RESOURCES LTD., a
  company existing under the laws of the State of Nevada and having its head office
  at 902-595 Howe Street., Vancouver, BC, Canada, V6C 2T5, (“Riverbank”)

 AND: 

GUDMUND LOVANG., an individual
  residing at 110-310 East 3rd Street, North Vancouver, British Columbia,
  Canada, V7L 1E9 (the “Vendor”). 

WHEREAS: 

	 A.      	 The Vendor holds, directly or indirectly, interests
        in certain mineral exploration claims located in the province of British
        Columbia, Canada; 

	 	 
	 B.      	 The Vendor wishes to sell and Riverbank wishes to
        purchase a 100% interest in the Property on the terms and conditions contained
        in this Agreement. 

 In consideration of the premises, covenants and agreements
  contained in this Agreement, the parties covenant and agree each with the other
  as follows: 

	 1.      	 INTERPRETATION 
	 
	 1.1      	 Definitions 

 For the purposes of this Agreement and the recitals in and
  Schedule to this Agreement, unless the context otherwise requires, the following
  words and phrases will have the meanings indicated below: 

	 	 (a)      	 “Agreement” means this Agreement including
        the recitals and Schedule hereto, which are incorporated by this reference,
        as amended and supplemented; 

	 
	 	 (b)      	 “Property” means the mineral exploration
        claims located in the province of British Columbia, Canada and listed
        in Schedule 1 hereto; 

	 
	 	 (c)      	 “Purchase Price” means the $3,000,
        US Dollars, purchase price for the Property as contemplated in this Agreement;
      

	 
	 	 (d)      	 “The Vendor” means Gudmund Lovang.,
        an individual residing in North Vancouver, British Columbia, Canada; 

	 
	 	 (e)      	 “Riverbank” means Riverbank Resources
        Ltd.., a company incorporated and existing under the laws of Nevada; 

 

	 1.2      	 Interpretation 

 In this Agreement, except as otherwise expressed or provided
  or as the context otherwise requires: 

	 	 (a)      	 the headings and captions are provided for convenience only and will
      not form a part of this Agreement, and will not be used to interpret, define
      or limit the scope, extent or intent of this Agreement or any of its provisions;
      and 
	 
	 	 (b)      	 a reference to time or date is to the local time or date in Vancouver,
      Canada, unless specifically indicated otherwise; 

	 1.3      	 Amendment 

 No amendment, waiver, termination or variation of the terms, conditions, warranties,
  covenants, agreements and undertakings set out herein will be of any force or
  effect unless the same is reduced to writing duly executed by all parties hereto
  in the same manner and with the same formality as this Agreement is executed.

	 1.4     	 Waiver 

No waiver of any of the provisions of this Agreement will constitute a waiver
  of any other provision (whether or not similar) and no waiver will constitute
  a continuing waiver unless otherwise expressly provided. 

	 1.5      	 Schedules 

The following Schedules are attached hereto and form a part hereof: 

	 Schedule	 Subject	 
	  	 	 
	 1	 Description of Property	 
	 2	 Claim Map	 
	 3	 Location Map	 

	1.6	 Currency 

All dollar ($) references in this Agreement are to United
  States dollars. 

	2. 	PURCHASE AND SALE 
	 	 
	2.1	Purchase and Sale 

Subject to the terms and conditions of this Agreement and based
  on the representations and warranties contained in this Agreement, Riverbank
  hereby offers to purchase the Property from the Vendor and the Vendor hereby
  agrees to sell the Property to Riverbank. 

 2 

 

	2.2 	Consideration 

In consideration for the sale by the Vendor to Riverbank of
  the Property, Tao will pay the Purchase Price for the Property to the Vendor
  on the Closing date. 

	3. 	REPRESENTATIONS AND WARRANTIES 
	 	 
	3.1 	Representations and Warranties of The Vendor 

The Vendor represents and warrants to and in favour of the
  Riverbank as follows and acknowledges that Riverbank is relying upon such representations
  and warranties in consummating the transactions contemplated by this Agreement:

	 	 (a)      	 This Agreement has been duly executed and delivered
        by the Vendor and constitutes a valid and binding obligation of the Vendor
        in accordance with its terms; 

	 
	 	 (b)      	 Schedules 1, 2 and 3 hereto contain an accurate
        and complete description of the Property; 

	 
	 	 (c)      	 No person has any agreement or option or any right
        or privilege (whether by law, pre-emptive or contractual) capable of becoming
        an agreement or option for the purchase from the Vendor of any interest
        in the Property; 

	 
	 	 (d)      	 The entering into, execution, delivery and performance
        by the Vendor of this Agreement will not violate or contravene or conflict
        with or result in a breach of or default or give rise to any right of
        termination, acceleration, cancellation or modification under any of the
        terms and conditions of any contract, agreement, commitment, arrangement
        or understanding pursuant to which the Vendor holds or has acquired its
        interest in the Property or any other contract, agreement, commitment,
        arrangement, understanding or restriction, written or oral, to which the
        Vendor is a party or by which it is bound; 

	 
	 	 (e)      	 To the best of the knowledge of the Vendor after
        due enquiry, there are no legal conflicts of any nature and no investigations
        or legal or administrative affairs pending against the Vendor in connection
        with the Property or for any other cause and there is no pending or threatened
        decree, decision, sentence, injunction, order or award of any court, arbitral
        tribunal or governmental authority or any action, procedure, arbitration,
        administrative or judicial investigation, actual or threatened, with respect
        to the Vendor or the Property; 

	 
	 	 (f)      	 The Vendor holds all right, title and interest in
        and to the Property, and the Property is free of any lien, claim, pledge,
        privilege, levy, lease, sublease or rights of any person and other than
        government royalties, government work requirements and other conditions
        imposed by a governmental authority; 

	3.2	Representations and Warranties of Riverbank 

Riverbank represents and warrants to and in favour of the Vendor
  as follows and acknowledges that the Vendor are relying upon such representations
  and warranties in consummating the transactions contemplated by this Agreement:

	 	 (a)      	 Riverbank is a corporation duly incorporated and
        validly subsisting and in good standing in the State of Nevada; 

 3 

 

	 	 (b)      	 Riverbank has the corporate power and authority
        to enter into this Agreement and to perform its obligations hereunder;
      

	 
	 	 (c)      	 The execution and delivery of this Agreement and
        the completion of the transactions contemplated herein will constitute
        a valid and binding obligation of Riverbank enforceable against it in
        accordance with its terms; 

	 
	 	 (d)      	 The entering into, execution, delivery and performance
        by the Riverbank of this Agreement will not violate or contravene or conflict
        with or result in a breach of or default or give rise to any right of
        termination, acceleration, cancellation or modification under any of the
        terms and conditions of any contract, agreement, commitment, arrangement,
        understanding or restriction, written or oral, to which Riverbank is a
        party or by which it is bound or under the constating documents or directors’
        or shareholders’ resolutions of Riverbank; 

	 4.      	 CLOSING 
	 
	 4.1      	 Time and Place of Closing 

 The closing (the “Closing”) of this Agreement will take place
  at the offices of Riverbank at 2:00 p.m. (Vancouver time) on April 26, 2005.

	4.2 	Closing Documents 

At Closing, the parties hereto will table the following documents:

	 	 (a)      	 Documents of The Vendor: The Vendor will
        table for delivery to Riverbank title transfer documents relating to the
        Property in a form acceptable to Riverbank’s legal counsel. 

	 
	 	 (b)      	 Documents of Riverbank. Tao will table for
        delivery to the Vendor a certified check, or a check issued from an attorney’s
        trust account for $3,000 made payable to the Vendor or its agents.
      

	 5.      	 TERMINATION 
	 
	 5.1      	 Mutual Termination 

 This Agreement may, prior to Closing, be terminated by the
  parties hereto by mutual agreement in writing notwithstanding anything contained
  herein. 

	 6.      	 GENERAL PROVISIONS 
	 
	 6.1      	 Time of Essence 

 Time is and will be of the essence of each and every provision
  of this Agreement. 

 4 

 

	6.2 	Finder’s Fees and Brokers’ Commission 

Each of the parties hereto represents to the other that it
  has not incurred any liability for any finders’ fee or brokers’
  commission in connection with the execution of this Agreement or the consummation
  of the transactions contemplated herein. 

	6.3	Expenses 

Riverbank will be responsible for all fees and expenses in
  connection with the preparation, execution and delivery of this Agreement and
  the preparation and completion of all other agreements, documents, approvals
  and transactions contemplated by this Agreement. 

	6.4 	Further Assurances 

Each of the parties hereto will, whether before or after Closing
  and at the expense of Riverbank, execute and deliver all such further documents
  and instruments, give all such further assurances, and do all such acts and
  things as may reasonably be required to carry out the full intent and meaning
  of this Agreement. 

	6.5 	Entire Agreement 

This Agreement and the Schedule hereto contain the whole agreement
  among the parties hereto in respect of the subject matter hereof and supersedes
  and replaces all prior negotiations, communications and correspondence between
  the parties hereto. There are no warranties, representations, terms, conditions
  or collateral agreements, express or implied, statutory or otherwise, among
  the Vendor and Riverbank other than as expressly set forth in this Agreement
  and the Schedule hereto. 

	6.6 	Enurement 

This Agreement will enure to the benefit of and be binding
  upon each of the parties hereto and their respective successors, liquidators
  and permitted assigns. 

	6.7 	Assignment 

No party hereto may assign any of its right, title or interest
  in, to or under this Agreement, nor will any such purported assignment be valid
  amongst the parties hereto, except with the prior written consent of all parties
  hereto, such consent not to be unreasonably withheld. 

	6.8 	Governing Law 

This Agreement will be construed and interpreted in accordance
  with the laws of the Province of British Columbia, Canada and the laws of Canada
  applicable therein. The parties hereto irrevocably attorn to the jurisdiction
  of the arbitrators and courts of the Province of British Columbia, Canada and
  the venue for any actions or arbitrations arising out of this Agreement will
  be Vancouver, British Columbia Canada. 

 5 

 

	6.9	Notices 

All notices, payments, and other required communications (“Notices”)
  to the parties hereto shall be in writing and shall be addressed respectively
  as follows: 

	 	 (a)  	 If to Riverbank:  
	 	  	 	 
	 	  	 	 Riverbank Resources Ltd.  
	 	  	 	 902-595 Howe Street.,  
	 	  	 	 Vancouver, BC, Canada V6C 2T 5,  
	 	  	  	 (604) 644 4359  
	 	  	 	 
	 	  	 If to the Vendor:  
	 	  	 	 
	 	 (b)  	 	 Gudmund Lovang.  
	 	  	 	 110-310 East 3rd Street,  
	 	  	 	 Vancouver, BC, Canada V7L 1E9  
	 	  	  	 (604) 985 2575  

 All notices shall be given (i) by personal delivery to the
  party by leaving a copy at the place specified for notice with a receptionist
  or an apparently responsible individual, or (ii) by electronic facsimile communication.
  All notices will be effective and will be deemed delivered (i) if by personal
  delivery, on the date of delivery if delivered during normal business hours
  and, if not delivered during normal business hours, on the next business day
  following delivery, and (ii) if by electronic communication, on the next business
  day following receipt of the electronic communication. A party hereto may change
  its address for notice by notice to the other party. 

 6 

 

	6.10	Counterparts 

This Agreement, and any certificates or other writing delivered
  in connection herewith, may be executed in any number of counterparts with the
  same effect as if all parties hereto had all signed the same documents, and
  all such counterparts will be construed together and will constitute one and
  the same instrument. The execution of this Agreement and any other writing by
  any party hereto or thereto will not become effective until counterparts hereof
  or thereof, as the case may be, have been executed by all the parties hereto
  or thereto, and executed copies delivered to each party who is a party hereto
  or thereto. Such delivery may be made by facsimile transmission of the execution
  page or pages, hereof or thereof, to each of the other parties by the party
  signing the particular counterpart, provided that forthwith after such facsimile
  transmission, an originally executed execution page or pages is forwarded by
  prepaid express courier to the other party by the party signing the particular
  counterpart. 

The parties hereto have executed and delivered this Agreement as of the date first written above. 

	 RIVERBANK RESOURCES LTD.  	 
	 	  	 
	 	  	 
	 	  	 
	 	  	 
	Per:  	  	 
	 	 EARL HOPE  	 
	 	 President  	 
	 	  	 
	 	  	 
	 	  	 
	 	 	 
	 	 GUDMUND LOVANG  	 

 7 

Schedule 1 

Description of Property 

	 Claim Name  	 Miniming District  	 Co-ordinates  
	  	 	 
	 Big Mike Border Gold  	 Skeena Mining District  	 55 Degree 50’ 50” N Lat.  
	  	 Stewart Area  	 130 Degree 02’40”W Long.  

 8EXHIBIT 10.1
                                                                    ------------

                          SECURITIES PURCHASE AGREEMENT

          This Securities Purchase Agreement (this "AGREEMENT") is dated as of
July 14, 2005, among GMX Resources Inc., an Oklahoma corporation (the
"COMPANY"), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a "PURCHASER" and collectively the
"PURCHASERS").
                                               -
          WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act and Rule 506
promulgated thereunder, the Company desires to issue and sell to each Purchaser,
and each Purchaser, severally and not jointly, desires to purchase from the
Company, on the Closing Date, that number of Shares as is set forth on the
Purchaser Signature Page of that Purchaser.

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

                                   ARTICLE I.
                                   DEFINITIONS

1.1   DEFINITIONS. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms have the meanings
indicated in this Section 1.1:

          "ACTION" shall have the meaning ascribed to such term in Section
3.1(j).

          "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. With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.

          "CLOSING" means the closing of the purchase and sale of the Common
Stock pursuant to Section 2.1.

          "CLOSING DATE" means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties thereto,
and all conditions precedent to (i) the Purchasers' obligations to pay the
Subscription Amount and (ii) the Company's obligations to deliver the Securities
have been satisfied or waived.

          "COMMISSION" means the Securities and Exchange Commission.

          "COMMON STOCK" means the common stock of the Company, par value $0.01
per share, and any securities into which such common stock may hereafter be
reclassified.

          "COMMON STOCK EQUIVALENTS" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

          "COMPANY COUNSEL" means Crowe & Dunlevy, A Professional Corporation.

          "EFFECTIVE DATE" means the date that the initial registration
statement filed by the Company for the Registrable Securities is first declared
effective by the Commission.

          "EVALUATION DATE" shall have the meaning ascribed to such term in
          Section 3.1(r).

          "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

          "GAAP" shall have the meaning ascribed to such term in Section 3.1(h).
<PAGE>

          "INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed to such
term in Section 3.1(o).

          "LEGEND REMOVAL DATE" shall have the meaning ascribed to such term in
Section 4.1(c).

          "LIENS" means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.

          "MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to such term
in Section 3.1(b).

          "MATERIAL PERMITS" shall have the meaning ascribed to such term in
Section 3.1(m).

          "PER SHARE PURCHASE PRICE" equals $13.50, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and other
similar transactions of the Common Stock that occur after the date of this
Agreement and have a record date prior to the Closing Date.

          "PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.

          "PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

          "PURCHASER PARTY" shall have the meaning ascribed to such term in
Section 4.9.

          "REGISTRABLE SECURITIES" means all of the Shares held by the
Purchasers, together with any shares of Common Stock issued or issuable upon any
stock split, dividend or other distribution, recapitalization or similar event
with respect to the Shares.

                                       2
<PAGE>

          "REGISTRATION STATEMENT" means a registration statement covering the
resale of the Registrable Securities.

          "REQUIRED APPROVALS" shall have the meaning ascribed to such term in
Section 3.1(e).

          "RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

          "SEC REPORTS" shall have the meaning ascribed to such term in Section
3.1(h).

          "SECURITIES" means the Shares.

          "SECURITIES ACT" means the Securities Act of 1933, as amended.

          "SHARES" means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement.

          "SHORT SALES" shall include, without limitation, all "short sales" as
defined in Rule 3b-3 of the Exchange Act.

          "SUBSCRIPTION AMOUNT" means, as to each Purchaser, the amounts set
forth below such Purchaser's signature block on the signature page hereto, in
United States dollars and in immediately available funds.

          "SUBSIDIARY" shall mean the subsidiaries of the Company, if any, set
forth on SCHEDULE 3.1(a).

          "TRADING DAY" means a day on which the Common Stock is traded on a
Trading Market.

          "TRADING MARKET" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market
or the Nasdaq SmallCap Market.

          "TRANSACTION DOCUMENTS" means this Agreement, the Registration
Agreement and any other documents or agreements executed in connection with the
transactions contemplated hereunder.

                                  ARTICLE II.
                                PURCHASE AND SALE

2.1   CLOSING. On the Closing Date, each Purchaser shall purchase from the
Company, severally and not jointly with the other Purchasers, and the Company
shall issue and sell to each Purchaser, a number of Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price. The
aggregate purchase price for the Shares sold hereunder shall be up to
$21,600,000. Upon satisfaction of the conditions set forth in Sections 2.2 and
2.3, the Closing

                                       3
<PAGE>

shall occur at the offices of Company Counsel or such other location as the
parties shall mutually agree.

2.2   DELIVERIES.

          (a) On the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser the following:

                    (i) this Agreement duly executed by the Company;

                    (ii) a copy of the irrevocable instructions to the Company's
                    transfer agent instructing the transfer agent to deliver, on
                    an expedited basis, a certificate evidencing a number of
                    Shares equal to such Purchaser's Subscription Amount divided
                    by the Per Share Purchase Price, registered in the name of
                    such Purchaser;

                    (iii) the Registration Agreement, duly executed by the
                    Company; and

                    (iv) a legal opinion of Company Counsel, substantially in
                    the form of EXHIBIT A attached hereto.

          (b) On the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:

                    (i) this Agreement duly executed by such Purchaser; and

                    (ii) such Purchaser's Subscription Amount by wire transfer
                    to the account as specified in writing by the Company.

2.2   CLOSING CONDITIONS.

          (a) The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:

                    (i) the accuracy in all material respects when made and on
                    the Closing Date of the representations and warranties of
                    the Purchasers contained herein;

                    (ii) all obligations, covenants and agreements of the
                    Purchasers required to be performed at or prior to the
                    Closing Date shall have been performed; and

                    (iii) the delivery by the Purchasers of the items set forth
                    in Section 2.2(b) of this Agreement.

          (b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being met:

                    (i) the accuracy in all material respects on the Closing
                    Date of the representations and warranties of the Company
                    contained herein;

                                       4
<PAGE>

                    (ii) all obligations, covenants and agreements of the
                    Company required to be performed at or prior to the Closing
                    Date shall have been performed;

                    (iii) the delivery by the Company of the items set forth in
                    Section 2.2(a) of this Agreement;

                    (iv) there shall have been no Material Adverse Effect with
                    respect to the Company since the date hereof; and

                    (v) From the date hereof to the Closing Date, trading in the
                    Common Stock shall not have been suspended by the Commission
                    (except for any suspension of trading of limited duration
                    agreed to by the Company, which suspension shall be
                    terminated prior to the Closing), and, at any time prior to
                    the Closing Date, trading in securities generally as
                    reported by Bloomberg Financial Markets shall not have been
                    suspended or limited, or minimum prices shall not have been
                    established on securities whose trades are reported by such
                    service, or on any Trading Market, nor shall a banking
                    moratorium have been declared either by the United States or
                    New York State authorities nor shall there have occurred any
                    material outbreak or escalation of hostilities or other
                    national or international calamity of such magnitude in its
                    effect on, or any material adverse change in, any financial
                    market that, in each such case, in the reasonable judgment
                    of a majority in interest of the Purchasers, makes it
                    impracticable or inadvisable to purchase the Shares at the
                    Closing.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

3.1   REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby makes
the representations and warranties set forth below to each Purchaser:

      (a) SUBSIDIARIES. All of the direct and indirect subsidiaries of the
Company are set forth on Exhibit 21 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 2004. The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities. If the Company has no subsidiaries, then references in
the Transaction Documents to the Subsidiaries will be disregarded.

      (b) ORGANIZATION AND QUALIFICATION. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
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
or default 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 conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes

                                       5
<PAGE>

such qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, would not reasonably be expected to result in
(i) a material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on
the Company's ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
"MATERIAL ADVERSE EFFECT") and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

      (c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith other than in connection with the Required Approvals. Each
of the Transaction Documents has been (or upon delivery will have been) duly
executed by the Company and, 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 (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.

      (d) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Shares and
the consummation by the Company of the other transactions contemplated 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, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, 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, or
(iii) subject to the Required Approvals, conflict with or 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), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as would not reasonably be expected to result in a Material Adverse Effect.

      (e) FILINGS, CONSENTS AND APPROVALS. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required pursuant to Section 4.4 of this Agreement,

                                       6
<PAGE>

(ii) the filing with the Commission of a Registration Statement, (iii)
application(s) to each applicable Trading Market for the listing of the Shares
for trading thereon in the time and manner required thereby, and (iv) the filing
of Form D with the Commission and such filings as are required to be made under
applicable state securities laws (collectively, the "REQUIRED APPROVALS").

      (f) ISSUANCE OF THE SECURITIES. The 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, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in the
Transaction Documents.

      (g) CAPITALIZATION. The authorized capital stock of the Company consists
of 60,000,000 shares of capital stock, of which 50,000,000 shares are designated
Common Stock and 10,000,000 shares are designated Preferred Stock. As of June
30, 2005, there were approximately 8,216,266 shares of Common Stock issued and
outstanding, and no shares of Preferred Stock issued and outstanding. As of June
30, 2005, an aggregate of (i) 235,250 shares of Common Stock were reserved for
issuance upon exercise of outstanding options and options remaining available
for issuance upon exercise under the Company's Stock Option Plan; and (ii)
1,343,116 shares of Common Stock were reserved for issuance upon exercise of
outstanding Class A warrants and underwriters' warrants. Other than the
Company's Shareholder Rights Plan as described in the Company's Form 8-K dated
May 17, 2005, no other shares or options, warrants or other rights to acquire
shares of capital stock of the Company or securities convertible into capital
stock of the Company are outstanding. The Company has not issued any capital
stock since its most recently filed periodic report under the Exchange Act,
other than pursuant to the exercise of employee stock options under the
Company's stock option plans, the issuance of shares of Common Stock to
employees pursuant to the Company's employee stock purchase plan and pursuant to
the conversion or exercise of outstanding Common Stock Equivalents. No Person
has any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the Transaction
Documents. Except as set forth in the Company's SEC Reports, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or
Common Stock Equivalents. The issue and sale of the Securities will not obligate
the Company to issue shares of Common Stock or other securities to any Person
(other than the Purchasers) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or reset price
under such Securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Shares. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company's capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company's
stockholders.

      (h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
under the

                                       7
<PAGE>

Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the "SEC Reports")
on a timely basis or has received a valid extension of such time of filing 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 of the Commission promulgated 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 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 Commission 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 except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries 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,
immaterial, year-end audit adjustments.

      (i) MATERIAL CHANGES. 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 that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
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 Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.

      (j) LITIGATION. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "ACTION") which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor, to the knowledge of the Company, any director
or officer thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws or a claim
of breach of fiduciary duty. There has not been, and to the knowledge of the
Company, there is not pending or threatened, any investigation by the Commission
involving the Company or any current director

                                       8
<PAGE>

or officer of the Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.

      (k) LABOR RELATIONS. No material labor dispute exists or, to the knowledge
of the Company, is imminent with respect to any of the employees of the Company
which could reasonably be expected to result in a Material Adverse Effect.

      (l) COMPLIANCE. Except in each case as would not reasonably be expected to
have a Material Adverse Effect, neither the Company nor any Subsidiary (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 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, including without limitation all foreign, federal, state
and local laws applicable to its business.

      (m) 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 permits would not reasonably be expected to result in a Material
Adverse Effect ("MATERIAL PERMITS"), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.

      (n) TITLE TO ASSETS. The Company and the Subsidiaries have good and
defensible title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
defensible title to all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens securing borrowings as disclosed in the SEC Reports,
Liens as do not materially affect the value of the Company's properties taken as
a whole and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries and Liens for the
payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance in all material respects.

      (o) PATENTS AND TRADEMARKS. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have
could have a Material Adverse Effect (collectively, the "INTELLECTUAL PROPERTY
RIGHTS"). Neither the Company nor any Subsidiary has received a written notice
that the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. To the knowledge of the
Company, all such Intellectual Property

                                       9
<PAGE>

Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights of others.

      (p) 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 in which the Company and
the Subsidiaries are engaged, including, but not limited to, directors and
officers insurance. To the best of Company's knowledge, such insurance contracts
and policies are accurate and complete. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.

      (q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set forth in the
SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $60,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the Company.

      (r) SARBANES-OXLEY; INTERNAL ACCOUNTING CONTROLS. The Company is in
material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which
are applicable to it as of the Closing Date. The Company's certifying officers
have evaluated the effectiveness of the Company's disclosure controls and
procedures as of the date prior to the filing date of the most recently filed
periodic report under the Exchange Act (such date, the "EVALUATION DATE"). The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company's internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the Company's knowledge,
in other factors that could significantly affect the Company's internal
controls.

      (s) CERTAIN FEES. Other than the fees payable to A.G. Edwards & Sons, Inc.
and Hibernia Southcoast Capital, Inc., (the "PLACEMENT AGENTS") pursuant to the
terms of their engagement letter and placement agreement with the Company of 6%
of the aggregate Share Purchase Prices, 3% to each, no brokerage or finder's
fees or commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions contemplated by this
Agreement. The Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.

                                       10
<PAGE>

      (t) PRIVATE PLACEMENT. Assuming the accuracy of the representations and
warranties of the Purchasers set forth in Section 3.2, no registration under the
Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.

      (u) INVESTMENT COMPANY. The Company is not, and is not an Affiliate of,
and immediately after receipt of payment for the Shares, will not be or be an
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.

      (v) LISTING AND MAINTENANCE REQUIREMENTS. The Company's Common Stock is
registered pursuant to Section 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. The Company has not, in the 12
months preceding the date hereof, received notice 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, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.

      (w) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is
applicable to the Purchasers as a result of the Purchasers and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including without limitation the Company's issuance of the Securities
to each Purchaser pursuant to this Agreement.

      (x) DISCLOSURE. The Company confirms that all disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, furnished by or on
behalf of the Company with respect to the representations and warranties made
herein are true and correct with respect to such representations and warranties
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 light
of the circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.

      (y) NO INTEGRATED OFFERING. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither the Company,
nor to the Company's knowledge, any of its affiliates, nor any Person acting on
its or their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities Act or any applicable

                                       11
<PAGE>

shareholder approval provisions, including, without limitation, under the rules
and regulations of any Trading Market on which any of the securities of the
Company are listed or designated.

      (z) SOLVENCY. Based on the financial condition of the Company as of the
Closing Date after giving effect to the receipt by the Company of the proceeds
from the sale of the Securities hereunder, (i) the Company's fair saleable value
of its assets exceeds the amount that will be required to be paid on or in
respect of the Company's existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company's assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date. The SEC Reports
set forth as of the dates thereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments. For the purposes of this Agreement, "INDEBTEDNESS"
shall mean (a) any liabilities for borrowed money or amounts owed in excess of
$50,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is
in default with respect to any Indebtedness.

      (aa) TAXES. Except for matters that would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect, the
Company and each Subsidiary has filed all necessary federal, state and foreign
income and franchise tax returns and has paid or accrued all taxes shown as due
thereon, and the Company has no knowledge of a material tax deficiency which has
been asserted or threatened against the Company or any Subsidiary.

      (bb) GENERAL SOLICITATION. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Shares by any form of
general solicitation or general advertising. The Company has offered the Shares
for sale only to the Purchasers and certain other "accredited investors" within
the meaning of Rule 501 under the Securities Act.

      (cc) FOREIGN CORRUPT PRACTICES. Neither the Company, nor to the knowledge
of the Company, any agent or other person acting on behalf of the Company, has
(i) directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which

                                       12
<PAGE>

is in violation of law, or (iv) violated in any material respect any provision
of the Foreign Corrupt Practices Act of 1977, as amended.

      (dd) ACCOUNTANTS. The Company's accountants are named in the Company's
Form 10-KSB for the year ended December 31, 2004. To the Company's knowledge,
such accountants, who the Company expects will express their opinion with
respect to the financial statements to be included in the Company's Annual
Report on Form 10-K for the year endingDecember 31, 2005, are a registered
public accounting firm as required by the Securities Act.

      (ee) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF SHARES. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby. The Company further acknowledges that
no Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Shares. The Company further represents to each Purchaser 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.

      (ff) ACKNOWLEDGEMENT REGARDING PURCHASERS' TRADING ACTIVITY. Anything in
this Agreement or elsewhere herein to the contrary notwithstanding (except for
Sections 3.2(f), 3.2(h) and 4.8 hereof), it is understood and agreed by the
Company (i) that none of the Purchasers have been asked to agree, nor has any
Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or "derivative" securities based on securities issued
by the Company or to hold the Securities for any specified term; (ii) that past
or future open market or other transactions by any Purchaser, including Short
Sales, and specifically including, without limitation, Short Sales or
"derivative" transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company's
publicly-traded securities; (iii) that any Purchaser, and counter parties in
"derivative" transactions to which any such Purchaser is a party, directly or
indirectly, presently may have a "short" position in the Common Stock, and (iv)
that each Purchaser shall not be deemed to have any affiliation with or control
over any arm's length counter-party in any "derivative" transaction.

      (gg) NO MANIPULATION OF STOCK. The Company has not taken and will not, in
violation of applicable law, take, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.

      (hh) S-3 STATUS. The Company meets the requirements for the use of Form
S-3 for the registration of the resale of the Shares by the Purchasers and will
use its reasonable best efforts to maintain S-3 status with the SEC during the
period it is required by the Registration Agreement to maintain such
registration of the resale of the shares. To the knowledge of the Company, there
exist no facts or circumstances that could reasonably be expected to prohibit or
delay the preparation or initial filing of the Registration Statement that is
required to effect such registration (the "Registration Statement").

                                       13
<PAGE>

      (ii) MATERIAL CONTRACTS. All material agreements to which the Company or
any Subsidiary is a party and which are required to have been filed by the
Company pursuant to the Securities Act or the Exchange Act have been filed by
the Company with the SEC pursuant to the requirements of the Securities Act or
the Exchange Act, as applicable. Each such agreement is in full force and effect
and is binding on the Company or a Subsidiary, as applicable, and, to the
Company's knowledge, is binding upon such other parties, in each case in
accordance with its terms, and neither the Company or a Subsidiary, as
applicable, nor, to the Company's knowledge, any other party thereto is in
breach of or default under any such agreement, which breach or default would
reasonably be expected to have a Material Adverse Effect. The Company has not
received any written notice regarding the termination of any such agreements.

3.2   REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby,
for itself and for no other Purchaser, represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows:

      (a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, 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 thereunder. The execution,
delivery and performance by such Purchaser of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate or similar
action on the part of such Purchaser. Each Transaction Documents to which it is
a party has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

      (b) OWN ACCOUNT. Such Purchaser understands that the Securities are
"restricted securities" and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof, has no present intention of distributing any of
such Securities and has no arrangement or understanding with any other persons
regarding the distribution of such Securities (this representation and warranty
not limiting such Purchaser's right to sell the Securities pursuant to a
Registration Statement or otherwise in compliance with applicable federal and
state securities laws). Such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business. Such Purchaser does not have any agreement
or understanding, directly or indirectly, with any Person to distribute any of
the Securities.

      (c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, either: (i) an "accredited
investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a "qualified institutional buyer" as defined in Rule
144A(a) under the Securities Act. Such Purchaser is not registered as, or
required

                                       14
<PAGE>

to be registered as, a broker-dealer under Section 15 of the Exchange Act. Such
Purchaser was not organized for the purpose of purchasing the Securities.

      (d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

      (e) GENERAL SOLICITATION. Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

      (f) SHORT SALES. Such Purchaser has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such
Purchaser, executed any Short Sales in the securities of the Company (including,
without limitations, any Short Sales involving the Company's securities) since
July 5, 2005 which was the earliest time that any Purchaser was first contacted
regarding an investment in the Company ("DISCUSSION TIME").

      (g) NO TAX, LEGAL, ETC. ADVICE. In evaluating the merits of an investment
in the Shares, Purchaser is not relying on the Company, the Placement Agents or
their respective counsel for an evaluation of the business, tax, legal or other
consequences of such an investment.

      (h) ECONOMIC RISK. Purchaser understands that Purchaser must bear the
economic risk of investment for an indefinite period of time because the sale of
the Shares has not been registered under the Securities Act pursuant to the
exemption provided by Section 4(2) and Rule 506 thereunder, nor under any
applicable state securities laws, and the Shares or any participation therein
may not be sold or transferred in the absence of evidence satisfactory to the
Company of compliance with applicable laws, including an opinion of counsel
satisfactory to the Company that, among other things, the Shares have been
registered under the Act and all applicable state securities laws or that such
registrations are not required. The Company has made no agreement whatsoever to
repurchase the Shares or, except as expressly provided in the Registration
Agreement, to register the transfer of any portion of them under the Securities
Act or under any state securities law.

      (i) ACCESS TO INFORMATION. Purchaser and its advisors were afforded full
and complete access to all information with respect to the Company, its
operations and the Shares that Purchaser and such advisors deemed necessary to
evaluate the merits and risks of an investment in the Shares, including the SEC
Reports, and Purchaser has had the opportunity to ask questions of and receive
answers from the Company concerning this investment. Neither the Company nor the
Agents have made any representations about the value or performance of the
Company or the Shares.

      (j) RULE 144. Purchaser is aware of the provisions of Rule 144 under the
Securities Act which permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, which may include,
among other things, the existence of a

                                       15
<PAGE>

public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of shares being sold during any three-month period
not exceeding specified limitations.

      (k) FORWARD LOOKING STATEMENTS. Purchaser acknowledges that information
Purchaser has received concerning the Company, including SEC Reports and oral
statements, include forward-looking statements about the Company's current and
future business operations, financial projections and other matters. These
statements speak only as of the date made, are not guarantees of future
performance, and involve known and unknown risks and other factors that could
cause actual results to be materially different from any future results
expressed or implied by them.

      (l) PLACEMENT AGENT FEES. Purchaser acknowledges that the Placement Agents
will receive a placement fee of 6% of the Share Purchase Prices, 3% each, and
reimbursement of certain expenses up to $50,000, all payable by the Company and
that the Company has agreed to indemnify the Placement Agents against certain
liabilities, including liabilities in connection with the offering of the
Shares.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

4.1   TRANSFER RESTRICTIONS.

      (a) The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or in connection with a pledge as contemplated in Section 4.1(b), the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement.

      (b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1(b), of a legend on any of the Securities in the following form:

          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"), 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

                                       16
<PAGE>

          AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED
          BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
          SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
          THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
          ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
          INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)
          UNDER THE SECURITIES ACT.

          The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities to a
financial institution that is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and who agrees to be bound by the provisions of this
Agreement and, if required under the terms of such arrangement, such Purchaser
may transfer pledged or secured Securities to the pledgees or secured parties.
Such a pledge or transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or pledgor shall be
required in connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser's expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities.

      (c) Certificates evidencing the Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) while a registration
statement covering the resale of such security is effective under the Securities
Act, or (ii) following any sale of such Shares pursuant to Rule 144, or (iii) if
such Shares are eligible for sale under Rule 144(k), or (iv) if such legend is
not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the Staff of the
Commission) and such lack of requirement is confirmed by a legal opinion
satisfactory to the Company; PROVIDED, HOWEVER, in connection with the sale of
the Shares under the Registration Statement, each Purchaser, severally and not
jointly with the other Purchasers, hereby agrees to adhere to and abide by all
prospectus delivery requirements under the Securities Act and rules and
regulations of the Commission. The Company shall cause its counsel to issue a
legal opinion to the Company's transfer agent promptly after the Effective Date
if required by the Company's transfer agent to effect the removal of the legend
hereunder. The Company agrees that following the Effective Date or at such time
as such legend is no longer required under this Section 4.1(c), it will, no
later than three Trading Days following the delivery by a Purchaser to the
Company or the Company's transfer agent of a certificate representing Shares
issued with a restrictive legend (such date, the "LEGEND REMOVAL DATE"), deliver
or cause to be delivered to such Purchaser 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 any transfer agent
of the Company that enlarge the restrictions on transfer set forth in this
Section. Certificates for Securities subject to legend removal hereunder shall
be transmitted by the transfer agent of the Company to the Purchasers by
crediting the account of the Purchaser's prime broker with the Depository Trust
Company System.

      (d) In addition to such Purchaser's other available remedies, the Company
shall pay to a Purchaser, in cash, as partial liquidated damages and not as a
penalty, for each $1,000 of Shares (based on the closing price of the Common
Stock on the date such Securities are

                                       17
<PAGE>

submitted to the Company's transfer agent) subject to Section 4.1(c), $10 per
Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such
damages have begun to accrue) for each Trading Day after the 2nd Trading Day
after the Legend Removal Date until such certificate is delivered. Nothing
herein shall limit such Purchaser's right to pursue actual damages for the
Company's failure to deliver certificates representing any Securities as
required by the Transaction Documents, and such Purchaser shall have the right
to pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.

      (e) Each Purchaser, severally and not jointly with the other Purchasers,
agrees that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the Company's
reliance that the Purchaser will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.

4.2   FURNISHING OF INFORMATION. As long as any Purchaser owns Securities, the
Company covenants 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. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

4.3   INTEGRATION. The Company shall not sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that 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 Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

4.4   SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the date hereof, issue a Current
Report on Form 8-K, reasonably acceptable to the Placement Agents disclosing the
material terms of the transactions contemplated hereby, and shall attach the
Transaction Documents thereto. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company (which consent shall not unreasonably be withheld) except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission

                                       18
<PAGE>

or any regulatory agency or Trading Market, without the prior written consent of
such Purchaser, except (i) as required by federal securities law in connection
with a Registration Statement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(ii).

4.5   SHAREHOLDER RIGHTS PLAN. No claim will be made or enforced by the Company
or, to the knowledge of the Company, any other Person that any Purchaser is an
"Acquiring Person" under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement,
solely by virtue of receiving Securities under the Transaction Documents or
under any other agreement between the Company and the Purchasers. The Company
shall conduct its business in a manner so that it will not become subject to the
Investment Company Act.

4.6   NON-PUBLIC INFORMATION. The Company covenants and agrees that neither it
nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel, with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company. The foregoing shall not apply to Purchasers who are directors,
employees or current shareholders of the Company holding 5% or more of its
capital stock.

4.7   USE OF PROCEEDS. The Company shall use the net proceeds from the sale of
the Securities hereunder for drilling and development of oil and gas properties
and other general corporate purposes.

4.8   SHORT SALES. Each Purchaser covenants that neither it nor any affiliates
acting on its behalf or pursuant to any understanding with it will execute any
Short Sales during the period commencing from the Discussion Time until the
effective date of the Registration Statement unless such Purchaser provides the
Company with an opinion of counsel satisfactory to the Company that such Short
Sale complies with applicable law and does not cause the exemption from
registration relied upon by the Company in issuing the Shares to be jeopardized
or lost.

4.9   INDEMNIFICATION OF PURCHASERS. Subject to the provisions of this Section
4.9, the Company will indemnify and hold the Purchasers and their directors,
officers, shareholders, partners, employees and agents (each, a "PURCHASER
PARTY") harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys' fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against a Purchaser, or any
of them or their respective Affiliates, by any stockholder of the Company who is
not an Affiliate of such Purchaser, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of such Purchaser's representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such Purchaser may
have with any such stockholder or any violations by the Purchaser of state or
federal securities laws or any conduct by such Purchaser which constitutes

                                       19
<PAGE>

fraud, gross negligence, willful misconduct or malfeasance). If any action shall
be brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall promptly notify
the Company in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing. Any Purchaser Party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party. The Company
will not be liable to any Purchaser Party under this Agreement (i) for any
settlement by a Purchaser Party effected without the Company's prior written
consent, which shall not be unreasonably withheld or delayed; or (ii) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party's breach of any of the representations,
warranties, covenants or agreements made by the Purchasers in this Agreement or
in the other Transaction Documents.

4.10  RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement.

4.11  LISTING OF COMMON STOCK. The Company hereby agrees to use best efforts to
maintain the listing of the Common Stock on a Trading Market, and as soon as
reasonably practicable following the Closing (but not later than the earlier of
the Effective Date and the first anniversary of the Closing Date) to list all of
the Shares on such Trading Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Trading Market, it will
include in such application all of the Shares, and will take such other action
as is necessary to cause all of the Shares to be listed on such other Trading
Market as promptly as possible. The Company will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a Trading
Market and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Trading Market.

4.12  EQUAL TREATMENT OF PURCHASERS. No consideration shall be offered or paid
to any person to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents unless the same consideration is also
offered to all of the parties to the Transaction Documents. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended for
the Company to treat the Purchasers as a class and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

4.13  DELIVERY OF SECURITIES AFTER CLOSING. The Company shall deliver, or cause
to be delivered, the respective Shares purchased by each Purchaser to such
Purchaser within 3 Trading Days of the Closing Date.

                                       20
<PAGE>

4.14 LIMITATION OF LIABILITY. Notwithstanding anything herein to the contrary,
the Company acknowledges and agrees that the liability of the Purchaser arising
directly or indirectly, under this Agreement or the Registration Agreement of
any and every nature whatsoever shall be satisfied solely out of the assets of
the Purchaser, and that no trustee, officer, other investment vehicle or any
other affiliate of the Purchaser or any subscriber, shareholder or holder of
shares of beneficial interest of the Purchaser shall be personally liable for
any liabilities of the Purchaser; provided, however, that such limitation of
liability shall not apply to acts of fraud by such trustee, officer, affiliate,
subscriber, shareholder or holder of beneficial interests of the Purchaser.

                                   ARTICLE V.
                                  MISCELLANEOUS

5.1   TERMINATION. This Agreement may be terminated by any Purchaser, as to such
Purchaser's obligations hereunder only and without any effect whatsoever on the
obligations between the Company and the other Purchasers, by written notice to
the other parties, if the Closing has not been consummated on or before July 31,
2005; PROVIDED, HOWEVER, that no such termination will affect the right of any
party to sue for any breach by the other party (or parties).

5.2   FEES AND EXPENSES. Except as otherwise set forth in this Agreement, 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 stamp and other taxes and duties levied in
connection with the delivery of the Securities.

5.3   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.

5.4   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
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City 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 set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

5.5   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 Purchaser 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

                                       21
<PAGE>

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.

5.6   HEADINGS. 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.

5.7   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 each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser 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 "Purchasers".

5.8   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, except as otherwise set forth in Section 4.9.

5.9   GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. The
parties hereby waive all rights to a trial by jury. If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys' fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.

5.10  SURVIVAL. The representations and warranties herein shall survive the
Closing and delivery of the Shares.

5.11  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.

5.12  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.

                                       22
<PAGE>

5.13  RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under the Transaction Documents and the Company does not timely perform its
related obligations within the periods therein provided, then such Purchaser may
rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.

5.14  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 customary and reasonable
indemnity, if requested. 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.

5.15  REMEDIES. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.

5.16  PAYMENT SET ASIDE. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

5.17  INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document. Nothing contained herein or in any Transaction Document,
and no action taken by any Purchaser pursuant thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser has been represented by its own separate legal counsel in their review
and negotiation of the Transaction Documents. The Company has elected to provide
all Purchasers with the same terms and

                                       23
<PAGE>

Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.

5.18  LIQUIDATED DAMAGES. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

5.19  CONSTRUCTION. The parties agree that each of them and/or their respective
counsel has reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

(SIGNATURE PAGE FOLLOWS)

                                       24
<PAGE>

          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.

                                       GMX RESOURCES INC.

                                       By:  _______________________________
                                            Name: Ken L. Kenworthy, Sr.
                                            Title: Chief Financial Officer

Address for Notice:

GMX Resources Inc.
9400 Broadway, Suite 600
Oklahoma City OK
Attn: Ken L. Kenworthy, Sr.
Fax 405-600-0600

With a copy to (which shall not constitute notice):

Crowe & Dunlevy A Professional Corporation
20 North Broadway, Suite 1800
Oklahoma City OK 73102
Attn: Michael M. Stewart
Fax 405-272-5238

                     [SIGNATURE PAGES FOR PURCHASERS FOLLOW]

                                       25
<PAGE>

[PURCHASER SIGNATURE PAGES TO GMX SECURITIES PURCHASE AGREEMENT]

          IN WITNESS WHEREOF, the undersigned has caused this Securities
Purchase Agreement to be duly executed by its authorized signatory as of the
date first indicated above.

Name of Purchaser: _________________________

By:  ________________________________________
         Name: ______________________________
         Title: _____________________________

Address for Notice to Purchaser:

________________________________
________________________________
________________________________
Fax:  __________________________

Address for Delivery of Securities for Purchaser (if not same as above):

______________________________
______________________________
______________________________

Subscription Amount: $_________________
Shares: ___________

          Purchaser is one or more of the following (check all that apply):

               (i)     a bank or savings and loan association. [_]

               (ii)    an insurance company. [_]

               (iii)   an investment company registered under the Investment
                       Company Act of 1940 or a business development company as
                       defined in section 2(a)(48) of that Act. [_]

               (iv)    a Small Business Investment Company licensed by the U.S.
                       Small Business Administration. [_]

               (v)     a plan established and maintained by a state or, its
                       political subdivisions for the benefit of its employees,
                       with total assets over $5,000,000. [_]

                                       26
<PAGE>

               (vi)    an employee benefit plan within the meaning of the
                       Employee Retirement Income Security Act of 1974 (A) the
                       investment decisions for which are made by a plan
                       fiduciary, which is either a bank, savings and loan
                       association, insurance company, or registered investment
                       adviser, or (B) which has total assets over $5,000,000,
                       or (C) if a self-directed plan, the investment decisions
                       for which are made solely by persons that are described
                       in subsections (g)(i) through (vi) and (g)(viii) through
                       (g)(xv). [_]

               (vii)   a private business development company as defined in the
                       Investment Advisers Act of 1940. [_]

               (viii)  an organization described in section 501(c)(3) of the
                       Internal Revenue Code, a corporation, Massachusetts or
                       similar business trust, or a partnership, not formed for
                       the specific purpose of acquiring the Shares, with total
                       assets over $5,000,000. [_]

               (ix)    a trust, with total assets over $5,000,000, not formed
                       for the specific purpose of acquiring the securities
                       offered, whose purchase is directed by a sophisticated
                       person. [_]

               (x)     a director or executive officer of the Company. [_]

               (xi)    a natural person whose individual net worth, or joint net
                       worth with such person's spouse, exceeds $1,000,000. [_]

               (xii)   a natural person who had an individual income over
                       $200,000 in each of 2003 and 2004 or joint income with
                       such person's spouse in excess of $300,000 in each of
                       those years and who has a reasonable expectation of
                       reaching the same income level in 2005. [_]

               (xiii)  an entity in which all of the equity owners are persons
                       or entities in the above categories and which has not
                       been organized for the specific purpose of making an
                       investment in the Shares. [_]

               (xiv)   none of the above. [_]

Purchaser's EIN Number is: _________________

                                       27
<PAGE>

                                                                       EXHIBIT A
                                                                       ---------

                  CONTENT OF OPINION OF COUNSEL TO THE COMPANY

                   (i) Each of the Company and its Subsidiaries is a corporation
          duly organized, validly existing and in good standing under the laws
          of the State of its incorporation. To our knowledge, all of the
          Company's Subsidiaries, as defined in the Agreements, are listed on
          Exhibit 21 to the Company's Annual Report on Form 10-K for the year
          ended December 31, 2004 (the "Form 10-K"). The Company and each of its
          Subsidiaries is duly qualified to do business as a foreign corporation
          and is in good standing in each other state in which the nature of its
          activities or of its properties owned or leased makes such
          qualification necessary, except to the extent that failure to so
          qualify would not have a material adverse effect on the Company and
          its consolidated subsidiaries (taken as a whole).

                   (ii) The Company and each of its Subsidiaries has the
          corporate power and authority to own its properties and assets, and to
          carry on its business as presently conducted.

                   (iii) The Company has the corporate power to enter into the
          Securities Purchase Agreement and the Registration Agreement
          (collectively, the "Transaction Documents") and perform its
          obligations thereunder.

                   (iv) The Transaction Documents have been duly authorized by
          all necessary corporate action on the part of the Company, have been
          duly executed and delivered by the Company and constitute legal, valid
          and binding agreements of the Company enforceable against the Company
          in accordance with their terms, except as rights to indemnity and
          contribution may be limited by state or federal securities laws or the
          public policy underlying such laws, except as enforceability may be
          limited by applicable bankruptcy, insolvency, reorganization,
          fraudulent conveyance, moratorium or similar laws affecting creditors'
          and contracting parties' rights generally and except as enforceability
          may be subject to general principles of equity (regardless of whether
          such enforceability is considered in a proceeding in equity or at
          law).

                   (v) The shares of Common Stock to be issued to the Purchasers
          at the Closing under the Securities Purchase Agreement have been duly
          authorized and, when issued and paid for in accordance with the terms
          of the Agreements, will be validly issued, fully paid and
          nonassessable.

                   (vi) The execution and delivery of the Transaction Documents
          and the performance by the Company of its obligations thereunder (a)
          will not breach or result in a violation of the Company's Charter,
          Bylaws, or any judgment, order or decree of any domestic court or
          arbitrator, known to us, to which the Company is a party or subject
          and (b) will not constitute a material breach of the terms, conditions
          or provisions of, or constitute a default under, any material
          contract, undertaking, indenture or other agreement or instrument
          identified in the Form 10-K or the Company's quarterly reports on Form
          10-Q or current reports on Form 8-K filed since the date of the Form
          10-K.
<PAGE>

                   (vii) No consent, approval or authorization of, or
          designation, declaration or filing with, any governmental authority is
          required in connection with the valid execution, delivery and
          performance by the Company of the Transaction Documents, other than
          such consents, approvals, authorizations, designations, declarations
          or filings as have been made or obtained on or before the date hereof
          or which are not required to be made or obtained until after the date
          hereof.

                   (viii) Except as disclosed in the Agreements or the exhibits
          and schedules delivered in connection therewith, there is, to our
          current actual knowledge, no action, suit or proceeding pending
          against the Company or its properties in any court or before any
          governmental authority or agency, or arbitration board or tribunal (a)
          which seeks to restrain, enjoin, prevent the consummation of, or
          otherwise challenge the Transaction Documents or any of the
          transactions contemplated thereby, or (b) which, if adversely
          determined, could reasonably be expected to have a material adverse
          effect on the Company or its business or properties (taken as a
          whole).

                   (ix) Based upon the representations of each Purchaser and the
          Company contained in the Transaction Documents, the offer, sale,
          issuance and delivery of the shares of Common Stock under the
          circumstances contemplated by the Securities Purchase Agreement are
          exempt from the registration requirements of the Securities Act.

                   (x) To our knowledge, no stockholder of the Company has any
          right to require the Company to register the sale of any shares owned
          by such stockholder under the Securities Act in the Registration
          Statement that will be filed under the Registration Agreement.

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