Document:

exv10w1

Exhibit 10.1

POSTROCK ENERGY CORPORATION

Common Stock

(par value $0.01 per share)

At-The-Market Issuance Sales Agreement

August 23, 2011

McNicoll, Lewis & Vlak LLC

1251 Avenue of the Americas

41st Floor

New York, NY 10020

Ladies and Gentlemen:

     PostRock Energy Corporation, a Delaware corporation (the “Company”), confirms its
agreement (this “Agreement”) with McNicoll, Lewis & Vlak LLC, a Delaware limited liability
company (“MLV”), as follows:

     1. Issuance and Sale of Shares. The Company agrees that, from time to time during the
term of this Agreement, on the terms and subject to the conditions set forth herein, it may issue
and sell through MLV shares (the “Placement Shares”) of the Company’s common stock, par
value $0.01 per share (the “Common Stock”); provided, however, that in no event shall the
Company issue or sell through MLV such number or dollar amount of Shares that (a) would cause the
Company or the offering of the Placement Shares to not satisfy the eligibility and transaction
requirements for use of Form S-3 (including, if applicable, Instruction I.B.6. thereof), (b)
exceeds the number or dollar amount of shares of Common Stock registered on the effective
Registration Statement (as defined below) pursuant to which the offering is being made, or (c)
exceeds the number of authorized but unissued shares of the Company’s Common Stock (the lesser of
(a), (b), and (c), the “Maximum Amount”). Notwithstanding anything to the contrary
contained herein, the parties hereto agree that compliance with the limitations set forth in this
Section 1 on the number or dollar amount of Placement Shares issued and sold under this
Agreement shall be the sole responsibility of the Company and that MLV shall have no obligation in
connection with such compliance. The issuance and sale of Placement Shares through MLV will be
effected pursuant to the Registration Statement filed by the Company and declared effective by the
Securities and Exchange Commission (the “Commission”) on May 13, 2011, although nothing in
this Agreement shall be construed as requiring the Company to use the Registration Statement to
issue Common Stock. MLV and the Company are sometimes referred to herein individually as a
“Party” and collectively as the “Parties.”

     The Company has filed with the Commission, in accordance with the provisions of the Securities
Act of 1933, as amended, and the rules and regulations thereunder (collectively, the
“Securities Act”), a registration statement on Form S-3 (File No. 333-173896), including a
base prospectus, relating to certain securities of the Company, including the Placement Shares, to
be issued from time to time by the Company pursuant to Rule 415 under the Securities Act, and

 

 

which incorporates by reference documents that the Company has filed or will file in
accordance with the provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (collectively, the “Exchange Act”). The Company has prepared a
prospectus supplement specifically relating to the Placement Shares (the “Prospectus
Supplement”) to the base prospectus included as part of such registration statement. The
Company will furnish to MLV, for use by MLV, copies of the prospectus included as part of such
registration statement, as supplemented by the Prospectus Supplement, relating to the Placement
Shares. Except where the context otherwise requires, such registration statement, including any
information contained in a Prospectus (as defined below) subsequently filed with the Commission
pursuant to Rule 424(b) under the Securities Act or deemed to be a part of such registration
statement pursuant to Rule 430B of the Securities Act, is herein called the “Registration
Statement.” The base prospectus included in the Registration Statement (the “Base
Prospectus”), as it may be supplemented by the Prospectus Supplement, in the form in which such
prospectus and/or Prospectus Supplement is filed by the Company with the Commission pursuant to
Rule 424(b) under the Securities Act is herein called the “Prospectus”. Any reference
herein to the Registration Statement, the Prospectus or any amendment or supplement thereto shall
be deemed to refer to and include the documents incorporated by reference therein (the
“Incorporated Documents”), and any reference herein to the terms “amend,” “amendment” or
“supplement” with respect to the Registration Statement or the Prospectus shall be deemed to refer
to and include the filing after the execution hereof of any document with the Commission deemed to
be incorporated by reference therein.

     For purposes of this Agreement, all references to the Registration Statement, the Prospectus
or to any amendment or supplement thereto, or any Issuer Free Writing Prospectus (as defined below)
(other than any Issuer Free Writing Prospectus that, pursuant to Rule 433, is not required to be
filed with the Commission) shall be deemed to include the most recent copy filed with the
Commission pursuant to its Electronic Data Gathering Analysis and Retrieval System, or if
applicable, the Interactive Data Electronic Application system when used by the Commission
(collectively, “EDGAR”).

     2. Placements. Each time that the Company wishes to issue and sell Placement Shares
hereunder (each, a “Placement”), it will notify MLV by email notice (or other method
mutually agreed to in writing by the Parties) of the number of Placement Shares to be sold, the
time period during which sales are requested to be made, any limitation on the number of Placement
Shares that may be sold in any one day or in any one transaction and any minimum price below which
sales may not be made (a “Placement Notice”), the form of which is attached hereto as
Schedule 1. The Placement Notice shall originate from any of the individuals from the
Company set forth on Schedule 3 (with a copy to each of the other individuals from the
Company listed on such schedule), and shall be addressed to each of the individuals from MLV set
forth on Schedule 3, as such Schedule 3 may be amended from time to time. The Placement
Notice shall be effective unless and until (i) MLV, acting in good faith, declines to accept the
terms contained therein, (ii) the entire amount of the Placement Shares thereunder have been sold,
(iii) the Company suspends or terminates the Placement Notice or (iv) this Agreement has been
terminated under the provisions of Section 13. The amount of any discount, commission or
other compensation to be paid by the Company to MLV in connection with the sale of the Placement
Shares shall be calculated in accordance with the terms set forth in Schedule 2. It is
expressly acknowledged and agreed that neither the Company nor MLV will have any obligation

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whatsoever with respect to a Placement or any Placement Shares unless and until the Company
delivers a Placement Notice to MLV and MLV does not decline such Placement Notice pursuant to the
terms set forth above, and then only upon the terms specified therein and herein. In the event of
a conflict between the terms of Sections 2, 3, and 4 of this Agreement and
the terms of a Placement Notice, the terms of the Placement Notice will control.

     3. Sale of Placement Shares by MLV.

          (a) Subject to the terms and conditions of this Agreement, MLV, for the period specified in
the Placement Notice, will use its commercially reasonable efforts consistent with its normal
trading and sales practices and applicable state and federal laws, rules and regulations and the
rules of the NASDAQ Global Market (the “Exchange”), to sell the Placement Shares up to the
amount specified, and otherwise in accordance with the terms of such Placement Notice. MLV will
provide written confirmation to the Company no later than the opening of the Trading Day (as
defined below) immediately following the Trading Day on which it has made sales of Placement Shares
hereunder setting forth the number of Placement Shares sold on such day, the compensation payable
by the Company to MLV pursuant to Section 2 with respect to such sales, and the Net
Proceeds (as defined below) payable to the Company, with an itemization of the deductions made by
MLV (as set forth in Section 5(a)) from the gross proceeds that it receives from such
sales. Subject to the terms of the Placement Notice, MLV may sell Placement Shares by any method
permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities
Act, including without limitation sales made directly on the Exchange, on any other existing
trading market for the Common Stock or to or through a market maker. Subject to the terms of a
Placement Notice, MLV may also sell Placement Shares by any other method permitted by law,
including but not limited to in privately negotiated transactions, with the Company’s consent. The
Company acknowledges and agrees that (i) there can be no assurance that MLV will be successful in
selling Placement Shares, (ii) MLV will incur no liability or obligation to the Company or any
other person or entity if it does not sell Placement Shares for any reason other than a failure by
MLV to use its commercially reasonable efforts consistent with its normal trading and sales
practices and applicable law and regulations to sell such Placement Shares as required under this
Agreement and (iii) MLV shall be under no obligation to purchase Placement Shares on a principal
basis pursuant to this Agreement, except as otherwise agreed by MLV and the Company. “Trading
Day” means any day on which Common Stock is purchased and sold on the Exchange.

          (b) During the term of this Agreement, neither MLV nor any of its affiliates or subsidiaries
shall engage in (i) any short sale of any security of the Company or (ii) any sale of any security
of the Company that MLV does not own or any sale which is consummated by the delivery of a security
of the Company borrowed by, or for the account of, MLV. Neither MLV nor any of its affiliates or
subsidiaries shall engage in any proprietary trading or trading for MLV’s (or its affiliates’ or
subsidiaries’) own account.

     4. Suspension of Sales. The Company (for any reason) or MLV (acting in good faith)
may, upon notice (a “Suspension Notice”) to the other Party in writing (including by email
correspondence to each of the individuals of the other Party set forth on Schedule 3, if receipt of
such correspondence is actually acknowledged by any of the individuals to whom the notice is sent,
other than via auto-reply) or by telephone (confirmed immediately by verifiable facsimile

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transmission or email correspondence to each of the individuals of the other Party set forth
on Schedule 3 ), suspend this offering and any sale of Placement Shares for a period of time (a
“Suspension Period”); provided, however, that such suspension shall not affect or impair
any party’s obligations with respect to any Placement Shares sold hereunder prior to the receipt of
such notice. Each of the Parties agrees that no such notice under this Section 4 shall be
effective against any other Party unless it is made to one of the individuals named on Schedule
3 hereto, as such Schedule may be amended from time to time. During a Suspension Period, the
Company shall not issue any Placement Notices and MLV shall not sell any Placement Shares
hereunder. A Suspension Period shall end five Trading Days after the Party which issued the
Suspension Notice notifies the other Party in writing that it wishes to end the Suspension Period.

     5. Settlement.

          (a) Settlement of Placement Shares. Unless otherwise specified in the applicable
Placement Notice, settlement for sales of Placement Shares will occur on the third (3rd)
Trading Day (or such earlier day as is industry practice for regular-way trading) following the
date on which such respective sales are made (each, a “Settlement Date”). The amount of
proceeds to be delivered to the Company on a Settlement Date against receipt of the Placement
Shares sold (the “Net Proceeds”) will be equal to the aggregate sales price received by MLV
at which such Placement Shares were sold, after deduction for (i) MLV’s commission, discount or
other compensation for such sales payable by the Company pursuant to Section 2 hereof, and
(ii) any transaction fees imposed by any governmental or self-regulatory organization in respect of
such sales.

          (b) Delivery of Placement Shares. On or before each Settlement Date, the Company
will, or will cause its transfer agent to, electronically transfer the Placement Shares being sold
by crediting MLV’s or its designee’s account (provided MLV shall have given the Company written
notice of such designee a reasonable period of time prior to the Settlement Date) at The Depository
Trust Company through its Deposit and Withdrawal at Custodian System or by such other means of
delivery as may be mutually agreed upon by the parties hereto which in all cases shall be freely
tradable, transferable, registered shares in good deliverable form. On each Settlement Date, MLV
will deliver the related Net Proceeds in same day funds to an account designated by the Company on,
or prior to, the Settlement Date. The Company agrees that if the Company, or its transfer agent
(if applicable), defaults in its obligation to deliver Placement Shares on a Settlement Date
through no fault of MLV, in addition to and in no way limiting the rights and obligations set forth
in Section 11(a) hereto, the Company will (i) hold MLV harmless against any loss, claim,
damage, or expense (including reasonable legal fees and expenses), as incurred, arising out of or
in connection with such default by the Company or its transfer agent (if applicable) and (ii) pay
to MLV (without duplication) any commission, discount, or other compensation to which it would
otherwise have been entitled absent such default.

          (c) Limitations on Offering Size. Under no circumstances shall the Company cause or
request the offer or sale of any Placement Shares if, after giving effect to the sale of such
Placement Shares, the aggregate number of Placement Shares sold pursuant to this Agreement would
exceed the lesser of (i) together with all sales of Placement Shares under this Agreement, the
Maximum Amount and (ii) the amount authorized from time to time to be issued

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and sold under this Agreement by the Company’s board of directors, a duly authorized committee
thereof or a duly authorized executive committee, and notified to MLV in writing. Under no
circumstances shall the Company cause or request the offer or sale of any Placement Shares pursuant
to this Agreement at a price lower than the minimum price authorized from time to time by the
Company’s board of directors, a duly authorized committee thereof or a duly authorized executive
committee, and notified to MLV in writing.

     6. Representations and Warranties of the Company. The Company represents and warrants
to, and agrees with MLV that as of the date of this Agreement and as of each Applicable Time (as
defined below), unless such representation, warranty or agreement specifies a different time or
times and except as may be disclosed in the Registration Statement or a Disclosure Schedule
delivered in connection herewith:

          (a) Registration Statement and Prospectus. The Company and, assuming no act or
omission on the part of MLV that would make such statement untrue, the transactions contemplated by
this Agreement meet the requirements for and comply with the conditions for the use of Form S-3
under the Securities Act. The Registration Statement has been filed with the Commission and has
been declared effective under the Securities Act by the Commission. The Prospectus Supplement will
name MLV, as an underwriter acting as the agent that the Company might engage, in the section
entitled “Plan of Distribution.” The Company has not received, and has no notice of, any order of
the Commission preventing or suspending the use of the Registration Statement, or threatening or
instituting proceedings for that purpose. The Registration Statement and the offer and sale of
Placement Shares as contemplated hereby meet the requirements of Rule 415 under the Securities Act
and comply in all material respects with said Rule. Any statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement have been so described or filed. Copies of the
Registration Statement, the Prospectus, and any such amendments or supplements and all documents
incorporated by reference therein that were filed with the Commission on or prior to the date of
this Agreement have been delivered, or are available through EDGAR, to MLV and its counsel. The
Company has not distributed and, prior to the later to occur of each Settlement Date and completion
of the distribution of the Placement Shares, will not distribute any offering material in
connection with the offering or sale of the Placement Shares other than the Registration Statement
and the Prospectus and any Issuer Free Writing Prospectus to which MLV has consented (such consent
not to be unreasonably withheld). The Common Stock is currently listed on the Exchange under the
trading symbol “PSTR”. Except as disclosed in the Registration Statement, including the
Incorporated Documents, the Company has not, in the 12 months preceding the date hereof, received
notice from the Exchange to the effect that the Company is not in compliance with the listing or
maintenance requirements.

          (b) No Misstatement or Omission. The Registration Statement, when it became
effective, and the Prospectus, and any amendment or supplement thereto, on the date of such
Prospectus or amendment or supplement, conformed or will conform in all material respects with the
requirements of the Securities Act. At each Settlement Date, the Registration Statement and the
Prospectus, as of such date, will conform in all material respects with the requirements of the
Securities Act. The Registration Statement, when it became effective, did not contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein or

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necessary to make the statements therein not misleading. The Prospectus and any amendment or
supplement thereto, on the date thereof and at each Applicable Time (defined below), did not or
will not include an untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which they were made, not
misleading. The documents incorporated by reference in the Prospectus or any Prospectus Supplement
did not, and any further documents filed and incorporated by reference therein will not, when filed
with the Commission, contain an untrue statement of a material fact or omit to state a material
fact required to be stated in such document or necessary to make the statements in such document,
in the light of the circumstances under which they were made, not misleading. The foregoing shall
not apply to statements in, or omissions from, any such document made in reliance upon, and in
conformity with, information furnished to the Company by MLV specifically for use in the
preparation thereof.

          (c) Conformity with Securities Act and Exchange Act. The documents incorporated by
reference in the Registration Statement, the Prospectus or any amendment or supplement thereto,
when such documents were or are filed with the Commission under the Securities Act or the Exchange
Act or became or become effective under the Securities Act, as the case may be, conformed or will
conform in all material respects with the requirements of the Securities Act and the Exchange Act,
as applicable.

          (d) Financial Information. The consolidated financial statements of the Company
included or incorporated by reference in the Registration Statement, the Prospectus and the Issuer
Free Writing Prospectuses, if any, together with the related notes and schedules, complied as to
form in all material respects with applicable requirements of the Securities Act and the Exchange
Act, as applicable, as in effect as of the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles, consistently applied, during
the periods covered thereby (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim financial statements, to the extent
they may exclude footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its Subsidiaries (as
defined below) as of the dates indicated and the consolidated results of operations and cash flows
of the Company and its Subsidiaries for the periods specified (subject, in the case of unaudited
statements, to normal year-end audit adjustments which will not be material, either individually or
in the aggregate); the other financial and statistical data with respect to the Company and the
Subsidiaries contained or incorporated by reference in the Registration Statement, the Prospectus
and the Issuer Free Writing Prospectuses, if any, are in all material respects accurately and
fairly presented and true and correct; there are no financial statements (historical or pro forma)
that are required to be included or incorporated by reference in the Registration Statement or the
Prospectus that are not included or incorporated by reference as required; the Company and its
Subsidiaries do not have any material liabilities or obligations, direct or contingent (including
any off-balance sheet obligations), not described in the Registration Statement (including the
exhibits thereto), or the Prospectus which are required to be described in the Registration
Statement or the Prospectus (including Exhibits thereto and Incorporated Documents); and all
disclosures contained or incorporated by reference in the Registration Statement, the Prospectus
and the Issuer Free Writing Prospectuses, if any, regarding “non-GAAP financial measures” (as such
term is defined by the rules and regulations

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of the Commission) comply in all material respects with Regulation G of the Exchange Act and
Item 10 of Regulation S-K under the Securities Act, to the extent applicable.

          (e) Conformity with EDGAR Filing. The Prospectus delivered to MLV for use in
connection with the sale of the Placement Shares pursuant to this Agreement will be identical to
the versions of the Prospectus created to be transmitted to the Commission for filing via EDGAR,
except to the extent permitted by Regulation S-T.

          (f) Organization. The Company and each of its Subsidiaries are, and will be, duly
organized, validly existing as a corporation, limited partnership, limited liability company or
other legal entity and in good standing under the laws of their respective jurisdictions of
organization. The Company and each of its Subsidiaries are, and will be, duly qualified as a
foreign corporation for transaction of business and in good standing under the laws of each other
jurisdiction in which their respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all corporate power and authority
necessary to own or hold their respective properties and to conduct their respective businesses as
described in the Registration Statement and the Prospectus, except where the failure to be so
qualified or in good standing or have such power or authority would not, individually or in the
aggregate, have a material adverse effect or would reasonably be expected to have a material
adverse effect on the assets, business, operations, earnings, properties, condition (financial or
otherwise), prospects, stockholders’ equity or results of operations of the Company and the
Subsidiaries (as defined below) (a “Material Adverse Effect”).

          (g) Subsidiaries. The subsidiaries set forth on Schedule 4 (collectively, the
“Subsidiaries”), are the Company’s only significant subsidiaries (as such term is defined
in Rule 1-02 of Regulation S-X promulgated by the Commission) as of the date hereof. Except as set
forth in the Registration Statement and in the Prospectus, the Company owns, directly or
indirectly, all of the equity interests of the Subsidiaries free and clear of any lien, charge,
security interest, encumbrance, right of first refusal or other restriction, and all the equity
interests of the Subsidiaries are validly issued and, to the extent applicable, are fully paid,
nonassessable and free of preemptive and similar rights.

          (h) No Violation or Default. Neither the Company nor any of its Subsidiaries is (i)
in violation of its charter or by-laws or similar organizational documents; (ii) in default, and no
event has occurred that, with notice or lapse of time or both, would constitute such a default, in
the due performance or observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or
to which any of the property or assets of the Company or any of its Subsidiaries are subject; or
(iii) in violation of any law or statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority, except, in the case of each of clauses (ii) and
(iii) above, for any such violation or default that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Except as described in the Prospectus or
the Incorporated Documents, to the Company’s knowledge, no other party under any material contract
or other agreement to which it or any of its Subsidiaries is a party is in default in any respect
thereunder where such default would reasonably be expected to have a Material Adverse Effect.

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          (i) No Material Adverse Change. Except as set forth in or otherwise contemplated by
the Registration Statement or the Prospectus, since the date of the most recent financial
statements of the Company included or incorporated by reference in the Registration Statement and
the Prospectus and prior to each Settlement Date (i) there has not been and will not have been any
change in the capital stock of the Company (except for changes in the number of outstanding shares
of Common Stock of the Company due to the issuance of shares upon the exercise or conversion of
securities exercisable for, or convertible into, shares of Common Stock outstanding on the date
hereof) or long-term debt of the Company or of its Subsidiaries or any dividend or distribution of
any kind declared, set aside for payment, paid or made by the Company on any class of capital
stock, that has resulted in or that would reasonably be expected to result in a Material Adverse
Effect; (ii) other than this Agreement, neither the Company nor its Subsidiaries have entered or
will enter into any transaction or agreement that is material to the Company and its Subsidiaries
taken as a whole or incurred or will incur any liability or obligation, direct or contingent, that
is material to the Company and its Subsidiaries taken as a whole; (iii) there has not been any
Material Adverse Effect; and (iv) neither the Company nor its Subsidiaries have sustained any
material loss or interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor disturbance or dispute or any action, order
or decree of any court or arbitrator or governmental or regulatory authority.

          (j) Capitalization. The issued and outstanding shares of capital stock of the Company
have been validly issued, are fully paid and non-assessable. The Company has an authorized, issued
and outstanding capitalization as set forth in the Registration Statement and the Prospectus as of
the dates referred to therein (other than the grant of additional options under the Company’s
existing stock option plans and the issuance of additional securities to White Deer Energy L.P. and
its affiliates (collectively, “White Deer”) pursuant to agreements disclosed in the
Registration Statement and the Prospectus, or changes in the number of outstanding shares of Common
Stock of the Company due to the issuance of shares upon the exercise or conversion of securities
exercisable for, or convertible into, shares of Common Stock outstanding on the date hereof or
subsequently issued to White Deer or as a result of the issuance of Placement Shares) and such
authorized capital stock conforms to the description thereof set forth in the Registration
Statement and the Prospectus. The description of the Common Stock in the Registration Statement
and the Prospectus is complete and accurate in all material respects. Except as disclosed in or
contemplated by the Registration Statement or the Prospectus, as of the date referred to therein,
the Company did not have outstanding any options to purchase, or any rights or warrants to
subscribe for, or any securities or obligations convertible into, or exchangeable for, or any
contracts or commitments to issue or sell, any shares of capital stock or other securities.

          (k) Authorization; Enforceability. The Company has full legal right, power and
authority to enter into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and
binding agreement of the Company enforceable in accordance with its terms, except to the extent
that (i) enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally and by general equitable principles and (ii) the
indemnification and contribution provisions of Section 11 hereof

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may be limited by federal or state securities laws and public policy considerations in respect
thereof.

          (l) Authorization of Placement Shares. The Placement Shares, when issued and
delivered pursuant to the terms approved by the board of directors of the Company or a duly
authorized committee thereof, or a duly authorized executive committee, against payment therefor as
provided herein, will be duly and validly authorized and issued and fully paid and nonassessable,
free and clear of any pledge, lien, encumbrance, security interest or other claim (other than any
pledge, lien, encumbrance, security interest or other claim arising from an act or omission of MLV
or a purchaser), including any statutory or contractual preemptive rights, resale rights, rights of
first refusal or other similar rights, and will be registered pursuant to Section 12 of the
Exchange Act. The Placement Shares, when issued, will conform in all material respects to the
description thereof set forth in or incorporated into the Prospectus.

          (m) No Consents Required. No consent, approval, authorization, order, registration or
qualification of or with any court or arbitrator or any governmental or regulatory authority is
required for the execution, delivery and performance by the Company of this Agreement, and the
issuance and sale by the Company of the Placement Shares as contemplated hereby, except for the
registration of the offering of the Placement Shares under the Securities Act, the filing of the
Prospectus with the Commission and such consents, approvals, authorizations, orders and
registrations or qualifications as may be required under applicable state securities laws or by the
by-laws and rules of the Financial Industry Regulatory Authority (“FINRA”) or the Exchange
in connection with the sale of the Placement Shares by MLV.

          (n) No Preferential Rights. Except as set forth in or contemplated by the
Registration Statement and the Prospectus, (i) no person, as such term is defined in Rule 1-02 of
Regulation S-X promulgated under the Securities Act (each, a “Person”), has the right,
contractual or otherwise, to cause the Company to issue or sell to such Person any shares of Common
Stock or shares of any other capital stock or other securities of the Company (other than upon the
exercise of options or warrants to purchase Common Stock or upon the exercise of options that may
be granted from time to time under the Company’s stock option plans), (ii) no Person has any
preemptive rights, rights of first refusal, or any other rights (whether pursuant to a “poison
pill” provision or otherwise) to purchase any shares of Common Stock or shares of any other capital
stock or other securities of the Company from the Company which have not been duly waived with
respect to the offering contemplated hereby, (iii) no Person has the right to act as an
underwriter or as a financial advisor to the Company in connection with the offer and sale of the
Placement Shares, and (iv) no Person has the right, contractual or otherwise, to require the
Company to register under the Securities Act any shares of Common Stock or shares of any other
capital stock or other securities of the Company, or to include any such shares or other securities
in the Registration Statement or the offering contemplated thereby, whether as a result of the
filing or effectiveness of the Registration Statement or the sale of the Placement Shares as
contemplated thereby or otherwise, except for such rights as have been waived on or prior to the
date hereof.

          (o) Independent Public Accountant. UHY LLP (the “Accountant”), whose report
on the consolidated financial statements of the Company is filed with the Commission as part of the
Company’s most recent Annual Report on Form 10-K and incorporated into the

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Registration Statement and the Prospectus, are and, during the periods covered by their
report, were an independent registered public accounting firm within the meaning of the Securities
Act and the Public Company Accounting Oversight Board (United States). To the Company’s knowledge,
the Accountant is not in violation of the auditor independence requirements of the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”) with respect to the Company.

          (p) Enforceability of Agreements. To the Company’s knowledge, all agreements between
the Company and third parties expressly referenced in the Prospectus, other than such agreements
that have expired by their terms or whose termination is disclosed in documents filed by the
Company with the Commission, are legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms, except to the extent that (i) enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights
generally and by general equitable principles and (ii) the indemnification provisions of certain
agreements may be limited be federal or state securities laws or public policy considerations in
respect thereof, except for any unenforceability that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.

          (q) No Litigation. Except as set forth in the Registration Statement or the
Prospectus, there are no legal, governmental or regulatory actions, suits or proceedings pending,
nor, to the Company’s knowledge, any legal, governmental or regulatory investigations, to which the
Company or a Subsidiary is a party or to which any property of the Company or any of its
Subsidiaries is the subject that, individually or in the aggregate, if determined adversely to the
Company or any of its Subsidiaries, would reasonably be expected to have a Material Adverse Effect
or materially and adversely affect the ability of the Company to perform its obligations under this
Agreement; and to the Company’s knowledge, no such actions, suits or proceedings are threatened or
contemplated by any governmental or regulatory authority or threatened by others that, individually
or in the aggregate, if determined adversely to the Company or any of its Subsidiaries, would
reasonably be expected to have a Material Adverse Effect; and there are no current or pending
legal, governmental or regulatory actions, suits, proceedings or, to the Company’s knowledge,
investigations that are required under the Securities Act to be described in the Prospectus that
are not described in the Prospectus.

          (r) Licenses and Permits. Except as set forth in the Registration Statement or the
Prospectus, the Company and each of its Subsidiaries possess or have obtained, all licenses,
certificates, consents, orders, approvals, permits and other authorizations issued by, and have
made all declarations and filings with, the appropriate federal, state, local or foreign
governmental or regulatory authorities that are necessary for the ownership or lease of their
respective properties or the conduct of their respective businesses as described in the
Registration Statement and the Prospectus (the “Permits”), except where the failure to
possess, obtain or make the same would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except as disclosed in the Registration Statement or
the Prospectus, neither the Company nor any of its Subsidiaries have received written notice of any
proceeding relating to revocation or modification of any such Permit or has any reason to believe
that such Permit will not be renewed in the ordinary course, except where the failure to obtain any
such renewal would not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

10

 

          (s) Market Capitalization. As of a date within 60 days immediately prior to the date
of this Agreement, the aggregate market value of the outstanding voting and non-voting common
equity (as defined in Securities Act Rule 405) of the Company held by persons other than affiliates
of the Company (pursuant to Securities Act Rule 144, those that directly, or indirectly through one
or more intermediaries, control, or are controlled by, or are under common control with, the
Company) (the “Non-Affiliate Shares”), was equal to $60.9 million (calculated by
multiplying (x) the last reported sale price at which the common equity of the Company was sold on
the Exchange as of such date times (y) the number of Non-Affiliate Shares outstanding as of the
date hereof).

          (t) No Material Defaults. Neither the Company nor any of the Subsidiaries has
defaulted on any installment on indebtedness for borrowed money or on any rental on one or more
long-term leases, which defaults, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect. The Company has not filed a report pursuant to Section 13(a) or
15(d) of the Exchange Act since the filing of its last Annual Report on Form 10-K, indicating that
it (i) has failed to pay any dividend or sinking fund installment on preferred stock or (ii) has
defaulted on any installment on indebtedness for borrowed money or on any rental on one or more
long-term leases, which defaults, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect.

          (u) Certain Market Activities. Neither the Company nor any of the Subsidiaries, nor
any of their respective directors, officers or controlling persons has taken, directly or
indirectly, any action designed, or that has constituted or might reasonably be expected to cause
or result in, under the Exchange Act or otherwise, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the Placement Shares.

          (v) Broker/Dealer Relationships. Neither the Company nor any of its Subsidiaries (i)
is required to register as a “broker” or “dealer” in accordance with the provisions of the Exchange
Act or (ii) directly or indirectly through one or more intermediaries, controls or is a “person
associated with a member” or “associated person of a member” (within the meaning set forth in the
FINRA Manual).

          (w) No Reliance. The Company has not relied upon MLV or legal counsel for MLV for any
legal, tax or accounting advice in connection with the offering and sale of the Placement Shares.

          (x) Taxes. The Company and each of its Subsidiaries have filed all federal, state,
local and foreign tax returns which have been required to be filed and paid all taxes shown thereon
through the date hereof, to the extent that such taxes have become due and are not being contested
in good faith, except where the failure to do so would not reasonably be expected to have a
Material Adverse Effect. Except as otherwise disclosed in or contemplated by the Registration
Statement or the Prospectus, no tax deficiency has been determined adversely to the Company or any
of its Subsidiaries which has had, or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. The Company has no knowledge of any federal, state or other
governmental tax deficiency, penalty or assessment which has been or might be asserted or
threatened against it which would have a Material Adverse Effect.

11

 

          (y) Title to Real and Personal Property. Except as set forth in the Registration
Statement or the Prospectus, the Company and each of its Subsidiaries have (i) good and defensible
title to all of its oil, gas and mineral leases or mineral interests (including oil and gas wells,
producing leasehold interests and appurtenant personal property), and title investigations having
been carried out by the Company or each of its Subsidiaries consistent with the reasonable practice
in the oil and gas industry in the areas in which the Company and each of its Subsidiaries operate
and (ii) good and valid title to all other items of real property and to all personal property
described in the Registration Statement or Prospectus as being owned by them that are material to
the businesses of the Company or such Subsidiary, in each case free and clear of all liens,
encumbrances and claims, except (A) those that do not materially interfere with the use made and
proposed to be made of such property by the Company and any of its Subsidiaries or would not
reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, (B)
royalties, overriding royalties and other similar burdens under oil and gas leases, (C) easements,
restrictions, rights-of-way and other matters that commonly affect property, (D) those securing
taxes and other governmental charges, or claims of materialmen, mechanics and similar persons, not
yet due and payable and (E) those under gas sales contracts, geophysical exploration agreements,
operating agreements, farmout agreements, participation agreements, unitization, pooling and
commutation agreements, declarations and orders and gas sales contracts securing payment of amounts
not yet due and payable and of a scope and nature customary in the oil and gas industry. Any real
property described in the Registration Statement or Prospectus as being leased by the Company and
any of its Subsidiaries is held by them under valid, existing and enforceable leases, free and
clear of all liens, encumbrances and claims, except those that (1) do not materially interfere with
the use made or proposed to be made of such property by the Company or any of its Subsidiaries or
(2) would not be reasonably expected, individually or in the aggregate, to have a Material Adverse
Effect.

          (z) Reserve Reports. The information underlying the estimates of the Company’s
reserves that was supplied by the Company to Cawley, Gillespie & Associates Inc. (the “Reserve
Engineers”), for the purposes of preparing the reserve reports and estimates of the proved
reserves of the Company disclosed in the Registration Statement and the Prospectus, including
production and costs of operation, was true and correct in all material respects on the dates such
information was supplied, and such information was supplied and was prepared in accordance with
customary industry practices. The estimates of such proved reserves and standardized measure as
described in the Registration Statement and the Prospectus and reflected in the reports referenced
therein have been prepared in a manner that complies in all material respects with the applicable
requirements of the rules under the Securities Act with respect to such estimates.

          (aa) Intellectual Property. Except as set forth in the Registration Statement or the
Prospectus, to the Company’s knowledge, the Company and its Subsidiaries own or possess adequate
enforceable rights to use all patents, patent applications, trademarks (both registered and
unregistered), service marks, trade names, trademark registrations, service mark registrations,
copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures) (collectively, the
“Intellectual Property”), necessary for the conduct of their respective businesses as
conducted as of the date hereof, except to the extent that the failure to own or possess adequate
rights to use such Intellectual Property would not, individually or in the aggregate, reasonably be
expected to

12

 

have a Material Adverse Effect; except as disclosed in writing to MLV, the Company and any of
its Subsidiaries have not received any written notice of any claim of infringement or conflict
which asserted Intellectual Property rights of others, which infringement or conflict, if the
subject of an unfavorable decision, would result in a Material Adverse Effect; there are no
pending, or to the Company’s knowledge, threatened judicial proceedings or interference proceedings
against the Company or its Subsidiaries challenging the Company’s or its Subsidiaries’ rights in or
to or the validity of the scope of any of the Company’s or its Subsidiaries’ material patents,
patent applications or proprietary information; to the Company’s knowledge, no other entity or
individual has any right or claim in any of the Company’s or its Subsidiaries’ owned, material
patents, patent applications or any patent to be issued therefrom by virtue of any contract,
license or other agreement entered into between such entity or individual and the Company or a
Subsidiary or by any non-contractual obligation of the Company or a Subsidiary, other than by
written licenses granted by the Company or a Subsidiary; the Company and its Subsidiaries have not
received any written notice of any claim challenging the rights of the Company or a Subsidiary in
or to any Intellectual Property owned, licensed or optioned by the Company or such Subsidiary which
claim, if the subject of an unfavorable decision, would result in a Material Adverse Effect.

          (bb) Environmental Laws. Except as set forth in the Registration Statement or the
Prospectus, the Company and its Subsidiaries (i) are in compliance with any and all applicable
federal, state, local and foreign laws, rules, regulations, decisions and orders relating to the
protection of human health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (collectively, “Environmental Laws”); (ii) have received and are
in compliance with all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses as described in the Registration
Statement and the Prospectus; and (iii) have not received notice of any actual or potential
liability for the investigation or remediation of any disposal or release of hazardous or toxic
substances or wastes, pollutants or contaminants, except, in the case of any of clauses (i), (ii)
or (iii) above, for any such failure to comply or failure to receive required permits, licenses,
other approvals or liability as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. Except as set forth in the Registration Statement or the
Prospectus, there are no costs or liabilities arising under Environmental Laws with respect to the
operation of the Company’s and each of its Subsidiaries’ oil and gas properties (including without
limitation, any capital, or operating expenditures required for clean-up or closure of the
properties, compliance with Environmental Laws, any permit, license or approval or any related
legal constraints or operating activities, and any potential liabilities of third parties assumed
under contract by the Company or any of its Subsidiaries) that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.

          (cc) Disclosure Controls. The Company maintains systems of internal accounting
controls designed to provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. Except as disclosed in the

13

 

Registration Statement and the Prospectus, from the end of the Company’s most recent audited
fiscal year to the end of the most recent fiscal quarter for which the Company has filed a Form
10-Q, there has been (i) no material weakness in the Company’s internal control over financial
reporting (whether or not remediated) and (ii) no change in the Company’s internal control over
financial reporting that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for the Company and
designed such disclosure controls and procedures to ensure that material information relating to
the Company and each of its Subsidiaries is made known to the certifying officers by others within
those entities, particularly during the period in which the Company’s Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, is being prepared. The Company’s certifying
officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of
the end of the period covered by the most recent periodic report filed by the Company with the
Commission (such date, the “Evaluation Date”). The Company presented in such periodic
report the conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.

          (dd) Sarbanes-Oxley. To the knowledge of the Company, there is and has been no
failure on the part of the Company or any of the Company’s directors or officers, in their
capacities as such, to comply with any applicable provisions of the Sarbanes-Oxley Act and the
rules and regulations promulgated thereunder. Each of the principal executive officer and the
principal financial officer of the Company (or each former principal executive officer of the
Company and each former principal financial officer of the Company as applicable) has made all
certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to all
reports, schedules, forms, statements and other documents required to be filed by it or furnished
by it to the Commission. For purposes of the preceding sentence, “principal executive officer” and
“principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley
Act.

          (ee) Finder’s Fees. Neither the Company nor any of the Subsidiaries has incurred any
liability for any finder’s fees, brokerage commissions or similar payments in connection with the
transactions herein contemplated, except as may otherwise exist with respect to MLV pursuant to
this Agreement.

          (ff) Labor Disputes. No labor disturbance by or dispute with employees of the Company
or any of its Subsidiaries exists or, to the knowledge of the Company, is threatened which would
reasonably be expected to result in a Material Adverse Effect

          (gg) Investment Company Act. Neither the Company nor any of the Subsidiaries is or,
after giving effect to the offering and sale of the Placement Shares, will be an “investment
company” or an entity “controlled” by an “investment company,” as such terms are defined in the
Investment Company Act of 1940, as amended (the “Investment Company Act”).

          (hh) Operations. The operations of the Company and its Subsidiaries are and have been
conducted at all times in compliance with applicable financial record keeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money
laundering statutes of all jurisdictions to which the Company or its

14

 

Subsidiaries are subject, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines, issued, administered or enforced by any governmental agency
having jurisdiction over the Company (collectively, the “Money Laundering Laws”), except as
would not reasonably be expected to result in a Material Adverse Effect; and no action, suit or
proceeding by or before any court or governmental agency, authority or body or any arbitrator
involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company, threatened.

          (ii) Off-Balance Sheet Arrangements. There are no transactions, arrangements and
other relationships between and/or among the Company, and/or, to the knowledge of the Company, any
of its affiliates and any unconsolidated entity, including, but not limited to, any structural
finance, special purpose or limited purpose entity (each, an “Off Balance Sheet
Transaction”) that could reasonably be expected to affect materially the Company’s liquidity or
the availability of or requirements for its capital resources, including those Off Balance Sheet
Transactions described in the Commission’s Statement about Management’s Discussion and Analysis of
Financial Conditions and Results of Operations (Release Nos. 33-8056; 34-45321; FR-61), required to
be described in the Prospectus which have not been described as required.

          (jj) Underwriter Agreements. The Company is not a party to any agreement with an
agent or underwriter for any other “at-the-market” or continuous equity transaction.

          (kk) ERISA. To the knowledge of the Company, (i) each material employee benefit plan,
within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), that is maintained, administered or contributed to by the Company or any
of its Subsidiaries (other than a Multiemployer Plan, within the meaning of Section 3(37) of ERISA)
for employees or former employees of the Company and any of its Subsidiaries has been maintained in
compliance with its terms and the requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Internal Revenue Code of 1986, as amended
(the “Code”); (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or
Section 4975 of the Code, has occurred with respect to any such plan (excluding transactions
effected pursuant to a statutory or administrative exemption); and (iii) for each such plan that is
subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated
funding deficiency” as defined in Section 412 of the Code has been incurred, whether or not waived,
and the fair market value of the assets of each such plan (excluding for these purposes accrued but
unpaid contributions) equals or exceeds the present value of all benefits accrued under such plan
determined using reasonable actuarial assumptions, other than, in the case of (i), (ii) and (iii)
above, as would not reasonably be expected to have a Material Adverse Effect.

          (ll) Margin Rules. Neither the issuance, sale and delivery of the Placement Shares
nor the application of the proceeds thereof by the Company as described in the Registration
Statement and the Prospectus will violate Regulation T, U or X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board of Governors.

          (mm) Insurance. The Company and each of its Subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as the Company and each of its

15

 

Subsidiaries reasonably believe are adequate for the conduct of their properties and as is
customary for companies of similar size engaged in similar businesses in similar industries.

          (nn) No Improper Practices. Neither the Company nor any of its Subsidiaries or
controlled affiliates, nor any director or officer, nor, to the Company’s knowledge, any employee,
agent or representative of the Company or of any of its Subsidiaries or controlled affiliates
acting on behalf of the Company or any of its Subsidiaries or controlled affiliates, has taken any
action in furtherance of an offer, payment, promise to pay, or authorization or approval of the
payment or giving of money, property, gifts or anything else of value, directly or indirectly, to
any “government official” (including any officer or employee of a government or government-owned or
controlled entity or of a public international organization, or any person acting in an official
capacity for or on behalf of any of the foregoing, or any political party or party official or
candidate for political office) to improperly influence official action or secure an improper
advantage for the Company; and the Company and its Subsidiaries or controlled affiliates have
conducted their businesses in compliance with applicable anti-corruption laws and have instituted
and maintained policies and procedures designed to promote and achieve compliance with such laws.

          (oo) Status Under the Securities Act. The Company was not and is not an ineligible
issuer as defined in Rule 405 under the Securities Act at the times specified in Rules 164 and 433
under the Securities Act in connection with the offering of the Placement Shares.

          (pp) No Misstatement or Omission in an Issuer Free Writing Prospectus. Each Issuer
Free Writing Prospectus, as of its issue date and as of each Applicable Time (as defined in
Section 25 below), did not, does not and will not include any information that conflicted,
conflicts or will conflict with the information contained in the Registration Statement or the
Prospectus, including any incorporated document deemed to be a part thereof that has not been
superseded or modified. The foregoing sentence does not apply to statements in or omissions from
any Issuer Free Writing Prospectus based upon and in conformity with written information furnished
to the Company by MLV specifically for use therein.

          (qq) No Conflicts. Neither the execution of this Agreement, nor the issuance,
offering or sale of the Placement Shares, nor the consummation of any of the transactions
contemplated herein and therein, nor the compliance by the Company with the terms and provisions
hereof and thereof will conflict with, or will result in a breach of, any of the terms and
provisions of, or has constituted or will constitute a default under, or has resulted in or will
result in the creation or imposition of any lien, charge or encumbrance upon any property or assets
of the Company pursuant to the terms of any contract or other agreement to which the Company may be
bound or to which any of the property or assets of the Company is subject, except (i) such
conflicts, breaches or defaults as may have been waived and (ii) such conflicts, breaches and
defaults that would not reasonably be expected to have a Material Adverse Effect; nor will such
action result (x) in any violation of the provisions of the organizational or governing documents
of the Company, or (y) in any material violation of the provisions of any statute or any order,
rule or regulation applicable to the Company or of any court or of any federal, state or other
regulatory authority or other government body having jurisdiction over the Company, except where
such violation would not reasonably be expected to have a Material Adverse Effect.

16

 

          (rr) Stock Transfer Taxes. On each Settlement Date, all stock transfer or other taxes
(other than income taxes) which are required to be paid in connection with the sale and transfer of
the Placement Shares to be sold hereunder will be, or will have been, fully paid or provided for by
the Company and all laws imposing such taxes will be or will have been fully complied with in all
material respects.

     Any certificate signed by an officer of the Company and delivered to MLV or to counsel for MLV
pursuant to or in connection with this Agreement shall be deemed to be a representation and
warranty by the Company, as applicable, to MLV as to the matters set forth therein.

     7. Covenants of the Company. The Company covenants and agrees with MLV that:

          (a) Registration Statement Amendments. After the date of this Agreement and during
any period in which a Prospectus relating to any Placement Shares is required to be delivered by
MLV under the Securities Act (including in circumstances where such requirement may be satisfied
pursuant to Rule 172 under the Securities Act), (i) the Company will notify MLV promptly of the
time when any subsequent amendment to the Registration Statement, other than documents incorporated
by reference, has been filed with the Commission and/or has become effective or any subsequent
supplement to the Prospectus has been filed and of any request by the Commission for any amendment
or supplement to the Registration Statement or Prospectus or for additional information, (ii) the
Company will prepare and file with the Commission, promptly upon MLV’s request, any amendments or
supplements to the Registration Statement or Prospectus that, in MLV’s reasonable opinion, may be
necessary in connection with the distribution of the Placement Shares by MLV (provided, however,
that the failure of MLV to make such request shall not relieve the Company of any obligation or
liability hereunder, or affect MLV’s right to rely on the representations and warranties made by
the Company in this Agreement and provided, further, that the only remedy MLV shall have with
respect to the failure to make such filing shall be to cease making sales under this Agreement
until such amendment or supplement is filed); (iii) the Company will not file any amendment or
supplement to the Registration Statement or Prospectus relating to the Placement Shares or a
security convertible into the Placement Shares unless a copy thereof has been submitted to MLV
within a reasonable period of time before the filing and MLV has not reasonably objected thereto
(provided, however, that the failure of MLV to make such objection shall not relieve the Company of
any obligation or liability hereunder, or affect MLV’s right to rely on the representations and
warranties made by the Company in this Agreement and provided, further, that the only remedy MLV
shall have with respect to the failure by the Company to provide MLV with such copy shall be to
cease making sales under this Agreement) and the Company will furnish to MLV at the time of filing
thereof a copy of any document that upon filing is deemed to be incorporated by reference into the
Registration Statement or Prospectus, except for those documents available via EDGAR; and (iv) the
Company will cause each amendment or supplement to the Prospectus to be filed with the Commission
as required pursuant to the applicable paragraph of Rule 424(b) of the Securities Act or, in the
case of any document to be incorporated therein by reference, to be filed with the Commission as
required pursuant to the Exchange Act, within the time period prescribed (the determination to file
or not file any amendment or supplement with the Commission under this Section 7(a), based
on the

17

 

Company’s reasonable opinion or reasonable objections, shall be made exclusively by the
Company).

          (b) Notice of Commission Stop Orders. The Company will advise MLV, promptly after it
receives notice or obtains knowledge thereof, of the issuance or threatened issuance by the
Commission of any stop order suspending the effectiveness of the Registration Statement, of the
suspension of the qualification of the Placement Shares for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceeding for any such purpose; and it will promptly
use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such a stop order should be issued. The Company will advise MLV promptly after it
receives any request by the Commission for any amendments to the Registration Statement or any
amendment or supplements to the Prospectus or any Issuer Free Writing Prospectus or for additional
information related to the offering of the Placement Shares or for additional information related
to the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus.

          (c) Delivery of Prospectus; Subsequent Changes. During any period in which a
Prospectus relating to the Placement Shares is required to be delivered by MLV under the Securities
Act with respect to the offer and sale of the Placement Shares (including in circumstances where
such requirement may be satisfied pursuant to Rule 172 under the Securities Act) (the
“Prospectus Delivery Period”), the Company will comply with all requirements imposed upon
it by the Securities Act, as from time to time in force, and to file on or before their respective
due dates all reports and any definitive proxy or information statements required to be filed by
the Company with the Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision
of or under the Exchange Act. If the Company has omitted any information from the Registration
Statement pursuant to Rule 430A under the Securities Act, it will use its reasonable best efforts
to comply with the provisions of and make all requisite filings with the Commission pursuant to
said Rule 430A and to notify MLV promptly of all such filings. If during the Prospectus Delivery
Period any event occurs as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances then existing, not misleading, or if
during the Prospectus Delivery Period it is necessary to amend or supplement the Registration
Statement or Prospectus to comply with the Securities Act, the Company will promptly notify MLV to
suspend the offering of Placement Shares during such period and the Company will promptly amend or
supplement the Registration Statement or Prospectus (at the expense of the Company) so as to
correct such statement or omission or effect such compliance.

          (d) Listing of Placement Shares. During the Prospectus Delivery Period, the Company
will use its reasonable best efforts to cause the Placement Shares to be listed on the Exchange and
to qualify the Placement Shares for sale under the securities laws of such jurisdictions as MLV
reasonably designates and to continue such qualifications in effect so long as required for the
distribution of the Placement Shares; provided, however, that the Company shall not be required in
connection therewith to qualify as a foreign corporation or dealer in securities or file a general
consent to service of process in any jurisdiction.

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          (e) Delivery of Registration Statement and Prospectus. The Company will furnish to
MLV and its counsel (at the expense of the Company) copies of the Registration Statement, the
Prospectus (including all documents incorporated by reference therein) and all amendments and
supplements to the Registration Statement or Prospectus that are filed with the Commission during
the Prospectus Delivery Period (including all documents filed with the Commission during such
period that are deemed to be incorporated by reference therein), in each case as soon as reasonably
practicable and in such quantities as MLV may from time to time reasonably request and, at MLV’s
request, will also furnish copies of the Prospectus to each exchange or market on which sales of
the Placement Shares may be made; provided, however, that the Company shall not be required to
furnish any document (other than the Prospectus, exclusive of any document incorporated by
reference therein) to MLV to the extent such document is available on EDGAR.

          (f) Earnings Statement. The Company will make generally available to its security
holders as soon as practicable, but in any event not later than 15 months after the end of the
Company’s current fiscal quarter, an earnings statement covering a 12-month period that satisfies
the provisions of Section 11(a) and Rule 158 of the Securities Act.

          (g) Use of Proceeds. The Company will use the Net Proceeds as described in the
Prospectus in the section entitled “Use of Proceeds.”

          (h) Notice of Other Sales. Without the prior written consent of MLV, the Company will
not, directly or indirectly, offer to sell, sell, contract to sell, grant any option to sell or
otherwise dispose of any shares of Common Stock (other than the Placement Shares offered pursuant
to this Agreement) or securities convertible into or exchangeable for Common Stock, warrants or any
rights to purchase or acquire, Common Stock during the period beginning on the third (3rd) Trading
Day immediately prior to the date on which any Placement Notice is delivered to MLV hereunder and
ending on the third (3rd) Trading Day immediately following the final Settlement Date with respect
to Placement Shares sold pursuant to such Placement Notice (or, if the Placement Notice has been
terminated or suspended prior to the sale of all Placement Shares covered by a Placement Notice,
ending on the date of such suspension or termination); and will not directly or indirectly in any
other “at-the-market” offering sell, contract to sell, grant any option to sell or otherwise
dispose of any shares of Common Stock (other than the Placement Shares offered pursuant to this
Agreement) or securities convertible into or exchangeable for Common Stock, warrants or any rights
to purchase or acquire, Common Stock prior to the earliest to occur of (1) the date on which this
Agreement is terminated by the Company pursuant to Section 13(b)(ii), (2) the date on which
MLV terminates this Agreement pursuant to Section 13(a) or Section 13(c) or (3) the
thirtieth (30th) day immediately following the final Settlement Date with respect to Placement
Shares sold pursuant to such Placement Notice; provided, however, that such restrictions will not
be required in connection with the Company’s issuance or sale of (i) Common Stock, options to
purchase shares of Common Stock or Common Stock issuable upon the exercise of options, or other
equity awards, pursuant to any employee or director stock option, incentive or benefits plan, stock
ownership plan or dividend reinvestment plan (but not Common Stock subject to a waiver to exceed
plan limits in its dividend reinvestment plan) of the Company whether now in effect or hereafter
implemented; (ii) Common Stock issuable upon conversion of securities or the exercise of warrants,
options or other rights in effect or outstanding, and disclosed in filings by the Company available
on

19

 

EDGAR or otherwise in writing to MLV; (iii) Common Stock, or securities convertible into or
exercisable for Common Stock, or warrants or any rights to purchase or acquire Common Stock offered
and sold in privately negotiated transactions to “accredited investors” as defined under Rule 501
under the Securities Act and otherwise conducted in a manner so as not to be integrated with the
offering of Common Stock hereby, and Common Stock issuable upon conversion or exercise of such
securities, warrants or rights; and (iv) Common Stock, warrants and other securities issued to
White Deer.

          (i) Change of Circumstances. The Company will, at any time during the pendency of a
Placement Notice, advise MLV promptly after it shall have received notice or obtained knowledge
thereof, of any information or fact that would alter or affect in any material respect any opinion,
certificate, letter or other document required to be provided to MLV pursuant to this Agreement.

          (j) Due Diligence Cooperation. The Company will cooperate with any reasonable due
diligence review conducted by MLV or its representatives in connection with the transactions
contemplated hereby, including, without limitation, providing information and making available
documents and senior corporate officers, during regular business hours and at the Company’s
principal offices or such other location mutually agreed to by the parties, as MLV may reasonably
request.

          (k) Required Filings Relating to Placement of Placement Shares. The Company agrees
that on such dates as the Securities Act shall require, the Company will (i) file a prospectus
supplement with the Commission under the applicable paragraph of Rule 424(b) under the Securities
Act (each and every filing under Rule 424(b), a “Filing Date”), which prospectus supplement
will set forth, within the relevant period, the amount of Placement Shares sold through MLV, the
Net Proceeds to the Company and the compensation payable by the Company to MLV with respect to such
Placement Shares, and (ii) deliver such number of copies of each such prospectus supplement to each
exchange or market on which such sales were effected as may be required by the rules or regulations
of such exchange or market.

          (l) Representation Dates; Certificate. On the date of this Agreement and each time
the Company:

(i) files the Prospectus relating to the Placement Shares or amends or supplements (other
than a prospectus supplement relating solely to an offering of securities other than the
Placement Shares) the Registration Statement or the Prospectus relating to the Placement
Shares (other than a prospectus supplement filed in accordance with Section 7(k)
of this Agreement) by means of a post-effective amendment, sticker, or supplement but not by
means of incorporation of documents by reference into the Registration Statement or the
Prospectus relating to the Placement Shares;

(ii) files an annual report on Form 10-K under the Exchange Act (including any Form 10-K/A
that contains restated financial statements);

(iii) files its quarterly reports on Form 10-Q under the Exchange Act; or

20

 

(iv) files a current report on Form 8-K containing amended audited financial information
(other than information “furnished” pursuant to Items 2.02 or 7.01 of Form 8-K or to provide
disclosure pursuant to Item 8.01 of Form 8-K relating to the reclassification of certain
properties as discontinued operations in accordance with Accounting Standards Codification
205) under the Exchange Act (each date of filing of one or more of the documents referred to
in clauses (i) through (iv) shall be a “Representation Date”);

the Company shall furnish MLV (but in the case of clause (iv) above only if MLV reasonably
determines that the information contained in such Form 8-K is material) with a certificate, in the
form attached hereto as Exhibit 7(l). The requirement to provide a certificate under this
Section 7(l) shall be waived for any Representation Date occurring at a time at which no
Placement Notice is pending, which waiver shall continue until the earlier to occur of the date the
Company delivers a Placement Notice hereunder (which for such calendar quarter shall be considered
a Representation Date) and the next occurring Representation Date; provided, however, that such
waiver shall not apply for any Representation Date on which the Company files its annual report on
Form 10-K. Notwithstanding the foregoing, if the Company subsequently decides to sell Placement
Shares following a Representation Date when the Company relied on such waiver and did not provide
MLV with a certificate under this Section 7(l), then before the Company delivers the
Placement Notice or MLV sells any Placement Shares, the Company shall provide MLV with a
certificate, in the form attached hereto as Exhibit 7(l), dated the date of the Placement Notice.

          (m) Legal Opinion. (i) On the date of this Agreement and (2) within five (5) Trading
Days of each Representation Date with respect to which the Company is obligated to deliver a
certificate in the form attached hereto as Exhibit 7(l) for which no waiver is applicable, the
Company shall cause to be furnished to MLV the written opinion of Baker Botts L.L.P. (“Company
Counsel”), or other counsel reasonably satisfactory to MLV, in form and substance reasonably
satisfactory to MLV and its counsel; provided, however, the Company shall be required to furnish to
MLV no more than one opinion hereunder per calendar quarter; provided, further, that in lieu of
such opinions for subsequent periodic filings under the Exchange Act, counsel may furnish MLV with
a letter (a “Reliance Letter”) to the effect that MLV may rely on a prior opinion delivered
under this Section 7(m) to the same extent as if it were dated the date of such letter
(except that statements in such prior opinion shall be deemed to relate to the Registration
Statement and the Prospectus as amended or supplemented as of the date of the Reliance Letter).

          (n) Comfort Letter. (i) On the date of this Agreement and (ii) within ten (10)
Trading Days following each subsequent date the Company files an annual report on Form 10-K under
the Exchange Act, during the Prospectus Delivery Period and with respect to which the Company is
obligated to deliver a certificate in the form attached hereto as Exhibit 7(l) for which no waiver
is applicable, the Company shall cause its independent accountants to furnish MLV letters (the
“Comfort Letters”), dated the date the Comfort Letter is delivered. The Comfort Letter
from the Company’s independent accountants shall be in a form and substance reasonably satisfactory
to MLV, (i) confirming that they are an independent public accounting firm within the meaning of
the Securities Act and the PCAOB, (ii) stating, as of such date, the conclusions and findings of
such firm with respect to the financial information and other matters ordinarily covered by
accountants’ “comfort letters” to underwriters in connection with registered public offerings (the
first such letter, the “Initial Comfort Letter”) and (iii) updating the Initial Comfort

21

 

Letter with any information that would have been included in the Initial Comfort Letter had it
been given on such date and modified as necessary to relate to the Registration Statement and the
Prospectus, as amended and supplemented to the date of such letter.

          (o) Market Activities. The Company will not, directly or indirectly, (i) take any
action designed to cause or result in, or that constitutes or might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Placement Shares or (ii) sell, bid for, or purchase the
Placement Shares in violation of Regulation M, or pay anyone any compensation for soliciting
purchases of the Placement Shares other than MLV.

          (p) Investment Company Act. The Company will conduct its affairs in such a manner so
as to reasonably ensure that neither it nor any of its Subsidiaries will be or become, at any time
prior to the termination of this Agreement, an “investment company,” as such term is defined in the
Investment Company Act, assuming no change in the Commission’s current interpretation as to
entities that are not considered an investment company.

          (q) No Offer to Sell. Other than an Issuer Free Writing Prospectus approved in
advance by the Company and MLV in its capacity as agent hereunder, neither MLV nor the Company
(including its agents and representatives, other than MLV in their capacity as such) will make,
use, prepare, authorize, approve or refer to any written communication (as defined in Rule 405
under the Securities Act), required to be filed with the Commission, that constitutes an offer to
sell or solicitation of an offer to buy Placement Shares hereunder.

          (r) Controls and Procedures. The Company will maintain a system of internal
accounting controls in a manner designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and including those policies and
procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide
reasonable assurance that transactions are recorded as necessary to permit the preparation of the
Company’s consolidated financial statements in accordance with generally accepted accounting
principles and that receipts and expenditures of the Company are being made only in accordance with
authorizations of the Company’s management and directors, and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on its financial statements. The Company will
maintain such controls and other procedures, including, without limitation, those required by
Sections 302 and 906 of the Sarbanes-Oxley Act, and the applicable regulations thereunder that are
designed to ensure that information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms, including, without limitation, controls
and procedures designed to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated and communicated to the
Company’s management, including its principal executive officer and principal financial officer, or
persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure and to ensure that material information relating to the Company, including the
Subsidiaries, is made known to

22

 

them by others within those entities, particularly during the period in which such periodic
reports are being prepared.

          (s) Required FINRA Disclosure. The Company will not file any amendment to the
Registration Statement that updates the plan of distribution included or incorporated by reference
therein without including the following language (the “Required FINRA Disclosure”) in the
updated plan of distribution: “In compliance with the guidelines of the Financial Industry
Regulatory Authority (‘FINRA’), the aggregate maximum discount, commission, agency fees or other
items constituting underwriting compensation to be received by any FINRA member or independent
broker-dealer will not exceed 8% of the gross offering proceeds from any offering pursuant to this
prospectus and any applicable prospectus supplement or pricing supplement, as the case may be”. In
addition, the Company will not file any amendment to the Registration Statement (other than any
periodic or current report filed with the Commission deemed to be incorporated by reference
therein) unless the plan of distribution in the Base Prospectus (as compared to the plan of
distribution in the prospectus supplement, including one that is part of the Prospectus)
immediately after the amendment, whether because the amendment updates the plan of distribution or
because the plan of distribution was previously updated by a prior amendment, contains the Required
FINRA Disclosure.

     8. Representations and Covenants of MLV. MLV represents and warrants that it is duly
registered as a broker-dealer under FINRA, the Exchange Act and the applicable statutes and
regulations of each state in which the Placement Shares will be offered and sold, except such
states in which MLV is exempt from registration or such registration is not otherwise required.
MLV shall continue, for the term of this Agreement, to be duly registered as a broker-dealer under
FINRA, the Exchange Act and the applicable statutes and regulations of each state in which the
Placement Shares will be offered and sold, except such states in which MLV is exempt from
registration or such registration is not otherwise required, during the term of this Agreement.
MLV will comply with all applicable law and regulations in connection with the Placement Shares,
including but not limited to Regulation M.

     9. Payment of Expenses. The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is terminated in accordance with the provisions of
Section 13 hereunder, will pay all expenses incident to the performance of its obligations
hereunder, including, but not limited to, expenses relating to (i) the preparation, filing,
including any fees required by the Commission, and printing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each amendment and
supplement thereto and each Issuer Free Writing Prospectus, in such number as MLV shall reasonably
deem necessary, (ii) the printing and delivery to MLV of this Agreement, (iii) the preparation,
issuance and delivery of the certificates, if any, for the Placement Shares to MLV, including any
stock or other transfer taxes and any capital duties, stamp duties or other duties or taxes payable
upon the sale, issuance or delivery of the Placement Shares to MLV, (iv) the fees and disbursements
of the counsel, accountants and other advisors to the Company, (v) the fees and expenses of the
transfer agent and registrar for the Common Stock, (vi) the filing fees incident to any review by
FINRA of the terms of the sale of the Placement Shares, and (vii) the fees and expenses incurred in
connection with the listing of the Placement Shares on the Exchange. MLV will pay all of its
expenses incident to the performance of its obligations hereunder.

23

 

     10. Conditions to MLV’s Obligations. The obligations of MLV hereunder with respect to
a Placement will be subject to the continuing accuracy and completeness of the representations and
warranties made by the Company herein, to the due performance by the Company of its obligations
hereunder, to the completion by MLV of a due diligence review satisfactory to it in its reasonable
judgment, and to the continuing satisfaction (or waiver by MLV in its sole discretion) of the
following additional conditions:

          (a) Registration Statement Effective. The Registration Statement shall have become
effective and shall be available for the sale of all Placement Shares contemplated to be issued by
any Placement Notice.

          (b) No Material Notices. None of the following events shall have occurred and be
continuing: (i) receipt by the Company of any request for additional information from the
Commission or any other federal or state governmental authority during the period of effectiveness
of the Registration Statement the response to which would require any post-effective amendments or
supplements to the Registration Statement or the Prospectus; (ii) the issuance by the Commission or
any other federal or state governmental authority of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt by
the Company of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Placement Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; or (iv) the occurrence of any event that requires
the making of any changes in the Registration Statement, the Prospectus or documents so that, in
the case of the Registration Statement, it will not contain any materially untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and, that in the case of the Prospectus, it will not contain
any materially untrue statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

          (c) No Misstatement or Material Omission. MLV shall not have advised the Company that
the Registration Statement or Prospectus, or any amendment or supplement thereto, contains an
untrue statement of fact that in MLV’s reasonable opinion based on advice of counsel is material,
or omits to state a fact that in MLV’s reasonable opinion based on advice of counsel is material
and is required to be stated therein or is necessary to make the statements therein not misleading.

          (d) Material Changes. Except as contemplated in the Prospectus, or disclosed in the
Company’s reports filed with the Commission, there shall not have been any material adverse change,
on a consolidated basis, in the authorized capital stock of the Company or any Material Adverse
Effect, or any development that would reasonably be expected to cause a Material Adverse Effect.

          (e) Legal Opinion. MLV shall have received the opinions of Company Counsel required
to be delivered pursuant Section 7(m) on or before the date on which such delivery of such
opinions are required pursuant to Section 7(m).

24

 

          (f) Comfort Letter. MLV shall have received the Comfort Letter required to be
delivered pursuant Section 7(n) on or before the date on which such delivery of such letter
is required pursuant to Section 7(n).

          (g) Representation Certificate. MLV shall have received the certificate required to
be delivered pursuant to Section 7(l) on or before the date on which delivery of such
certificate is required pursuant to Section 7(l).

          (h) No Suspension. Trading in the Common Stock shall not have been suspended on the
Exchange and the Common Stock shall not have been delisted from the Exchange.

          (i) Other Materials. On each date on which the Company is required to deliver a
certificate pursuant to Section 7(l), the Company shall have furnished to MLV such
appropriate further information, certificates and documents as MLV may reasonably request and which
are usually and customarily furnished by an issuer of securities in connection with a securities
offering.

          (j) Securities Act Filings Made. All filings with the Commission required by Rule 424
under the Securities Act to have been filed prior to the issuance of any Placement Notice hereunder
shall have been made within the applicable time period prescribed for such filing by Rule 424.

          (k) Approval for Listing. The Placement Shares shall either have been approved for
listing on the Exchange, subject only to notice of issuance, or the Company shall have filed an
application for listing of the Placement Shares on the Exchange at, or prior to, the issuance of
any Placement Notice.

          (l) No Termination Event. There shall not have occurred any event that would permit
MLV to terminate this Agreement pursuant to Section 13(a).

     11. Indemnification and Contribution.

          (a) Company Indemnification. The Company agrees to indemnify and hold harmless MLV,
its partners, members, directors, officers, employees and agents and each person, if any, who
controls MLV within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act as follows:

               (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred,
joint or several, to the extent arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any amendment thereto), or
the omission or alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out of any untrue statement or
alleged untrue statement of a material fact included in any related Issuer Free Writing Prospectus
or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

25

 

               (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred,
joint or several, to the extent of the aggregate amount paid in settlement of any litigation, or
any investigation or proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that any such settlement is effected with the written consent of
the Company; and

               (iii) against any and all expense whatsoever, as incurred (including the reasonable fees and
disbursements of counsel), reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or
(ii) above,

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue statement or omission
or alleged untrue statement or omission made solely in reliance upon and in conformity with written
information furnished to the Company by MLV expressly for use in the Registration Statement (or any
amendment thereto), or in any related Issuer Free Writing Prospectus or the Prospectus (or any
amendment or supplement thereto).

          (b) MLV Indemnification. MLV agrees to indemnify and hold harmless the Company and
its directors and each officer of the Company who signed the Registration Statement, and each
person, if any, who (i) controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act or (ii) is controlled by or is under common control with the
Company against any and all loss, liability, claim, damage and expense described in the indemnity
contained in Section 11(a), as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any
amendments thereto), the Prospectus (or any amendment or supplement thereto) or any Free Writing
Prospectus in reliance upon and in conformity with information furnished to the Company in writing
by MLV expressly for use therein.

          (c) Procedure. Any party that proposes to assert the right to be indemnified under
this Section 11 will, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim is to be made against an indemnifying party or
parties under this Section 11, notify each such indemnifying party of the commencement of
such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying
party will not relieve the indemnifying party from (i) any liability that it might have to any
indemnified party otherwise than under this Section 11 and (ii) any liability that it may
have to any indemnified party under the foregoing provision of this Section 11 unless, and
only to the extent that, such omission results in the forfeiture or material impairment of
substantive rights or defenses by the indemnifying party. If any such action is brought against
any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by delivering written
notice to the indemnified party a reasonable time, but in no event more than ten (10) days after
receiving notice of the commencement of the action from the indemnified party, jointly with any
other indemnifying party similarly notified, to assume the defense of the action, with counsel

26

 

reasonably satisfactory to the indemnified party, and after notice from the indemnifying party
to the indemnified party of its election to assume the defense, the indemnifying party will not be
liable to the indemnified party for any legal or other expenses except as provided below and except
for the reasonable costs of investigation subsequently incurred by the indemnified party in
connection with the defense. The indemnified party will have the right to employ its own counsel
in any such action, but the fees, expenses and other charges of such counsel will be at the expense
of such indemnified party unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded
(based on advice of counsel) that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the indemnifying party, (3) a
conflict or potential conflict exists (based on advice of counsel to the indemnified party) between
the indemnified party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or parties shall not,
in connection with any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or parties. All such
fees, disbursements and other charges will be reimbursed by the indemnifying party promptly after
the indemnifying party receives a written invoice relating to fees, disbursements and other charges
in reasonable detail. An indemnifying party will not, in any event, be liable for any settlement
of any action or claim effected without its written consent. No indemnifying party shall, without
the prior written consent of each indemnified party, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding relating to the matters
contemplated by this Section 11 (whether or not any indemnified party is a party thereto),
unless such settlement, compromise or consent (1) includes an unconditional release of each
indemnified party from all liability arising out of such litigation, investigation, proceeding or
claim and (2) does not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.

          (d) Contribution. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing paragraphs of this
Section 11 is applicable in accordance with its terms but for any reason is held to be
unavailable from the Company or MLV, the Company and MLV will contribute to the total losses,
claims, liabilities, expenses and damages (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received by the Company from
persons other than MLV, such as persons who control the Company within the meaning of the
Securities Act, officers of the Company who signed the Registration Statement and directors of the
Company, who also may be liable for contribution) to which the Company and MLV may be subject in
such proportion as shall be appropriate to reflect the relative benefits received by the Company on
the one hand and MLV on the other hand. The relative benefits received by the Company on the one
hand and MLV on the other hand shall be deemed to be in the same proportion as the total net
proceeds from the sale of the Placement Shares (before deducting

27

 

expenses) received by the Company bear to the total compensation received by MLV (before
deducting expenses) from the sale of Placement Shares on behalf of the Company. If, but only if,
the allocation provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is appropriate to reflect not only
the relative benefits referred to in the foregoing sentence but also the relative fault of the
Company, on the one hand, and MLV, on the other hand, with respect to the statements or omission
that resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as
well as any other relevant equitable considerations with respect to such offering. Such relative
fault shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or MLV, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or omission. The
Company and MLV agree that it would not be just and equitable if contributions pursuant to this
Section 11(d) were to be determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense,
or damage, or action in respect thereof, referred to above in this Section 11(d) shall be
deemed to include, for the purpose of this Section 11(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating or defending any
such action or claim to the extent consistent with Section 11(c) hereof. Notwithstanding
the foregoing provisions of this Section 11(d), MLV shall not be required to contribute any
amount in excess of the commissions received by it under this Agreement and no person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be
entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 11(d), any person who controls a party to this Agreement
within the meaning of the Securities Act, and any officers, directors, partners, employees or
agents of MLV, will have the same rights to contribution as that party, and each officer and
director of the Company who signed the Registration Statement will have the same rights to
contribution as the Company, subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action against such party in
respect of which a claim for contribution may be made under this Section 11(d), will notify
any such party or parties from whom contribution may be sought, but the omission to so notify will
not relieve that party or parties from whom contribution may be sought from any other obligation it
or they may have under this Section 11(d) except to the extent that the failure to so
notify such other party materially prejudiced the substantive rights or defenses of the party from
whom contribution is sought. Except for a settlement entered into pursuant to the last sentence of
Section 11(c) hereof, no party will be liable for contribution with respect to any action
or claim settled without its written consent if such consent is required pursuant to Section
11(c) hereof.

     12. Representations and Agreements to Survive Delivery. The indemnity and
contribution agreements contained in Section 11 of this Agreement and all representations
and warranties of the Company herein or in certificates delivered pursuant hereto shall survive, as
of their respective dates, regardless of (i) any investigation made by or on behalf of MLV, any
controlling persons, or the Company (or any of their respective officers, directors or controlling
persons), (ii) delivery and acceptance of the Placement Shares and payment therefor or (iii) any
termination of this Agreement.

28

 

     13. Termination.

          (a) MLV may terminate this Agreement, by notice to the Company, as hereinafter specified at
any time (1) if there has been, since the time of execution of this Agreement or since the date as
of which information is given in the Prospectus, any Material Adverse Effect, or any development
that has occurred that is reasonably likely to have a Material Adverse Effect, has occurred that in
the reasonable judgment of MLV makes it impractical or inadvisable to market the Placement Shares
or to enforce contracts for the sale of the Placement Shares, (2) if there has occurred any
material adverse change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or international political,
financial or economic conditions, in each case the effect of which is such as to make it, in the
judgment of MLV, impracticable or inadvisable to market the Placement Shares or to enforce
contracts for the sale of the Placement Shares, (3) if trading in the Common Stock has been
suspended or limited by the Commission or the Exchange, or if trading generally on the Exchange has
been suspended or limited, or minimum prices for trading have been fixed on the Exchange, (4) if
any suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market shall have occurred and be continuing, (5) if a major disruption of
securities settlements or clearance services in the United States shall have occurred and be
continuing, or (6) if a banking moratorium has been declared by either U.S. Federal or New York
authorities. Any such termination shall be without liability of any party to any other party
except that the provisions of Section 9 (Payment of Expenses), Section 11
(Indemnification and Contribution), Section 12 (Representations and Agreements to Survive
Delivery), Section 18 (Applicable Law; Waiver of Jury Trial) and Section 19
(Consent to Jurisdiction) hereof shall remain in full force and effect notwithstanding such
termination. If MLV elects to terminate this Agreement as provided in this Section 13(a),
MLV shall provide the required notice as specified in Section 14 (Notices).

          (b) (i) The Company shall have the right, by giving ten (10) days notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time after the date of this
Agreement.

          (ii) If MLV declines any commercially reasonable Placement Notice pursuant to clause (i) of
Section 2 of this Agreement, then the Company shall have the right to terminate this
Agreement by giving written notice of termination to MLV. Any such termination shall be effective
immediately upon a delivery of a termination notice by the Company to MLV.

     Any termination pursuant to Section 13(b) shall be without liability of any party to
any other party except that the provisions of Section 9 (Payment of Expenses), Section
11 (Indemnification and Contribution), Section 12 (Representations and Agreements to
Survive Delivery), Section 18 (Applicable Law; Waiver of Jury Trial) and Section 19
(Consent to Jurisdiction) hereof shall remain in full force and effect notwithstanding such
termination.

          (c) MLV shall have the right, by giving thirty (30) days notice as hereinafter specified to
terminate this Agreement in its sole discretion at any time after the date of this Agreement. Any
such termination shall be without liability of any party to any other party except that the
provisions of Section 9 (Payment of Expenses), Section 11 (Indemnification and

29

 

Contribution), Section 12 (Representations and Agreements to Survive Delivery),
Section 18 (Applicable Law; Waiver of Jury Trial) and Section 19 (Consent to
Jurisdiction) hereof shall remain in full force and effect notwithstanding such termination.

          (d) Unless earlier terminated pursuant to this Section 13, this Agreement shall
automatically terminate upon the earlier to occur of (i) the two (2) year anniversary of the date
hereof or (ii) the issuance and sale of the Maximum Amount through MLV on the terms and subject to
the conditions set forth herein, except that, in either such case, the provisions of Section
9 (Payment of Expenses), Section 11 (Indemnification and Contribution), Section
12 (Representations and Agreements to Survive Delivery), Section 18 (Applicable Law;
Waiver of Jury Trial) and Section 19 (Consent to Jurisdiction) hereof shall remain in full
force and effect notwithstanding such termination.

          (e) This Agreement shall remain in full force and effect unless terminated pursuant to
Sections 13(a), (b), (c) or (d) above or otherwise by mutual
agreement of the parties. Upon termination of this Agreement, the Company shall not have any
liability to MLV for any discount, commission or other compensation with respect to any Placement
Shares not otherwise sold by MLV under this Agreement.

          (f) Any termination of this Agreement shall be effective on the date specified in such notice
of termination; provided, however, that such termination shall not be effective until the close of
business on the date of receipt of such notice by MLV or the Company, as the case may be. If such
termination shall occur prior to the Settlement Date for any sale of Placement Shares, such
Placement Shares shall settle in accordance with the provisions of this Agreement.

     14. Notices. All notices or other communications required or permitted to be given by
any party to any other party pursuant to the terms of this Agreement shall be in writing, unless
otherwise specified, and if sent to MLV, shall be delivered to:

McNicoll, Lewis & Vlak LLC

1251 Avenue of the Americas, 41st Floor

New York, NY 10020

Attention: General Counsel

Telephone: (212) 542-5870

Facsimile: (212) 317-1515

with a copy to:

DLA Piper LLP (US)

1251 Avenue of the Americas

New York, NY 10020

Attention: Michael Barz

Telephone: (212) 335-4796

Facsimile: (212) 884-8596

30

 

and if to the Company, shall be delivered to:

PostRock Energy Corporation

210 Park Avenue, Suite 2750

Oklahoma City, OK 73102

Attention: Stephen L. DeGiusti, General Counsel

Telephone: (405) 600-7704

Facsimile: (405) 815-4315

with a copy to:

Baker Botts L.L.P.

One Shell Plaza

910 Louisiana Street

Houston, Texas 77002-4995

Attention: Tull R. Florey

Telephone: (713) 229-1379

Facsimile: (713) 229-2779

     Each party to this Agreement may change such address for notices by sending to the parties to
this Agreement written notice of a new address for such purpose. Each such notice or other
communication shall be deemed given (i) when delivered personally or by verifiable facsimile
transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a Business
Day or, if such day is not a Business Day, on the next succeeding Business Day, (ii) on the next
Business Day after timely delivery to a nationally-recognized overnight courier and (iii) on the
Business Day actually received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid). For purposes of this Agreement, “Business Day” shall
mean any day on which the Exchange and commercial banks in the City of New York are open for
business.

     An electronic communication (“Electronic Notice”) shall be deemed written notice for
purposes of this Section 14 if sent to the electronic mail address specified by the
receiving party under separate cover. Electronic Notice shall be deemed received at the time the
party sending Electronic Notice receives confirmation of receipt by the receiving party. Any party
receiving Electronic Notice may request and shall be entitled to receive the notice on paper, in a
nonelectronic form (“Nonelectronic Notice”) which shall be sent to the requesting party
within ten (10) days of receipt of the written request for Nonelectronic Notice.

     15. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the Company and MLV and their respective successors and the affiliates, controlling
persons, partners, members, officers, directors, employees and agents referred to in Section
11 hereof. References to any of the parties contained in this Agreement shall be deemed to
include the successors and permitted assigns of such party. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement. Neither party

31

 

may assign its rights or obligations under this Agreement without the prior written consent of
the other party.

     16. Adjustments for Stock Splits. The parties acknowledge and agree that all
share-related numbers contained in this Agreement shall be adjusted to take into account any share
consolidation, stock split, stock dividend, corporate domestication or similar event effected with
respect to the Placement Shares.

     17. Entire Agreement; Amendment; Severability. This Agreement (including all
schedules and exhibits attached hereto and Placement Notices issued pursuant hereto) constitutes
the entire agreement of the parties with respect to the subject matter hereof and thereof and
supersedes all other prior and contemporaneous agreements and undertakings, both written and oral,
among the parties hereto with regard to the subject matter hereof and thereof. Neither this
Agreement nor any term hereof may be amended except pursuant to a written instrument executed by
the Company and MLV. In the event that any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or unenforceable as written by a
court of competent jurisdiction, then such provision shall be given full force and effect to the
fullest possible extent that it is valid, legal and enforceable, and the remainder of the terms and
provisions herein shall be construed as if such invalid, illegal or unenforceable term or provision
was not contained herein, but only to the extent that giving effect to such provision and the
remainder of the terms and provisions hereof shall be in accordance with the intent of the parties
as reflected in this Agreement.

     18. APPLICABLE LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. THE COMPANY AND MLV EACH HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

     19. CONSENT TO JURISDICTION. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH
OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH ANY TRANSACTION
CONTEMPLATED HEREBY, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR
PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT
SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT,
ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS
AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF

32

 

(CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO
LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.

     20. Use of Information. MLV may not use any information gained in connection with this
Agreement and the transactions contemplated by this Agreement, including due diligence, to advise
any party with respect to transactions not expressly approved by the Company. MLV acknowledges
that any information gained in connection with this Agreement and the transactions contemplated by
this Agreement are subject to confidentiality and other restrictions pursuant to the
Confidentiality Agreement and agrees to abide by the terms of the Confidentiality Agreement.

     21. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument. Delivery of an executed Agreement by one party to the other may be made by facsimile
transmission, email or pdf.

     22. Effect of Headings.

     The section and Exhibit headings herein are for convenience only and shall not affect the
construction hereof.

     23. Permitted Free Writing Prospectuses.

     The Company represents, warrants and agrees that, unless it obtains the prior consent of MLV,
and MLV represents, warrants and agrees that, unless it obtains the prior consent of the Company,
it has not made and will not make any offer relating to the Placement Shares that would constitute
an Issuer Free Writing Prospectus, or that would otherwise constitute a “free writing prospectus,”
as defined in Rule 405, required to be filed with the Commission. Any such free writing prospectus
consented to by MLV or by the Company, as the case may be, is hereinafter referred to as a
“Permitted Free Writing Prospectus.” The Company represents and warrants that it has treated and
agrees that it will treat each Permitted Free Writing Prospectus as an “issuer free writing
prospectus,” as defined in Rule 433, and has complied and will comply with the requirements of Rule
433 applicable to any Permitted Free Writing Prospectus, including timely filing with the
Commission where required, legending and record keeping. For the purposes of clarity, the parties
hereto agree that all free writing prospectuses, if any, listed in Exhibit G hereto are
Permitted Free Writing Prospectuses.

     24. Absence of Fiduciary Relationship.

          The Company acknowledges and agrees that:

          (a) MLV is acting solely as agent in connection with the public offering of the Placement
Shares and in connection with each transaction contemplated by this Agreement and the process
leading to such transactions, and no fiduciary or advisory relationship between the

33

 

Company or any of its respective affiliates, stockholders (or other equity holders), creditors
or employees or any other party, on the one hand, and MLV, on the other hand, has been or will be
created in respect of any of the transactions contemplated by this Agreement, irrespective of
whether or not MLV has advised or is advising the Company on other matters, and MLV has no
obligation to the Company with respect to the transactions contemplated by this Agreement except
the obligations expressly set forth in this Agreement;

          (b) it is capable of evaluating and understanding, and understands and accepts, the terms,
risks and conditions of the transactions contemplated by this Agreement;

          (c) MLV has not provided any legal, accounting, regulatory or tax advice with respect to the
transactions contemplated by this Agreement and it has consulted its own legal, accounting,
regulatory and tax advisors to the extent it has deemed appropriate;

          (d) it is aware that MLV and its affiliates are engaged in a broad range of transactions which
may involve interests that differ from those of the Company and MLV has no obligation to disclose
such interests and transactions to the Company by virtue of any fiduciary, advisory or agency
relationship or otherwise; provided that MLV hereby agrees not to engage in any such transaction
which would cause its interests to be in direct conflict with the best interests of the Company;
and

          (e) it waives, to the fullest extent permitted by law, any claims it may have against MLV for
breach of fiduciary duty or alleged breach of fiduciary duty in connection with the sale of
Placement Shares under this Agreement and agrees that MLV shall not have any liability (whether
direct or indirect, in contract, tort or otherwise) to it in respect of such a fiduciary duty claim
or to any person asserting a fiduciary duty claim on its behalf or in right of it or the Company,
employees or creditors of Company, other than in respect of MLV’s obligations under this Agreement
and to keep information provided by the Company to MLV and MLV’s counsel confidential to the extent
not otherwise publicly-available.

     25. Definitions.

     As used in this Agreement, the following terms have the respective meanings set forth below:

     “Applicable Time” means (i) each Representation Date and (ii) the time of each sale of
any Placement Shares pursuant to this Agreement.

     “Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as
defined in Rule 433, relating to the Placement Shares.

     “Rule 164,” “Rule 172,” “Rule 405,” “Rule 415,” “Rule
424,” “Rule 424(b),” “Rule 430A,” “Rule 430B,” and “Rule 433”
refer to such rules under the Securities Act.

[Signature Page Follows]

34

 

     If the foregoing correctly sets forth the understanding between the Company and MLV, please so
indicate in the space provided below for that purpose, whereupon this letter shall constitute a
binding agreement between the Company and MLV.

	 	 	 	 	 
	 	Very truly yours,

POSTROCK ENERGY CORPORATION

 	 
	 	By:  	/s/ Stephen L. DeGiusti	 
	 	 	Stephen L. DeGiusti	 
	 	 	Executive Vice President, General Counsel and Secretary	 
	 
	 	ACCEPTED as of the date first-above written:

MCNICOLL, LEWIS & VLAK LLC

 	 
	 	By:  	/s/ Patrice McNicoll
	 
	 	 	Name:  	Patrice McNicoll 	 
	 	 	Title:  	Chief Executive Officer 	 

 

 

	 	 	 	 	 

SCHEDULE 1

 

FORM OF PLACEMENT NOTICE

 

	 	 	 	 	 
	 

	 	From:
	 	PostRock Energy Corporation
	 
	 	 	 	 
	 

	 	To:
	 	McNicoll, Lewis & Vlak LLC
	 

	 	 	 	Attention: Patrice McNicoll
	 
	 	 	 	 
	 

	 	Subject:
	 	At-The-Market Issuance—Placement Notice
	 
	 	 	 	 
	 

	 	Gentlemen:	 	 

     Pursuant to the terms and subject to the conditions contained in the At-The-Market Issuance
Sales Agreement between PostRock Energy Corporation, a Delaware corporation (the
“Company”), and McNicoll, Lewis & Vlak LLC (“MLV”), dated August 23, 2011, the Company hereby requests that MLV sell up to ____________ shares of the Company’s Common
Stock, par value $0.01 per share, at a minimum market price of $_______ per share, during the time
period beginning [month, day, time] and ending [month, day, time].

 

 

SCHEDULE 2

 

Compensation

 

     The Company shall pay to MLV in cash, upon each sale of Placement Shares pursuant to this
Agreement, an amount equal to 3.0% of the gross proceeds from each sale of Placement Shares.

 

 

SCHEDULE 3

 

Notice Parties

 

     The Company

          Terry Carter

          Jack Collins

          Stephen L. DeGiusti

     MLV

          Randy Billhardt

          Dean Colucci

          Ryan Loforte

          Patrice McNicoll

 

 

SCHEDULE 4

 

Significant Subsidiaries

 

PostRock Energy Services Corporation

PostRock MidContinent Production, LLC

PostRock KPC Pipeline, LLC

Constellation Energy Partners Management, LLC

 

 

Disclosure Schedule

     The matters with respect to Jerry Cash, David Grose and Brent Mueller set forth in the joint
proxy statement/prospectus that is a part of the Company’s Registration Statement on Form S-4/A
(Registration No. 333-162366) are incorporated herein by reference.

 

 

     EXHIBIT 7(l)

Form of Representation Date Certificate

This Officers Certificate (this “Certificate”) is executed and delivered in connection with
Section 7(l) of the At-The-Market Issuance Sales Agreement (the “Agreement”), dated
August 23, 2011, and entered into between PostRock Energy Corporation (the
“Company”) and McNicoll, Lewis & Vlak LLC. All capitalized terms used but not defined
herein shall have the meanings given to such terms in the Agreement.

     The undersigned, a duly appointed and authorized officer of the Company, having made all
necessary inquiries to establish the accuracy of the statements below and having been authorized by
the Company to execute this certificate on behalf of the Company, hereby certifies as follows:

     1. As of the date of this Certificate, (i) the Registration Statement does not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading and (ii) the Prospectus does
not contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

     2. Each of the representations and warranties of the Company contained in the Agreement were,
when originally made, and are, as of the date of this Certificate, true and correct in all material
respects.

     3. Except as waived by MLV in writing, each of the covenants required to be performed by the
Company in the Agreement on or prior to the date of the Agreement, this Representation Date, and
each such other date prior to the date hereof as set forth in the Agreement, has been duly, timely
and fully performed in all material respects and each condition required to be complied with by the
Company on or prior to the date of the Agreement, this Representation Date, and each such other
date prior to the date hereof as set forth in the Agreement has been duly, timely and fully
complied with in all material respects.

     4. Subsequent to the date of the most recent financial statements in the Prospectus, and
except as described in the Prospectus, including Incorporated Documents, there has been no Material
Adverse Effect.

     5. No stop order suspending the effectiveness of (a) the Registration Statement or of any part
thereof or (b) the qualification or registration of the Placement Shares under the securities or
Blue Sky laws of any jurisdiction has been issued, and, to the Company’s knowledge, no proceedings
for that purpose have been instituted or are pending or threatened by any securities or other
governmental authority (including, without limitation, the Commission).

     The undersigned has executed this Officer’s Certificate as of the date first written above.

41

 

	 	 	 	 	 
	 	POSTROCK ENERGY CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

42exv10w46

EXHIBIT NO. 10.46

EQUITY PURCHASE AGREEMENT

BY AND BETWEEN

UFOOD RESTAURANT GROUP, INC.

AND

SOUTHRIDGE PARTNERS II, LP

Dated

August 19, 2011

 

 

     THIS EQUITY PURCHASE AGREEMENT entered into as of the 19th of August, 2011 (this “AGREEMENT”),
by and between SOUTHRIDGE PARTNERS II, LP, Delaware limited partnership (“INVESTOR”), and UFOOD
RESTAURANT GROUP, INC., a Nevada corporation (the “COMPANY”).

     WHEREAS, the parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to Investor, from time to time as provided herein, and
Investor shall purchase, up to Three Million Dollars ($3,000,000) of its Common Stock (as defined
below); and

     NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

     Section 1.1 DEFINED TERMS as used in this Agreement, the following terms shall have the
following meanings specified or indicated (such meanings to be equally applicable to both the
singular and plural forms of the terms defined)

          “AGREEMENT” shall have the meaning specified in the preamble hereof.

          “BLACKOUT NOTICE” shall mean a written notice from the Company to the Investor with respect to
the existence of a Potential Blackout Event.

          “BLACKOUT PERIOD” shall have the meaning specified in Section 2.6

          “BLACKOUT SHARES” shall have the meaning specified in Section 2.6

          “BY-LAWS” shall have the meaning specified in Section 4.8.

          “CERTIFICATE” shall have the meaning specified in Section 4.8.

          “CLAIM NOTICE” shall have the meaning specified in Section 9.3(a).

          “CLOSING” shall mean one of the closings of a purchase and sale of shares of Common Stock
pursuant to Section 2.3.

          “CLOSING CERTIFICATE” shall mean the closing certificate of the Company in the form of Exhibit
C hereto.

          “CLOSING DATE” shall mean, with respect to a Closing, the sixth (6th) Trading Day following
the Put Date related to such Closing, or such earlier date as the Company and Investor shall agree,
provided all conditions to such Closing have been satisfied on or before such Trading Day.

1

 

          “CLOSING PRICE” shall mean the volume weighted average price (“VWAP”) for the Company’s common
stock on the Principal Market on a Trading Day as reported by Bloomberg Finance L.P.

          “COMMITMENT PERIOD” shall mean the period commencing on the Effective Date, and ending on the
earlier of (i) the date on which Investor shall have purchased Put Shares pursuant to this
Agreement for an aggregate Purchase Price of the Maximum Commitment Amount, or (ii) the date
occurring twenty four (24) months from the date of commencement of the Commitment Period.

          “COMMON STOCK” shall mean the Company’s common stock, $0.001 par value per share, and any
shares of any other class of common stock whether now or hereafter authorized, having the right to
participate in the distribution of dividends (as and when declared) and assets (upon liquidation of
the Company).

          “COMMON STOCK EQUIVALENTS” shall mean any securities that are convertible into or exchangeable
for Common Stock or any options or other rights to subscribe for or purchase Common Stock or any
such convertible or exchangeable securities.

          “COMPANY” shall have the meaning specified in the preamble to this Agreement.

          “CONDITION SATISFACTION DATE” shall have the meaning specified in Section 7.2.

          “DAMAGES” shall mean any loss, claim, damage, liability, cost and expense (including, without
limitation, reasonable attorneys’ fees and disbursements and costs and expenses of expert witnesses
and investigation).

          “DISPUTE PERIOD” shall have the meaning specified in Section 9.3(a).

          “DOLLAR VOLUME” shall mean the product of (a) the Closing Price multiplied by (b) the trading
volume on the Principal Market on a Trading Day.

          “DTC” shall have the meaning specified in Section 2.3.

          “DWAC” shall have the meaning specified in Section 2.3.

          “EFFECTIVE DATE” shall mean the date on which the SEC first declares effective a Registration
Statement, or any amendment thereof, registering the Registrable Securities as set forth in Section
7.2(a).

          “EXCHANGE ACT” shall mean the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder.

2

 

          “FAST” shall have the meaning specified in Section 2.3.

          “FINRA” shall mean the Financial Industry Regulatory Authority, Inc.

          “FLOOR PRICE” shall have the meaning specified in Section 2.2 (c).

          “INDEMNIFIED PARTY” shall have the meaning specified in Section 9.3(a).

          “INDEMNIFYING PARTY” shall have the meaning specified in Section 9.3(a).

          “INDEMNITY NOTICE” shall have the meaning specified in Section 9.3(b).

          “INVESTMENT AMOUNT” shall mean the dollar amount to be invested by Investor to purchase Put
Shares with respect to any Put as notified by the Company to Investor in accordance with Section
2.2.

          “INVESTOR” shall have the meaning specified in the preamble to this Agreement.

          “LEGEND” shall have the meaning specified in Section 8.1.

          “MARKET PRICE” shall mean the average of the Closing Prices during the Valuation Period.

          “MATERIAL ADVERSE EFFECT” shall mean any effect on the business, operations, properties, or
financial condition of the Company that is material and adverse to the Company and/or any
condition, circumstance, or situation that would prohibit or otherwise materially interfere with
the ability of the Company to enter into and perform its obligations under any of (a) this
Agreement and (b) the Registration Rights Agreement.

          “MAXIMUM COMMITMENT AMOUNT” shall mean Three Million Dollars ($3,000,000).

          “MAXIMUM PUT AMOUNT” shall mean the lesser of (i) Five Hundred Thousand Dollars ($500,000),
or (ii) Five Hundred (500%) percent of the average of the Dollar Volume for the twenty (20) Trading
Days immediately preceding the Put Date.

          “NEW PRICE” shall have the meaning specified in Section 2.6.

          “OLD PRICE” shall have the meaning specified in Section 2.6.

3

 

          “PERSON” shall mean an individual, a corporation, a partnership, an association, a trust or
other entity or organization, including a government or political subdivision or an agency or
instrumentality thereof.

          “POTENTIAL BLACKOUT EVENT” shall mean any of the following: (a) the possession by the Company
of material information ripe for disclosure in a Registration Statement, which shall be evidenced
by determinations in good faith by the Board of Directors of the Company that disclosure of such
information in the Registration Statement is required but not included therein, (b) receipt by the
Company of any request by the SEC or any other federal or state governmental authority during the
period of effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related prospectus; (c) the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; (d) receipt by the Company of any
notification with respect to the suspension of the qualification or exemption from qualification of
any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; or (e) the happening of any event that, in the good faith
determination of the Board of Directors of the Company, makes any statement made in such
Registration Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that requires the making of any
amendment or supplement in the Registration Statement, related prospectus or documents so that, in
the case of a Registration Statement, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the related prospectus, it will not
contain any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading.

          “PRINCIPAL MARKET” shall mean any of the national exchanges (i.e. NYSE, AMEX, NASDAQ), the OTC
Bulletin Board, or other principal exchange which is at the time the principal trading exchange or
market for the Common Stock.

          “PURCHASE PRICE” shall mean 92% of the Market Price on such date on which the Purchase Price
is calculated in accordance with the terms and conditions of this Agreement.

          “PUT” shall mean the right of the Company to require the Investor to purchase shares of Common
Stock, subject to the terms and conditions of this Agreement.

          “PUT DATE” shall mean any Trading Day during the Commitment Period that a Put Notice is deemed
delivered pursuant to Section 2.2(b).

          “PUT NOTICE” shall mean a written notice, substantially in the form of Exhibit B hereto, to
Investor setting forth the Investment Amount with respect to which the Company intends to require
Investor to purchase shares of Common Stock pursuant to the terms of this Agreement.

4

 

          “PUT SHARES” shall mean all shares of Common Stock issued or issuable pursuant to a Put that
has been exercised or may be exercised in accordance with the terms and conditions of this
Agreement.

          “REGISTRABLE SECURITIES” shall mean the (a) Put Shares, (b) the Blackout Shares, and (c) any
securities issued or issuable with respect to any of the foregoing by way of exchange, stock
dividend or stock split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular Registrable Securities,
once issued such securities shall cease to be Registrable Securities when (i) a Registration
Statement has been declared effective by the SEC and such Registrable Securities have been disposed
of pursuant to a Registration Statement, (ii) such Registrable Securities have been sold under
circumstances under which all of the applicable conditions of Rule 144 are met, (iii) such time as
such Registrable Securities have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act or (iv) in the opinion of counsel to the Company,
which counsel shall be reasonably acceptable to Investor, such Registrable Securities may be sold
without registration under the Securities Act or the need for an exemption from any such
registration requirements and without any time, volume or manner limitations pursuant to Rule
144(b)(i) (or any similar provision then in effect) under the Securities Act.

          “REGISTRATION RIGHTS AGREEMENT” shall mean the registration rights agreement in the form of
Exhibit A hereto.

          “REGISTRATION STATEMENT” shall mean a registration statement on such form promulgated by the
SEC for which the Company then qualifies and which counsel for the Company shall deem appropriate
and which form shall be available for the resale of the Registrable Securities to be registered
thereunder in accordance with the provisions of this Agreement and the Registration Rights
Agreement and in accordance with the intended method of distribution of such securities, for the
registration of the resale by Investor of the Registrable Securities under the Securities Act.

          “REGULATION D” shall mean Regulation D promulgated under the Securities Act.

          “REMAINING PUT SHARES” shall have the meaning specified in Section 2.6.

          “RULE 144” shall mean Rule 144 under the Securities Act or any similar provision then in force
under the Securities Act.

          “SEC” shall mean the Securities and Exchange Commission.

          “SECURITIES ACT” shall have the meaning specified in the recitals of this Agreement.

5

 

          “SEC DOCUMENTS” shall mean, as of a particular date, all reports and other documents filed by
the Company pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the Company’s
then most recently completed and reported fiscal year as of the time in question (provided that if
the date in question is within ninety days of the beginning of the Company’s fiscal year, the term
shall include all documents filed since the beginning of the preceding fiscal year).

          “SHORT SALES” shall mean all “short sales” as defined in Rule 200 of Regulation SHO under the
Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable
shares of Common Stock).

          “SUBSCRIPTION DATE” shall mean the date on which this Agreement is executed and delivered by
the Company and Investor.

          “THIRD PARTY CLAIM” shall have the meaning specified in Section 9.3(a).

          “TRADING DAY” shall mean a day on which the Principal Market shall be open for business.

          “TRANSACTION DOCUMENTS” shall mean this Equity Purchase Agreement and the Registration Rights
Agreement.

          “TRANSFER AGENT” shall mean the transfer agent for the Common Stock (and to any substitute or
replacement transfer agent for the Common Stock upon the Company’s appointment of any such
substitute or replacement transfer agent).

          “UNDERWRITER” shall mean any underwriter participating in any disposition of the Registrable
Securities on behalf of Investor pursuant to a Registration Statement.

          “VALUATION EVENT” shall mean an event in which the Company at any time during a Valuation
Period takes any of the following actions:

               (a) subdivides or combines the Common Stock;

               (b) pays a dividend in shares of Common Stock or makes any other distribution of shares of
Common Stock, except for dividends paid with respect to any series of preferred stock authorized by
the Company, whether existing now or in the future;

               (c) issues any options or other rights to subscribe for or purchase shares of Common Stock
other than pursuant to this Agreement and the price per share for which shares of Common Stock may
at any time thereafter be issuable pursuant to such options or other rights shall be less than the
Closing Price in effect immediately prior to such issuance;

6

 

               (d) issues any securities convertible into or exchangeable for shares of Common Stock and the
consideration per share for which shares of Common Stock may at any time thereafter be issuable
pursuant to the terms of such convertible or exchangeable securities shall be less than the Closing
Price in effect immediately prior to such issuance;

               (e) issues shares of Common Stock otherwise than as provided in the foregoing subsections (a)
through (d), at a price per share less, or for other consideration lower, than the Closing Price in
effect immediately prior to such issuance, or without consideration; or

               (f) makes a distribution of its assets or evidences of indebtedness to the holders of Common
Stock as a dividend in liquidation or by way of return of capital or other than as a dividend
payable out of earnings or surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially all of the
Company’s assets (other than under the circumstances provided for in the foregoing subsections (a)
through (e).

          “VALUATION PERIOD” shall mean the period of five (5) Trading Days immediately following the
date on which the applicable Put Notice is deemed to be delivered and during which the Purchase
Price of the Common Stock is valued; provided, however, that if a Valuation Event occurs during any
Valuation Period, a new Valuation Period shall begin on the Trading Day immediately after the
occurrence of such Valuation Event and end on the fifth (5th) Trading Day thereafter.

ARTICLE II

PURCHASE AND SALE OF COMMON STOCK

     Section 2.1 INVESTMENTS.

          (a) PUTS. Upon the terms and conditions set forth herein (including, without limitation, the
provisions of Article VII), on any Put Date the Company may exercise a Put by the delivery of a Put
Notice. The number of Put Shares that Investor shall purchase pursuant to such Put shall be
determined by dividing the Investment Amount specified in the Put Notice by the Purchase Price with
respect to such Put Notice.

          (b) RESTRICTED COMMON STOCK. As a condition for the execution of this Agreement by the
Investor, the Company shall issue to the Investor 133,333 shares of restricted Common Stock (the
“Restricted Shares”). The Restricted Shares shall be delivered to the Investor upon the execution
of this Agreement.

     Section 2.2 MECHANICS.

          (a) PUT NOTICE. At any time and from time to time during the Commitment Period, the Company
may deliver a Put Notice to Investor, subject to the conditions set forth in Section 7.2; provided,
however, that the Investment Amount identified in the applicable Put

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Notice shall not be greater than the Maximum Put Amount and, when taken together with any prior Put
Notices, shall not exceed the Maximum Commitment.

          (b) DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed delivered on (i) the Trading
Day it is received by facsimile or otherwise by Investor if such notice is received on or prior to
12:00 noon New York time, or (ii) the immediately succeeding Trading Day if it is received by
facsimile or otherwise after 12:00 noon New York time on a Trading Day or at anytime on a day which
is not a Trading Day.

          (c) FLOOR PRICE. In the event that, during a Valuation Period the Closing Price on any
Trading Day is more than twenty percent (20%) below the average of the five (5) most recent Closing
Prices prior to the Put Date (a “Floor Price”), then for each such Trading Day the parties shall be
under no obligation to purchase and sell one-fifth (1/5th) of the Investment Amount specified in
the Put Notice, and the Investment Amount shall accordingly be deemed reduced by such amount. In
the event that during a Valuation Period the Closing Price is below the Floor Price for any two (2)
Trading Days—not necessarily consecutive—then the balance of each party’s obligation to purchase
and sell the Investment Amount under such Put Notice shall terminate on such second Trading Day
(“Termination Day”), and the Investment Amount shall be adjusted to include only one-fifth
(1/5th) of the initial Investment Amount for each Trading Day during the Valuation
Period prior to the Termination Day that the Closing Price equals or exceeds the Floor Price.

     Section 2.3 CLOSINGS. On or prior to each Closing Date for any Put, (a) the Company shall
deliver to the Investor one or more certificates, at Investor’s option, representing the Put Shares
purchased by Investor pursuant to Section 2.1 herein, registered in the name of Investor and (b)
Investor shall deliver the Investment Amount specified in the Put Notice by wire transfer of
immediately available funds to an account designated by the Company within twenty four (24) hours
of receipt of the Put Shares. In lieu of delivering physical certificates representing the Common
Stock issuable in accordance with clause (a) of this Section 2.3, and provided that the Transfer
Agent then is participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer (“FAST”) program, upon request of Investor, but subject to the applicable provisions of
Article VIII hereof, the Company shall use its commercially reasonable efforts to cause the
Transfer Agent to electronically transmit, prior to the applicable Closing Date, the applicable Put
Shares by crediting the account of the Investor’s prime broker with DTC through its Deposit
Withdrawal Agent Commission (“DWAC”) system, and provide proof satisfactory to the Investor of such
delivery. In addition, on or prior to such Closing Date, each of the Company and Investor shall
deliver to each other all documents, instruments and writings required to be delivered or
reasonably requested by either of them pursuant to this Agreement in order to implement and effect
the transactions contemplated herein.

     Section 2.4 COVER. If the Company fails for any reason to take or cause to be taken all steps
necessary on the part of the Company to deliver the Put Shares on such Closing Date

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and the Investor purchases, in an open market transaction or otherwise, shares of Common Stock (the
“Covering Shares”) in order to make delivery in satisfaction of a sale of Common Stock by the
Investor (the “Sold Shares”), which delivery the Investor anticipated to make using the Put Shares
(a “Buy-In”), then the Company shall pay to such Investor, in addition to all other amounts
contemplated in other provisions of the Transaction Documents, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The “Buy-In Adjustment Amount” is the amount equal to the
excess, if any, of (x) such Investor’s total purchase price (including brokerage commissions, if
any) for the Covering Shares over (y) the net proceeds (after brokerage commissions, if any)
received by such Investor from the sale of the Sold Shares. The Company shall pay the Buy-In
Adjustment Amount to such Investor in immediately available funds immediately upon demand by such
Investor. By way of illustration and not in limitation of the foregoing, if such Investor purchases
Covering Shares having a total purchase price (including brokerage commissions) of $11,000 to cover
a Buy-In with respect to shares of Common Stock that it sold for net proceeds of $10,000, the
Buy-In Adjustment Amount that the Company will be required to pay to such Investor will be $1,000.

     Section 2.5 [INTENTIONALLY OMITTED]

     Section 2.6 BLACKOUT SHARES.

          (a) If at any time or from time to time after the date of effectiveness of the Registration
Statement, the Company delivers a Blackout Notice to the Investor, the Investor shall not offer or
sell any Put Shares, or Blackout Shares (as defined below), or engage in any other transaction
involving or relating to such shares, from the time of the Blackout Notice until Investor receives
written notice from the Company that such Potential Blackout Event either has been disclosed to the
public or no longer constitutes a Potential Blackout Event (such period, a “Blackout Period”).

          (b) In the event that, (i) within fifteen (15) Trading Days following any Closing Date, the
Company delivers a Blackout Notice to Investor, and (ii) the Closing Price on the Trading Day
immediately preceding the applicable Blackout Period (“OLD PRICE”) is greater than the Closing
Price on the first Trading Day following such Blackout Period that Investor may sell its
Registrable Securities pursuant to an effective Registration Statement (“NEW PRICE”), then the
Company shall issue to Investor the number of additional shares of Registrable Securities (the
“BLACKOUT SHARES”) equal to the excess of (x) the product of the number of Put Shares held by
Investor immediately prior to the Blackout Period that were issued on the most recent Closing Date
(the “REMAINING PUT SHARES”) multiplied by the Old Price, divided by the New Price, over (y) the
Remaining Put Shares.

     Section 2.7 [INTENTIONALLY OMITTED]

     Section 2.8 LIQUIDATED DAMAGES. Each of the Company and Investor acknowledges and agrees that
the requirement to issue Blackout Shares under Section 2.6 shall give rise to liquidated damages
and not penalties. Each of the Company and Investor further

9

 

acknowledges that (a) the amount of loss or damages likely to be incurred is incapable or is
difficult to precisely estimate, (b) the amount specified in such Section bears a reasonable
proportion and is not plainly or grossly disproportionate to the probable loss likely to be
incurred by Investor in connection with a Blackout Period, and (c) each of the Company and Investor
is a sophisticated business party and has been represented by sophisticated and able legal and
financial counsel and negotiated this Agreement at arm’s length.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF INVESTOR

     Investor represents and warrants to the Company that:

     Section 3.1 INTENT. Investor is entering into this Agreement for its own account and Investor
has no present arrangement (whether or not legally binding) at any time to sell the Registrable
Securities to or through any person or entity; provided, however, that Investor reserves the right
to dispose of the Registrable Securities at any time in accordance with federal and state
securities laws applicable to such disposition.

     Section 3.2 NO LEGAL ADVICE FROM THE COMPANY. The Investor acknowledges that it has had the
opportunity to review this Agreement and the transactions contemplated by this Agreement with its
own legal counsel and investment and tax advisors. The Investor is relying solely on such counsel
and advisors and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any jurisdiction.

     Section 3.3 SOPHISTICATED INVESTOR. Investor is a sophisticated investor (as described in Rule
506(b)(2)(ii) of Regulation D) and an accredited investor (as defined in Rule 501 of Regulation D),
and Investor has such experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Registrable Securities. Investor acknowledges that an
investment in the Registrable Securities is speculative and involves a high degree of risk.

     Section 3.4 AUTHORITY. (a) Investor has the requisite power and authority to enter into and
perform its obligations under this Agreement and the transactions contemplated hereby in accordance
with its terms; (b) the execution and delivery of this Agreement and the Registration Rights
Agreement, and the consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action and no further consent or authorization of Investor or its
partners is required; and (c) each of this Agreement and the Registration Rights Agreement has been
duly authorized and validly executed and delivered by Investor and constitutes a valid and binding
obligation of Investor enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of,
creditors’ rights and remedies or by other equitable principles of general application.

10

 

     Section 3.5 NOT AN AFFILIATE. Investor is not an officer, director or “affiliate” (as that
term is defined in Rule 405 of the Securities Act) of the Company.

     Section 3.6 ORGANIZATION AND STANDING. Investor is a limited partnership duly organized,
validly existing and in good standing under the laws of the Delaware and has all requisite power
and authority to own, lease and operate its properties and to carry on its business as now being
conducted. Investor is duly qualified and in good standing in every jurisdiction in which the
nature of the business conducted or property owned by it makes such qualification necessary, other
than those in which the failure so to qualify would not have a material adverse effect on Investor.

     Section 3.7 ABSENCE OF CONFLICTS. The execution and delivery of this Agreement and any other
document or instrument contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, and compliance with the requirements hereof and thereof, will not (a) violate
any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Investor,
(b) violate any provision of any indenture, instrument or agreement to which Investor is a party or
is subject, or by which Investor or any of its assets is bound, or conflict with or constitute a
material default thereunder, (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty
owed by Investor to any third party, or (d) require the approval of any third-party (that has not
been obtained) pursuant to any material contract, instrument, agreement, relationship or legal
obligation to which Investor is subject or to which any of its assets, operations or management may
be subject.

     Section 3.8 DISCLOSURE; ACCESS TO INFORMATION. Investor had an opportunity to review copies of
the SEC Documents filed on behalf of the Company and has had access to all publicly available
information with respect to the Company.

     Section 3.9 MANNER OF SALE. At no time was Investor presented with or solicited by or through
any leaflet, public promotional meeting, television advertisement or any other form of general
solicitation or advertising.

     Section 3.10 FINANCIAL CAPABILITY. Investor presently has the financial capacity
and the necessary capital to perform its obligations hereunder.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company represents and warrants to Investor that, except as disclosed in the SEC
Documents:

     Section 4.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly organized and
validly existing and in good standing under the laws of the State of Nevada

11

 

and has all requisite power and authority to own, lease and operate its properties and to carry on
its business as now being conducted. The Company is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.

     Section 4.2 AUTHORITY. (a) The Company has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement and the Registration Rights Agreement
and to issue the Put Shares, Restricted Shares and Blackout Shares, if any; (b) the execution and
delivery of this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action and no further consent or authorization of the Company or its Board
of Directors or stockholders is required; and (c) each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other
equitable principles of general application.

     Section 4.3 CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company
consists of 300,000,000 shares of Common Stock, $0.001 par value per share, of which 44,887,771
shares are outstanding as of the date hereof.

     Except as otherwise disclosed in the SEC Documents, there are no outstanding securities which
are convertible into shares of Common Stock, whether such conversion is currently exercisable or
exercisable only upon some future date or the occurrence of some event in the future.

     All of the outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable.

     Section 4.4 COMMON STOCK. The Company is in full compliance with all reporting requirements of
the Exchange Act, and the Company has maintained all requirements for the continued listing or
quotation of the Common Stock, and such Common Stock is currently listed or quoted on the Principal
Market.

     Section 4.5 SEC DOCUMENTS. The Company may make available to Investor true and complete copies
of the SEC Documents (including, without limitation, proxy information and solicitation materials).
To the Company’s knowledge, the Company has not provided to Investor any information that,
according to applicable law, rule or regulation, should have been disclosed publicly prior to the
date hereof by the Company, but which has not been so disclosed. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the Exchange Act, and
other federal laws, rules and regulations applicable to

12

 

such SEC Documents, and none of the SEC Documents 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 Documents comply as to form and substance
in all material respects with applicable accounting requirements and the published rules and
regulations of the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated
in such financial statements or the notes thereto or (b) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).

     Section 4.6 VALID ISSUANCES. When issued and paid for as herein provided, the Put Shares, the
Restricted Shares, and the Blackout Shares, if any, shall be duly and validly issued, fully paid,
and non-assessable. Neither the sales of the Put Shares or the Blackout Shares, if any, pursuant to
this Agreement or the Registration Rights Agreement, nor the Company’s performance of its
obligations thereunder, shall (a) result in the creation or imposition of any liens, charges,
claims or other encumbrances upon the Put Shares, Restricted Shares or Blackout Shares, if any, or
any of the assets of the Company, or (b) entitle the holders of outstanding shares of Common Stock
to preemptive or other rights to subscribe to or acquire the Common Stock or other securities of
the Company. The Put Shares, Restricted Shares and Blackout Shares, if any, shall not subject
Investor to personal liability, in excess of the subscription price by reason of the ownership
thereof.

     Section 4.7 [INTENTIONALLY OMITTED]

     Section 4.8 [INTENTIONALLY OMITTED]

     Section 4.9 NO CONFLICTS. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated hereby, including
without limitation the issuance of the Put Shares, the Restricted Shares and the Blackout Shares,
if any, do not and will not (a) result in a violation of the Certificate or By-Laws or (b) conflict
with, or constitute a material default (or an event that with notice or lapse of time or both would
become a material default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument or any “lock-up” or
similar provision of any underwriting or similar agreement to which the Company is a party, or (c)
result in a violation of any federal, state or local law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected (except for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect) nor is the Company otherwise in
violation of, conflict with or in default under

13

 

any of the foregoing. The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible violations that either
singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not
required under federal, state or local law, rule or regulation to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental agency in order for
it to execute, deliver or perform any of its obligations under this Agreement or issue and sell the
Common Stock in accordance with the terms hereof (other than any SEC, FINRA or state securities
filings that may be required to be made by the Company subsequent to any Closing, and any
registration statement that may be filed pursuant hereto); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of Investor herein.

     Section 4.10 NO MATERIAL ADVERSE CHANGE. Since May 18, , 2011 no event has occurred that would
have a Material Adverse Effect on the Company.

     Section 4.11 [INTENTIONALLY OMITTED]

     Section 4.12 [INTENTIONALLY OMITTED]

     Section 4.13 [INTENTIONALLY OMITTED]

     Section 4.14 LITIGATION AND OTHER PROCEEDINGS. There are no lawsuits or proceedings pending or
to the knowledge of the Company threatened, against the Company, nor has the Company received any
written or oral notice of any such action, suit, proceeding or investigation, which would have a
Material Adverse Effect. No judgment, order, writ, injunction or decree or award has been issued by
or, so far as is known by the Company, requested of any court, arbitrator or governmental agency
which would have a Material Adverse Effect.

     Section 4.15 DILUTION. The number of shares of Common Stock issuable as Put Shares may
increase substantially in certain circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines during the period between the
Effective Date and the end of the Commitment Period. The Company’s executive officers and
directors have studied and fully understand the nature of the transactions contemplated by this
Agreement and recognize that they have a potential dilutive effect. The board of directors of the
Company has concluded in its good faith business judgment that such issuance is in the best
interests of the Company. The Company specifically acknowledges that, subject to Section 2.2(c),
its obligation to issue the Put Shares is binding upon the Company and enforceable regardless of
the dilution such issuance may have on the ownership interests of other shareholders of the
Company.

     Section 4.16 [INTENTIONALLY OMITTED]

     Section 4.17 DIRECTORS AND OFFICERS LIABILITY POLICY. The Company maintains a Directors’ and
Officers’ liability insurance policy. Such policy is in full force and

14

 

effect, and has not been modified, cancelled or terminated and the Company has not received
any notice of cancellation, modification or non renewal.

ARTICLE V

COVENANTS OF INVESTOR

     Section 5.1 COMPLIANCE WITH LAW; TRADING IN SECURITIES. Investor’s trading activities with
respect to shares of the Common Stock will be in compliance with all applicable state and federal
securities laws, rules and regulations and the rules and regulations of FINRA and the Principal
Market on which the Common Stock is listed or quoted.

     Section 5.2 SHORT SALES AND CONFIDENTIALITY. Neither Investor nor any affiliate of the
Investor acting on its behalf or pursuant to any understanding with it will execute any Short Sales
during the period from the date hereof to the end of the Commitment Period. For the purposes
hereof, and in accordance with Regulation SHO, the sale after delivery of a Put Notice of such
number of shares of Common Stock reasonably expected to be purchased under a Put Notice shall not
be deemed a Short Sale.

     Other than to other Persons party to this Agreement, Investor has maintained the
confidentiality of all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).

ARTICLE VI

COVENANTS OF THE COMPANY

     Section 6.1 REGISTRATION RIGHTS. The Company shall use its best efforts to cause the
Registration Statement to remain in full force and effect and the Company shall comply in all
respects with the terms thereof.

     Section 6.2 RESERVATION OF COMMON STOCK. The Company will, from time to time as needed in
advance of a Closing Date, reserve and keep available until the consummation of such Closing, free
of preemptive rights sufficient shares of Common Stock for the purpose of enabling the Company to
satisfy its obligation to issue the Put Shares to be issued in connection therewith. The number of
shares so reserved from time to time, as theretofore increased or reduced as hereinafter provided,
may be reduced by the number of shares actually delivered hereunder.

     Section 6.3 LISTING OF COMMON STOCK. If the Company applies to have the Common Stock traded
on any other Principal Market, it shall include in such application the Put Shares, the Restricted
Shares, and the Blackout Shares, if any, and shall take such other action as is necessary or
desirable in the reasonable opinion of Investor to cause the Common Stock to be listed on such
other Principal Market as promptly as possible. The Company shall use its commercially reasonable
efforts to continue the listing and trading of the Common Stock on the Principal Market (including,
without limitation, maintaining sufficient net tangible assets) and

15

 

will comply in all respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the FINRA and the Principal Market.

     Section 6.4 [INTENTIONALLY OMITTED]

     Section 6.5 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A
PUT. The Company shall promptly notify Investor upon the occurrence of any Potential Blackout
Event. The Company shall not deliver to Investor any Put Notice during the continuation of any
Blackout Period.

     Section 6.6 [INTENTIONALLY OMITTED]

     Section 6.7 [INTENTIONALLY OMITTED]

     Section 6.8 [INTENTIONALLY OMITTED]

     Section 6.9 CERTAIN AGREEMENTS. The Company covenants and agrees that it will not, without the
prior written consent of the Investor, enter into any other equity line of credit agreement with a
third party during the Commitment Period having terms and conditions substantially comparable to
this Agreement. For the avoidance of doubt, nothing contained in the Transaction Documents shall
restrict, or require the Investor’s consent for, any agreement providing for the issuance or
distribution of (or the issuance or distribution of) any equity securities pursuant to any private
placement of securities or any other agreement or arrangement that is not commonly understood to be
an “equity line of credit.”

ARTICLE VII

CONDITIONS TO DELIVERY OF

PUT NOTICES AND CONDITIONS TO CLOSING

     Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL COMMON
STOCK. The obligation hereunder of the Company to issue and sell the Put Shares to Investor
incident to each Closing is subject to the satisfaction, at or before each such Closing, of each of
the conditions set forth below.

     (a) ACCURACY OF INVESTOR’S REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Investor shall be true and correct in all material respects as of the date of this Agreement and
as of the date of each such Closing as though made at each such time.

     (b) PERFORMANCE BY INVESTOR. Investor shall have performed, satisfied and complied in all
respects with all covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by Investor at or prior to such Closing.

16

 

          (c) Principal Market Regulation. The Company shall not issue any Put Shares,
Restricted Shares or Blackout Shares, if any, and the Investor shall not have the right to receive
any Put Shares, Restricted Shares or Blackout Shares, if the issuance of such shares would exceed
the aggregate number of shares of Common Stock which the Company may issue without breaching the
Company’s obligations under the rules or regulations of the Principal Market (the “EXCHANGE CAP”),
except that such limitation shall not apply in the event that the Company obtains the approval of
its stockholders as required by the applicable rules of the Principal Market for issuances of
Common Stock in excess of such amount, which such approval the Company will use its best efforts to
obtain. Until such approval is obtained, Investor shall not be issued under the Transaction
Documents, shares of Common Stock in an amount greater than the Exchange Cap.

     Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT NOTICE AND THE
OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The right of the Company to deliver a Put Notice and
the obligation of Investor hereunder to acquire and pay for the Put Shares incident to a Closing is
subject to the satisfaction, on (i) the date of delivery of such Put Notice and (ii) the applicable
Closing Date (each a “CONDITION SATISFACTION DATE”), of each of the following conditions:

          (a) EFFECTIVE REGISTRATION STATEMENT. As set forth in the Registration Rights Agreement, a
Registration Statement, and any amendment or supplement thereto, shall have previously become
effective for the resale by Investor of the Registrable Securities subject to such Put Notice, and
such Registration Statement shall remain effective on each Condition Satisfaction Date and (i)
neither the Company nor Investor shall have received notice that the SEC has issued or intends to
issue a stop order with respect to such Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or
permanently, or intends or has threatened to do so (unless the SEC’s concerns have been addressed
and Investor is reasonably satisfied that the SEC no longer is considering or intends to take such
action), and (ii) no other suspension of the use or withdrawal of the effectiveness of such
Registration Statement or related prospectus shall exist.

          (b) ACCURACY OF THE COMPANY’S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company shall be true and correct in all material respects as of each Condition
Satisfaction Date as though made at each such time (except for representations and warranties
specifically made as of a particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction Date, except for
any conditions which have temporarily caused any representations or warranties herein to be
incorrect and which have been corrected with no continuing impairment to the Company or Investor.

          (c) PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by this Agreement and
the Registration Rights Agreement to be performed, satisfied or complied with by the Company at or
prior to each Condition Satisfaction Date.

17

 

          (d) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or adopted by any court or governmental authority of
competent jurisdiction that prohibits or directly and materially adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have been commenced that may
have the effect of prohibiting or materially adversely affecting any of the transactions
contemplated by this Agreement.

          (e) ADVERSE CHANGES. Since the date of filing of the Company’s most recent SEC Document, no
event that had or is reasonably likely to have a Material Adverse Effect has occurred, except those
events contemplated by and disclosed in the Company’s most recent SEC Document.

          (f) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the Common Stock
shall not have been suspended by the SEC, the Principal Market or the FINRA and the Common Stock
shall have been approved for listing or quotation on and shall not have been delisted from the
Principal Market.

          (g) [INTENTIONALLY OMITTED]

          (h) TEN PERCENT LIMITATION. On each Closing Date, the number of Put Shares then to be
purchased by Investor shall not exceed the number of such shares that, when aggregated with all
other shares of Registrable Securities then owned by Investor beneficially or deemed beneficially
owned by Investor, would result in Investor owning more than 9.99% of all of such Common Stock as
would be outstanding on such Closing Date, as determined in accordance with Section 16 of the
Exchange Act and the regulations promulgated thereunder. For purposes of this Section, in the event
that the amount of Common Stock outstanding as determined in accordance with Section 16 of the
Exchange Act and the regulations promulgated thereunder is greater on a Closing Date than on the
date upon which the Put Notice associated with such Closing Date is given, the amount of Common
Stock outstanding on such Closing Date shall govern for purposes of determining whether Investor,
when aggregating all purchases of Common Stock made pursuant to this Agreement and Blackout Shares,
if any, would own more than 9.99% of the Common Stock following such Closing Date.

          (i) Principal Market Regulation. The Company shall not issue any Put Shares,
Restricted Shares or Blackout Shares, if any, and the Investor shall not have the right to receive
any Put Shares, Restricted Shares or Blackout Shares, if the issuance of such shares would exceed
the Exchange Cap, except that such limitation shall not apply in the event that the Company obtains
the approval of its stockholders as required by the applicable rules of the Principal Market for
issuances of Common Stock in excess of such amount, which such approval the Company will use its
best efforts to obtain. Until such approval is obtained, Investor shall not be issued under the
Transaction Documents, shares of Common Stock in an amount greater than the Exchange Cap.

18

 

          (j) NO KNOWLEDGE. The Company shall have no knowledge of any event more likely than not to
have the effect of causing such Registration Statement to be suspended or otherwise ineffective
(which event is more likely than not to occur within the fifteen (15) Trading Days following the
Trading Day on which such Put Notice is deemed delivered).

          (k) SHAREHOLDER VOTE. The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of the Principal Market.

          (l) NO VALUATION EVENT. No Valuation Event shall have occurred since the Put Date.

          (m) OTHER. On each Condition Satisfaction Date, Investor shall have received a certificate in
substantially the form and substance of Exhibit C hereto, executed by an executive officer of the
Company and to the effect that all the conditions to such Closing shall have been satisfied as at
the date of each such certificate.

ARTICLE VIII

LEGENDS

     Section 8.1 LEGENDS. Until such time as the Registrable Securities have been registered under
the Securities Act, as contemplated by the Registration Rights Agreement, and sold in accordance
with an effective Registration Statement or otherwise in accordance with another effective
registration statement, or until such Registrable Securities can otherwise be sold without
restriction, whichever is earlier, each certificate representing Registrable Securities will bear
the following legend (the “LEGEND”):

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 AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

     The Company warrants that it will give its Transfer Agent no instructions inconsistent
with the provisions hereof. It is the intent and purpose of such instructions, as provided therein,
to require its Transfer Agent to issue to Investor certificates evidencing shares of Common Stock
incident to a Closing, free of the Legend; provided that (a) a Registration Statement shall then be
effective, (b) Investor confirms to the Transfer Agent and the Company that it has sold or intends
to sell such Common Stock to a third party which is not an affiliate of Investor or the Company and
Investor agrees to redeliver the certificate representing such shares of Common Stock to the

19

 

Transfer Agent to add the Legend in the event the Common Stock is not sold, and (c) Investor
confirms to the transfer agent and the Company that Investor has complied, or will comply with the
prospectus delivery requirement under the Securities Act.

     Section 8.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other than the one
specified in Section 8.1 has been or shall be placed on the share certificates representing the
Registrable Securities..

     Section 8.3 [INTENTIONALLY OMITTED]

     Section 8.4 INVESTOR’S COMPLIANCE. Nothing in this Article VIII shall affect in any way
Investor’s obligations under any agreement to comply with all applicable securities laws upon
resale of the Common Stock.

ARTICLE IX

NOTICES; INDEMNIFICATION

     Section 9.1 NOTICES. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless otherwise specified
herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, telegram, facsimile, or email as a PDF, addressed as
set forth below or to such other address as such party shall have specified most recently by
written notice given in accordance herewith. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile machine, or email as
a PDF, at the address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours where such notice
is to be received) or (ii) on the second business day following the date of mailing by express
courier service or on the fifth business day after deposited in the mail, in each case, fully
prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first
occur.

The addresses for such communications shall be:

     If to the Company:

UFood Restaurant Group, Inc.

255 Washington Street

Suite 150

Newton, MA 02458Tel: 617-787-6000

Fax:

Email:

20

 

     If to Investor:

Southridge Partners II, LP

90 Grove Street

Ridgefield, Connecticut 06877

Tel: 203-431-8300

Fax: 203-431-8301

Email: info@southridgellc.com

Either party hereto may from time to time change its address or facsimile number for notices under
this Section 9.1 by giving at least ten (10) days’ prior written notice of such changed address or
facsimile number to the other party hereto.

     Section 9.2 INDEMNIFICATION. Each party (an “Indemnifying Party”) agrees to indemnify and
hold harmless the other party along with its officers, directors, employees, and authorized
agents, and each Person or entity, if any, who controls such party within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, together with the Controlling Persons (as
defined in the Registration Rights Agreement) (an “Indemnified Party”) from and against any
Damages, joint or several, and any action in respect thereof to which the Indemnified Party becomes
subject to, resulting from, arising out of or relating to any misrepresentation, breach of warranty
or nonfulfillment of or failure to perform any covenant or agreement on the part of Indemnifying
Party contained in this Agreement, as such Damages are incurred, except to the extent such Damages
result primarily from Indemnified Party’s failure to perform any covenant or agreement contained in
this Agreement or Indemnified Party’s negligence, recklessness or bad faith in performing its
obligations under this Agreement.

     Section 9.3 METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for indemnification by any
Indemnified Party (as defined below) under Section 9.2 shall be asserted and resolved as follows:

          (a) In the event any claim or demand in respect of which an Indemnified Party might seek
indemnity under Section 9.2 is asserted against or sought to be collected from such Indemnified
Party by a person other than a party hereto or an affiliate thereof (a “THIRD PARTY CLAIM”), the
Indemnified Party shall deliver a written notification, enclosing a copy of all papers served, if
any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified
Party’s claim for indemnification that is being asserted under any provision of Section 9.2 against
an Indemnifying Party, together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such Third Party Claim (a “CLAIM NOTICE”) with
reasonable promptness to the Indemnifying Party. If the Indemnified Party fails to provide the
Claim Notice with reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to

21

 

indemnify the Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party’s ability to defend has been prejudiced by such failure of the Indemnified
Party. The Indemnifying Party shall notify the Indemnified Party as soon as practicable within the
period ending thirty (30) calendar days following receipt by the Indemnifying Party of either a
Claim Notice or an Indemnity Notice (as defined below) (the “DISPUTE PERIOD”) whether the
Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party
under Section 9.2 and whether the Indemnifying Party desires, at its sole cost and expense, to
defend the Indemnified Party against such Third Party Claim.

          (i) If the Indemnifying Party notifies the Indemnified Party within the Dispute Period
that the Indemnifying Party desires to defend the Indemnified Party with respect to the
Third Party Claim pursuant to this Section 9.3(a), then the Indemnifying Party shall have
the right to defend, with counsel reasonably satisfactory to the Indemnified Party, at the
sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings shall be vigorously and diligently prosecuted by the
Indemnifying Party to a final conclusion or will be settled at the discretion of the
Indemnifying Party (but only with the consent of the Indemnified Party in the case of any
settlement that provides for any relief other than the payment of monetary damages or that
provides for the payment of monetary damages as to which the Indemnified Party shall not be
indemnified in full pursuant to Section 9.2). The Indemnifying Party shall have full control
of such defense and proceedings, including any compromise or settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and expense of the Indemnified
Party, at any time prior to the Indemnifying Party’s delivery of the notice referred to in
the first sentence of this clause (i), file any motion, answer or other pleadings or take
any other action that the Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and provided further, that if requested by the
Indemnifying Party, the Indemnified Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party elects to contest. The Indemnified Party
may participate in, but not control, any defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to this clause (i), and except as provided in
the preceding sentence, the Indemnified Party shall bear its own costs and expenses with
respect to such participation. Notwithstanding the foregoing, the Indemnified Party may
takeover the control of the defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under Section 9.2 with respect to such Third Party
Claim.

          (ii) If the Indemnifying Party fails to notify the Indemnified Party within the Dispute
Period that the Indemnifying Party desires to defend the Third Party Claim pursuant to
Section 9.3(a), or if the Indemnifying Party gives such notice but fails to prosecute
vigorously and diligently or settle the Third Party Claim, or if the Indemnifying Party
fails to give any notice whatsoever within the Dispute Period, then the Indemnified Party
shall have the right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which

22

 

proceedings shall be prosecuted by the Indemnified Party in a reasonable manner and in
good faith or will be settled at the discretion of the Indemnified Party(with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld). The Indemnified
Party will have full control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that if requested by the Indemnified Party, the
Indemnifying Party will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its counsel in contesting any Third
Party Claim which the Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this clause (ii), if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes its liability or the amount
of its liability hereunder to the Indemnified Party with respect to such Third Party Claim
and if such dispute is resolved in favor of the Indemnifying Party in the manner provided in
clause (iii) below, the Indemnifying Party will not be required to bear the costs and
expenses of the Indemnified Party’s defense pursuant to this clause (ii) or of the
Indemnifying Party’s participation therein at the Indemnified Party’s request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all reasonable costs
and expenses incurred by the Indemnifying Party in connection with such litigation. The
Indemnifying Party may participate in, but not control, any defense or settlement controlled
by the Indemnified Party pursuant to this clause (ii), and the Indemnifying Party shall bear
its own costs and expenses with respect to such participation.

          (iii) If the Indemnifying Party notifies the Indemnified Party that it does not dispute
its liability or the amount of its liability to the Indemnified Party with respect to the
Third Party Claim under Section 9.2 or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability or the amount of its
liability to the Indemnified Party with respect to such Third Party Claim, the amount of
Damages specified in the Claim Notice shall be conclusively deemed a liability of the
Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the amount of such
Damages to the Indemnified Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to such claim, the Indemnifying
Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of
such dispute; provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute such legal
action as it deems appropriate.

          (b) In the event any Indemnified Party should have a claim under Section 9.2 against the
Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver a
written notification of a claim for indemnity under Section 9.2 specifying the nature of and basis
for such claim, together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such claim (an “INDEMNITY NOTICE”) with reasonable promptness
to the Indemnifying Party. The failure by any Indemnified Party to give the Indemnity Notice shall
not impair such party’s rights hereunder except to the extent that the Indemnifying Party
demonstrates that it has been irreparably

23

 

prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not
dispute the claim or the amount of the claim described in such Indemnity Notice or fails to notify
the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim
or the amount of the claim described in such Indemnity Notice, the amount of Damages specified in
the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under
Section 9.2 and the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified Party shall
proceed in good faith to negotiate a resolution of such dispute; provided, however, that if the
dispute is not resolved within thirty (30) days after the Claim Notice, the Indemnifying Party
shall be entitled to institute such legal action as it deems appropriate.

          (c) The indemnity provisions contained herein shall be in addition to (i) any cause of action
or similar rights of the Indemnified Party against the Indemnifying Party or others, and (ii) any
liabilities the Indemnifying Party may be subject to.

ARTICLE X

MISCELLANEOUS

     Section 10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York without regard to the principles of conflicts
of law. Each of the Company and Investor hereby submit to the exclusive jurisdiction of the United
States Federal and state courts located in New York with respect to any dispute arising under this
Agreement, the agreements entered into in connection herewith or the transactions contemplated
hereby or thereby.

     Section 10.2 JURY TRIAL WAIVER. The Company and the Investor hereby waive a trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto against the other in
respect of any matter arising out of or in connection with the Transaction Documents.

     Section 10.3 ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the
Company and Investor and their respective successors. Neither this Agreement nor any rights of
Investor or the Company hereunder may be assigned by either party to any other person.

     Section 10.4 THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the
Company and Investor and their respective successors, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.

     Section 10.5 TERMINATION. The Company may terminate this Agreement at any time by written
notice to the Investor. Additionally, this Agreement shall terminate at the end of Commitment
Period or as otherwise provided herein (unless extended by the agreement of the Company and
Investor); provided, however, that the provisions of Articles V, VI, VIII, and

24

 

Sections 9.2, 9.3 10.1, 10.2 and 10.4 shall survive the termination of this Agreement for a period
of eighteen (18) months.

     Section 10.6 ENTIRE AGREEMENT, AMENDMENT; NO WAIVER. This Agreement and the instruments
referenced herein contain the entire understanding of the Company and Investor with respect to the
matters covered herein and therein and, except as specifically set forth herein or therein, neither
the Company nor Investor makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the party to be charged with enforcement.

     Section 10.7 FEES AND EXPENSES. Each of the Company and Investor agrees to pay its own
expenses in connection with the preparation of this Agreement and performance of its obligations
hereunder. The Company shall pay all stamp or other similar taxes and duties levied in connection
with issuance of the Put Shares pursuant hereto.

     Section 10.8 [INTENTIONALLY OMITTED]

     Section 10.9 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of
which may be executed by less than all of the parties and shall be deemed to be an original
instrument which shall be enforceable against the parties actually executing such counterparts and
all of which together shall constitute one and the same instrument. This Agreement may be delivered
to the other parties hereto by facsimile transmission or email of a copy of this Agreement bearing
the signature of the parties so delivering this Agreement.

     Section 10.10 SEVERABILITY. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided that such severability
shall be ineffective if it materially changes the economic benefit of this Agreement to any party.

     Section 10.11 FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.

     Section 10.12 NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

     Section 10.13 EQUITABLE RELIEF. The Company recognizes that in the event that it fails to
perform, observe, or discharge any or all of its obligations under this Agreement, any remedy at
law may prove to be inadequate relief to Investor. The Company therefore agrees that

25

 

Investor shall be entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.

     Section 10.14 TITLE AND SUBTITLES. The titles and subtitles used in this Agreement are used
for the convenience of reference and are not to be considered in construing or interpreting this
Agreement.

     Section 10.15 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied upon for the
determination of the Closing Price for the Common Stock on any given Trading Day for the purposes
of this Agreement shall be Bloomberg Finance L.P. or any successor thereto. The written mutual
consent of Investor and the Company shall be required to employ any other reporting entity.

     Section 10.16 PUBLICITY. The Company and Investor shall consult with each other in issuing
any press releases or otherwise making public statements with respect to the transactions
contemplated hereby and no party shall issue any such press release or otherwise make any such
public statement without the prior written consent of the other parties, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure
is required by law, in which such case the disclosing party shall provide the other parties with
prior notice of such public statement. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of Investor without the prior written consent of such Investor, except
to the extent required by law. Investor acknowledges that this Agreement and all or part of the
Transaction Documents may be deemed to be “material contracts” as that term is defined by Item
601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents
as exhibits to reports or registration statements filed under the Securities Act or the Exchange
Act. Investor further agrees that the status of such documents and materials as material contracts
shall be determined solely by the Company, in consultation with its counsel.

[SIGNATURES ON FOLLOWING PAGE]

26

 

[SIGNATURE PAGE]

     IN WITNESS WHEREOF, the parties hereto have caused this Equity Purchase Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set forth above.

	 	 	 	 	 
	 	SOUTHRIDGE PARTNERS II, LP

 	 
	 	By:  	Southridge Advisors LLC
 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	/s/Stephen Hicks 	 
	 	 	Title:  	Manager 	 
	 
	 
	 	UFOOD RESTAURANT GROUP, INC.

 	 
	 
	 	By:  	 	 
	 	 	Name:  	/s/ George Naddaff 	 
	 	 	Title:  	CEO/Chairman 	 
	 

 

 

EXHIBITS

	 	 	 

	EXHIBIT A

	 	Registration Rights Agreement
	 
	 	 
	EXHIBIT B

	 	Put Notice
	 
	 	 
	EXHIBIT C

	 	Closing Certificate

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