Document:

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”)
is dated as of November 30, 2005, among Geokinetics Inc., a Delaware
corporation (the “Company”), and each purchaser identified on the
signature pages hereto (each, including its successors and assigns, a “Purchaser”
and collectively the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth
in this Agreement and pursuant to Section 4(2) of the Securities Act
of 1933, as amended (the “Securities Act”), and Rule 506 promulgated
thereunder, the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the Company,
securities of the Company as more fully described in this Agreement.

 

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

 

ARTICLE I.

DEFINITIONS

 

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

 

“Action” shall have the meaning ascribed to
such term in Section 3.1(j).

 

“Affiliate” means any Person that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with a Person as such terms are used in and construed
under Rule 144 under the Securities Act. 
With respect to a Purchaser, any investment fund or managed account that
is managed on a discretionary basis by the same investment manager as such
Purchaser will be deemed to be an Affiliate of such Purchaser.

 

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

 

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

 

“Commission” means the Securities and Exchange
Commission.

 

“Common Stock” means the common stock of the
Company, par value $.01 per share, and any other class of securities into which
such securities may hereafter have been reclassified or changed into.

 

“Common Stock Equivalents” means any securities
of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common

 

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Stock, including, without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.

 

“Company Counsel” means Chamberlain, Hrdlicka, White,
Williams & Martin.

 

“Disclosure Schedules” means the Disclosure
Schedules of the Company delivered concurrently herewith.

 

“Effective Date” means the date that the
initial Registration Statement filed by the Company pursuant to the
Registration Rights Agreement is first declared effective by the Commission.

 

“Escrow
Agent” means FW.

 

“Escrow Agreement” shall mean the Escrow Agreement,
dated November     , 2005, by and among the Company,
each Purchaser and the Escrow Agent pursuant to which the Purchasers will
deposit their respective Subscription Amounts and Transaction Document
signature pages with the Escrow Agent to be applied to the transactions
contemplated hereunder.

 

“Evaluation Date” shall have the meaning
ascribed to such term in Section 3.1(r).

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options
to employees, officers or directors of the Company pursuant to any stock or
option plan duly adopted by a majority of the non-employee members of the Board
of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities issued
hereunder of the first or second closings and upon the exercise or exchange of
or conversion of any Securities issued hereunder and/or securities exercisable
or exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement, provided that such securities have
not been amended since the date of this Agreement to increase the number of such
securities or to decrease the exercise, exchange or conversion price of any
such securities, and (c) securities issued pursuant to acquisitions or
strategic transactions, provided any such issuance shall only be to a Person
(or an equity owner of a Person) which is, itself or through its subsidiaries,
an operating company in a business synergistic with the business of the
Company, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.

 

“FW” means Feldman Weinstein LLP with offices
located at 420 Lexington Avenue, Suite 2620, New York, New York
10170-0002.

 

“GAAP” shall have the meaning ascribed to such
term in Section 3.1(h).

 

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“Intellectual Property Rights” shall have the
meaning ascribed to such term in Section 3.1(o).

 

“Legend Removal Date” shall have the meaning
ascribed to such term in Section 4.1(c).

 

“Liens” means a lien, charge, security
interest, encumbrance, right of first refusal, preemptive right or other
restriction.

 

“Material Adverse Effect” shall have the
meaning assigned to such term in Section 3.1(b).

 

“Material Permits” shall have the meaning
ascribed to such term in Section 3.1(m).

 

“Per Share Purchase Price” equals $1.25,
subject to adjustment for reverse and forward stock splits, stock dividends,
stock combinations and other similar transactions of the Common Stock that
occur after the date of this Agreement and prior to the Closing.

 

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

 

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

 

“Purchaser Party” shall have the meaning
ascribed to such term in Section 4.9.

 

“Registration Rights Agreement” means the
Registration Rights Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit A attached hereto.

 

“Registration Statement” means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement and covering the resale by the Purchasers of the Shares and the
Warrant Shares.

 

“Required Approvals” shall have the meaning
ascribed to such term in Section 3.1(e).

 

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

 

“SEC Reports” shall have the meaning ascribed
to such term in Section 3.1(h).

 

“Securities” means the Shares, the Warrants and
the Warrant Shares.

 

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“Securities Act” means the Securities Act of
1933, as amended.

 

“Shares” means the shares of Common Stock
issued or issuable to each Purchaser pursuant to this Agreement.

 

“Short Sales” shall include all “short sales”
as defined in Rule 200 of Regulation SHO under the Exchange Act. 

 

 “Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for
Shares and Warrants purchased hereunder as specified below such Purchaser’s
name on the signature page of this Agreement and next to the heading
“Subscription Amount”, in United States Dollars and in immediately available
funds.

 

“Subsidiary” means any subsidiary of the
Company as set forth on Schedule 3.1(a).

 

“Trading Day” means a day on which the Common
Stock is traded on a Trading Market.

 

“Trading Market” means the following markets or
exchanges on which the Common Stock is listed or quoted for trading on the date
in question: the Nasdaq Capital Market, the American Stock Exchange, the New
York Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.

 

“Transaction Documents” means this Agreement,
the Warrants, the Registration Rights Agreement and any other documents or
agreements executed in connection with the transactions contemplated hereunder.

 

“VWAP” means, for any date, the price
determined by the first of the following clauses that applies: (a) if the
Common Stock is then listed or quoted on a Trading Market, the daily volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from
9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b)  if the
Common Stock is not then listed or quoted on a Trading Market and if prices for
the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on the OTC Bulletin Board; (c) if the Common Stock is not then listed or
quoted on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (d) in
all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Purchasers and
reasonably acceptable to the Company.

 

“Warrants” means collectively the Common Stock
purchase warrants, in the form of Exhibit C delivered to the
Purchasers at the Closing in accordance with Section 2.2(a) hereof,
which Warrants shall be exercisable immediately and have a term of exercise
equal to five years.

 

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“Warrant Shares” means the shares of Common
Stock issuable upon exercise of the Warrants.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1                                 Closing.

 

(a)                                  First
Closing.  On the first Closing Date,
upon the terms and subject to the conditions set forth herein, concurrent with
the execution and delivery of this Agreement by the parties hereto, the Company
agrees to sell, and each Purchaser agrees to purchase in the aggregate,
severally and not jointly, not less than $25,000,000 of Shares and Warrants.  Each Purchaser shall deliver to the Escrow
Agent via wire transfer or a certified check immediately available funds equal
to their Subscription Amount and the Company shall deliver to the Escrow Agent
for delivery to each Purchaser their respective Shares and Warrants as
determined pursuant to Section 2.2(a) and the other items set forth
in Section 2.2 issuable at the first Closing.  Upon satisfaction of the conditions set forth
in Sections 2.2 and 2.3, the first Closing shall occur at the offices of FW, or
such other location as the parties shall mutually agree.

 

(b)                                 Second
Closing.  On the second Closing Date,
which shall be held on a date agreed by the Purchasers in the second Closing
and the Company but not later than December 9, 2005, upon the terms and
subject to the conditions set forth herein, concurrent with the execution and
delivery of this Agreement by the parties hereto who are purchasing Securities
in the second Closing, the Company agrees to sell, and each Purchaser agrees to
purchase in the aggregate, severally and not jointly, that number of Shares and
Warrants as are set forth on the Purchasers’ signature pages hereto, but
the aggregate Subscription Amounts at the second Closing shall not exceed the
difference between $32,000,000 and the aggregate Subscription Amount which is
sold by the Company at the first Closing. 
Each Purchaser in the second Closing shall deliver to the Escrow Agent
via wire transfer or a certified check immediately available funds equal to their
Subscription Amount and the Company shall deliver to the Escrow Agent for
delivery to each Purchaser their respective Shares and Warrants as determined
pursuant to Section 2.2(a) and the other items set forth in
Section 2.2 issuable at the second Closing.  Upon satisfaction of the conditions set forth
in Sections 2.2 and 2.3, the second Closing shall occur at the offices of FW,
or such other location as the parties shall mutually agree.

 

2.2                                 Deliveries.

 

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

 

(i)                                     this
Agreement duly executed by the Company;

 

(ii)                                  a
legal opinion of Company Counsel, in the form of Exhibit B attached
hereto;

 

(iii)                               a
copy of the irrevocable instructions to the Company’s transfer agent
instructing the transfer agent to deliver, on an expedited basis, a certificate

 

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evidencing a number of
Shares equal to such Purchaser’s Subscription Amount divided by the Per Share
Purchase Price, registered in the name of such Purchaser;

 

(iv)                              a
Warrant registered in the name of such Purchaser to purchase up to a number of
shares of Common Stock equal to 10% of such Purchaser’s Subscription Amount
divided by 1.25, with an exercise price equal to $2.00, subject to adjustment
as provided therein;

 

(v)                                 the
Escrow Agreement duly executed by the Company; and

 

(vi)                              the
Registration Rights Agreement duly executed by the Company.

 

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

 

(i)                                     this
Agreement duly executed by such Purchaser;

 

(ii)                                  such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
the Escrow Agreement;

 

(iii)                               the
Escrow Agreement duly executed by the Purchaser; and

 

(iv)                              the
Registration Rights Agreement duly executed by such Purchaser.

 

2.3                                 Closing
Conditions. 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)                                 the
Trace Acquisition shall have closed but for payment of the purchase price
thereof from the Escrow Account (as defined in the Escrow Agreement)(as to the
first Closing only); and

 

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

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1                                 Representations
and Warranties of the Company.  Except
as set forth under the corresponding section of the Disclosure Schedules which
Disclosure Schedules shall be deemed a part hereof, the Company hereby makes
the representations and warranties set forth below to each Purchaser:

 

(a)                                  Subsidiaries.  All of the direct and indirect subsidiaries
of the Company are set forth on Schedule 3.1(a).  The Company owns, directly or indirectly, all
of the capital stock or other equity interests of each Subsidiary free and
clear of any Liens, and all the issued and outstanding shares of capital stock
of each Subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no
subsidiaries, then references in the Transaction Documents to the Subsidiaries
will be disregarded.

 

(b)                                 Organization
and Qualification.  The Company and
each of the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as

 

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applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. 
Neither the Company nor any Subsidiary is in violation or default of any
of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case
may be, could not have or reasonably be expected to result in (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company’s ability to perform in any material respect on a
timely basis its obligations under any Transaction Document (any of (i),
(ii) or (iii), a “Material Adverse Effect”) and no Proceeding has
been instituted in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or qualification.

 

(c)                                  Authorization;
Enforcement.  The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, its board of directors or its stockholders in connection therewith
other than in connection with the Required Approvals.  Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies.

 

(d)                                 No
Conflicts.  The execution, delivery
and performance of the Transaction Documents by the Company, the issuance and
sale of the Shares and the consummation by the Company of the other
transactions contemplated hereby and thereby do not and will not
(i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties
or assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required

 

8

 

Approvals, conflict with
or result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected
to result in a Material Adverse Effect.

 

(e)                                  Filings,
Consents and Approvals.  The Company
is not required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required pursuant to
Section 4.4 of this Agreement, (ii) the filing with the Commission of
the Registration Statement, (iii) application(s) to each applicable
Trading Market for the listing of the Shares and Warrant Shares for trading
thereon in the time and manner required thereby, and (iv) the filing of
Form D with the Commission and such filings as are required to be made
under applicable state securities laws (collectively, the “Required
Approvals”).

 

(f)                                    Issuance
of the Securities.  The Securities
are duly authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the Company other
than restrictions on transfer provided for in the Transaction Documents.  The Warrant Shares, when issued in accordance
with the terms of the Transaction Documents, will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the Company.  The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants.

 

(g)                                 Capitalization.  The capitalization of the Company is as set
forth on Schedule 3.1(g). 
The Company has not issued any capital stock since its most recently
filed periodic report under the Exchange Act, other than pursuant to the
exercise of employee stock options under the Company’s stock option plans, the
issuance of shares of Common Stock to employees pursuant to the Company’s
employee stock purchase plan and pursuant to the conversion or exercise of
outstanding Common Stock Equivalents.  No
Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. 
Except as a result of the purchase and sale of the Securities, there are
no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common
Stock or Common Stock Equivalents.  The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding

 

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shares of capital stock
of the Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities.  No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for
the issuance and sale of the Securities. 
There are no stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to which the Company is
a party or, to the knowledge of the Company, between or among any of the
Company’s stockholders.

 

(h)                                 SEC
Reports; Financial Statements.  The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials, including the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC Reports”) on a timely basis
or has received a valid extension of such time of filing and has filed any such
SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The financial statements of
the Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.

 

(i)                                     Material
Changes.  Since the date of the
latest audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or required to be disclosed in
filings made with the Commission, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock

 

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and (v) the Company
has not issued any equity securities to any officer, director or Affiliate,
except pursuant to existing Company stock option plans.  The Company does not have pending before the
Commission any request for confidential treatment of information.

 

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

 

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

 

(l)                                     Compliance.  Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred that
has not been waived that, with notice or lapse of time or both, would result in
a default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is
in violation of any order of any court, arbitrator or governmental body, or
(iii) is or has been in violation of any statute, rule or regulation
of any governmental authority, including without limitation all foreign,
federal, state and local laws applicable to its business except in each case as
could not have a Material Adverse Effect.

 

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

 

11

 

(n)                                 Title
to Assets.  The Company and the
Subsidiaries have good and marketable title in fee simple to all real property
owned by them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance.

 

(o)                                 Patents
and Trademarks.  The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights necessary or material for use in connection
with their respective businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”).  Neither the
Company nor any Subsidiary has received a written notice that the Intellectual
Property Rights used by the Company or any Subsidiary violates or infringes
upon the rights of any Person.  To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights of others.

 

(p)                                 Insurance.  The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged, including, but not limited
to, directors and officers insurance coverage equal to $2,000,000.  To the best knowledge of the Company, such
insurance contracts and policies are accurate and complete.  Neither the Company nor any Subsidiary has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.

 

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

 

12

 

(r)                                    Sarbanes-Oxley;
Internal Accounting Controls.  The
Company is in material compliance with all provisions of the Sarbanes-Oxley Act
of 2002 which are applicable to it as of the applicable Closing Date.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP 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. The Company’s certifying officers have
evaluated the effectiveness of the Company’s controls and procedures as of the
date prior to the filing date of the most recently filed periodic report under
the Exchange Act (such date, the “Evaluation Date”).  The Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no
significant changes in the Company’s internal controls (as such term is defined
in Item 307(b) of Regulation S-K under the Exchange Act) or, to the
knowledge of the Company, in other factors that could significantly affect the
Company’s internal controls.

 

(s)                                  Certain
Fees.  No brokerage or finder’s fees
or commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the Transaction
Documents.  The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated
by the Transaction Documents.

 

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

 

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

 

(v)                                 Registration
Rights.  Other than each of the
Purchasers, no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.

 

(w)                               Listing
and Maintenance Requirements.  The
Company’s Common Stock is registered pursuant to Section 12(g) of the
Exchange Act, and the Company has taken

 

13

 

no action designed to, or
which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the Commission is contemplating terminating such
registration.  The Company has not, in
the 12 months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.

 

(x)                                   Application
of Takeover Protections.  The Company
and its Board of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the
Company’s issuance of the Securities and the Purchasers’ ownership of the
Securities.

 

(y)                                 Disclosure.  All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
including the Disclosure Schedules to this Agreement, furnished by or on behalf
of the Company with respect to the representations and warranties made herein
are true and correct with respect to such representations and warranties and do
not contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.

 

(z)                                   No
Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules and
regulations of any Trading Market on which any of the securities of the Company
are listed or designated. 

 

(aa)                            Solvency.  Based on the financial condition of the
Company as of the applicable Closing Date after giving effect to the receipt by
the Company of the proceeds from the sale of the Securities hereunder,
(i) the Company’s fair saleable value of its assets exceeds the amount
that will be required to be paid on or in respect of the Company’s existing
debts and other liabilities (including known contingent liabilities) as they
mature; (ii) the Company’s assets do not constitute unreasonably small
capital to

 

14

 

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

 

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

 

(cc)                            No
General Solicitation.  Neither the
Company nor any person acting on behalf of the Company has offered or sold any
of the Securities by any form of general solicitation or general
advertising.  The Company has offered the
Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

 

(dd)                          Foreign
Corrupt Practices.  Neither the
Company, nor to the knowledge of the Company, any agent or other person acting
on behalf of the Company, has (i) directly or indirectly, used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or
made by any person acting on its behalf of which the Company is aware) which is
in violation of law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

15

 

(ee)                            Accountants.  The Company’s accountants are set forth on Schedule 3.1(ee)
of the Disclosure Schedule.  To the
knowledge of the Company, such accountants, who the Company expects will
express their opinion with respect to the financial statements to be included
in the Company’s Annual Report on Form 10-KSB for the year ending
December 31, 2005, are a registered public accounting firm as required by
the Securities Act.

 

(ff)                                Acknowledgment
Regarding Purchasers’ Purchase of Securities.  The Company acknowledges and agrees that each
of the Purchasers is acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions contemplated
hereby.  The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Purchaser or any
of its representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Securities.  The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.

 

(gg)                          Acknowledgement Regarding
Purchasers’ Trading Activity. 
Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Section 4.15 hereof), it is understood and agreed
by the Company (i) that none of the Purchasers has been asked to agree,
nor has any Purchaser agreed, to desist from purchasing or selling, long and/or
short, securities of the Company, or “derivative” securities based on
securities issued by the Company or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by any
Purchaser, including Short Sales, and specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities; (iii) that
any Purchaser, and counter parties in “derivative” transactions to which any
such Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) that each Purchaser shall not be
deemed to have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction. 
The Company further
understands and acknowledges that (a) one or more Purchasers may engage in
hedging activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value
of the Warrant Shares deliverable with respect to Securities are being
determined and (b) such hedging activities (if any) could reduce the value
of the existing stockholders’ equity interests in the Company at and after the
time that the hedging activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

 

(hh)                          Manipulation
of Price.  The Company has not, and to its knowledge no one acting on
its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for,

 

16

 

purchased, or, paid any
compensation for soliciting purchases of, any of the Securities (other than for
the placement agent’s placement of the Securities), or (iii) paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.

 

3.2                                 Representations
and Warranties of the Purchasers. 
Each Purchaser hereby, for itself and for no other Purchaser, represents
and warrants as of the date hereof and as of the applicable Closing Date to the
Company as follows:

 

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

 

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

 

(c)                                  Purchaser
Status.  At the time such Purchaser
was offered the Securities, it was, and at the date hereof it is, and on each
date on which it exercises any Warrants, it will be either: (i) an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities
Act.  Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange Act.

 

17

 

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

 

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

 

(f)                                    Short
Sales and Confidentiality Prior To The Date Hereof.  Such Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Purchaser, executed any Short Sales in the securities of
the Company (including, without limitations, any Short Sales involving the
Company’s securities) since noon (New York Time) on November 3, 2005 which was the
time that such Purchaser was first contacted regarding an investment in the
Company (“Discussion Time”)
through the date hereof. 
Other than to other Persons party to this Agreement, such Purchaser has
maintained the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction).

 

The Company acknowledges and agrees that each
Purchaser does not make or has not made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in this Section 3.2.

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1                                 Transfer
Restrictions.  

 

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

 

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

 

18

 

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

 

The Company acknowledges and agrees that a Purchaser
may from time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of the
Securities to a financial institution that is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and who agrees to be
bound by the provisions of this Agreement and the Registration Rights Agreement
and, if required under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection therewith.  Further, no notice shall be required of such
pledge.  At the appropriate Purchaser’s
expense, the Company will execute and deliver such reasonable documentation as
a pledgee or secured party of Securities may reasonably request in connection
with a pledge or transfer of the Securities, including, if the Securities are
subject to registration pursuant to the Registration Rights Agreement, the
preparation and filing of any required prospectus supplement under
Rule 424(b)(3) under the Securities Act or other applicable provision
of the Securities Act to appropriately amend the list of Selling Stockholders
thereunder.

 

(c)                                  Certificates
evidencing the Shares and Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) while a
registration statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, or
(ii) following any sale of such Shares or Warrant Shares pursuant to
Rule 144, or (iii) if such Shares or Warrant Shares are eligible for
sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission).  The Company shall cause its counsel to issue
a legal opinion to the Company’s transfer agent promptly after the Effective
Date if required by the

 

19

 

Company’s transfer agent
to effect the removal of the legend hereunder. 
If all or any portion of a Warrant is exercised at a time when there is
an effective registration statement to cover the resale of the Warrant Shares,
such Warrant Shares shall be issued free of all legends.  The Company agrees that following the
Effective Date or at such time as such legend is no longer required under this
Section 4.1(c), it will, no later than three Trading Days following the
delivery by a Purchaser to the Company or the Company’s transfer agent of a
certificate representing Shares or Warrant Shares, as the case may be, issued
with a restrictive legend (such third Trading Day, the “Legend Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate representing
such shares that is free from all restrictive and other legends.  The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section.  Certificates for Securities subject to legend
removal hereunder shall be transmitted by the transfer agent of the Company to
the Purchasers by crediting the account of the Purchaser’s prime broker with
the Depository Trust Company System.

 

(d)                                 In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Shares or Warrant Shares (based on the Closing Price of the
Common Stock on the date such Securities are submitted to the Company’s
transfer agent) delivered for removal of the restrictive legend and subject to
Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day
five (5) Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is delivered
without a legend. Nothing herein shall limit such Purchaser’s right to pursue
actual damages for the Company’s failure to deliver certificates representing
any Securities as required by the Transaction Documents, and such Purchaser
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.

 

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

 

4.2                                 Furnishing
of Information.  As long as any
Purchaser owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act.  As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the Securities under
Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.

 

20

 

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

 

4.4                                 Securities
Laws Disclosure; Publicity.  The
Company shall, by 8:30 a.m. Eastern time on the Trading Day following the
first Closing Date, issue a Current Report on Form 8-K, reasonably
acceptable to each Purchaser in the first Closing disclosing the material terms
of the transactions contemplated hereby, and shall attach the Transaction
Documents thereto. The Company shall also file a Form 8-K within four
(4) Trading Days following the closing of the Trace Energy Services Ltd.
acquisition (the “Trace Acquisition”) which shall contain all information
required to be contained therein by applicable Commission regulations, and
expressly including all non-public information contained in the private
placement memorandum and investor presentation distributed by the Company to
Purchaser. The Company and each Purchaser shall consult with each other in
issuing any other press releases with respect to the transactions contemplated
hereby, and neither the Company nor any Purchaser shall issue any such press
release or otherwise make any such public statement without the prior consent
of the Company, with respect to any press release of any Purchaser, or without
the prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser,
or include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in connection
with the registration statement contemplated by the Registration Rights
Agreement and (ii) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).

 

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

 

4.6                                 Non-Public
Information.  The Company covenants
and agrees that neither it nor any other Person acting on its behalf will
provide any Purchaser or its agents or counsel with any information that the
Company believes constitutes material non-public information other than that to
be contained in the company’s Form 8-K to be filed in connection with the
Trace Acquisition to, unless prior thereto such Purchaser shall have executed a
written agreement regarding the confidentiality and use of such
information.  The Company understands and

 

21

 

confirms that each Purchaser
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.

 

4.7                                 Use
of Proceeds.  Except as set forth on Schedule 4.7
attached hereto, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and not for the satisfaction
of any portion of the Company’s debt (other than payment of trade payables in
the ordinary course of the Company’s business and prior practices), to redeem
any Common Stock or Common Stock Equivalents or to settle any outstanding
litigation.

 

4.8                                 Reimbursement.  If any Purchaser becomes involved in any
capacity in any Proceeding by or against any Person who is a stockholder of the
Company (except as a result of sales, pledges, margin sales and similar
transactions by such Purchaser to or with any current stockholder), solely as a
result of such Purchaser’s acquisition of the Securities under this Agreement,
the Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred.  The reimbursement obligations
of the Company under this paragraph shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Purchasers who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchasers and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the Purchasers
and any such Affiliate and any such Person. 
The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of
or in right of the Company solely as a result of acquiring the Securities under
this Agreement.

 

4.9                                 Indemnification
of Purchasers.   Subject to the
provisions of this Section 4.9, the Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, members, partners,
employees and agents (each, a “Purchaser Party”) harmless from any and
all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of
any of the representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other Transaction Documents or (b) any
action instituted against a Purchaser, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of such
Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such
Purchaser’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser may have with any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). 
If any action shall be brought against any Purchaser Party in respect of
which indemnity may be sought pursuant to this Agreement, such Purchaser Party
shall promptly notify the Company in writing, and the Company shall have the
right to assume the defense thereof with counsel of its own choosing.  Any Purchaser Party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the

 

22

 

expense of such Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or
(iii) in such action there is, in the reasonable opinion of such separate
counsel, a material conflict on any material issue between the position of the
Company and the position of such Purchaser Party.  The Company will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the
extent that a loss, claim, damage or liability is attributable to any Purchaser
Party’s breach of any of the representations, warranties, covenants or
agreements made by the Purchasers in this Agreement or in the other Transaction
Documents.

 

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

 

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

 

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

 

4.13                           [RESERVED].

 

4.14                           Subsequent
Equity Sales.

 

(a)                                  From
the date hereof until 90 days after the Effective Date, neither the Company nor
any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
provided, however, the 90 day period set forth in this Section 4.14 shall
be extended for the number of Trading Days during such period in which
(i) trading in the

 

23

 

Common Stock is suspended
by any Trading Market, or (ii) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Shares and Warrant Shares.

 

(b)                                 From
the date hereof until such time as no Warrants remain unexercised and
unexpired, the Company shall be prohibited from effecting or entering into an
agreement to effect any Subsequent Financing involving a “Variable Rate
Transaction”.  The term “Variable Rate
Transaction” shall mean a transaction in which the Company issues or sells
(i) any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion, exercise or exchange rate or other price
that is based upon and/or varies with the trading prices of or quotations for
the shares of Common Stock at any time after the initial issuance of such debt
or equity securities, or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the initial issuance
of such debt or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock or (ii) enters into any agreement,
including, but not limited to, an equity line of credit, whereby the Company
may sell securities at a future determined price.  Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which
remedy shall be in addition to any right to collect damages.

 

(c)                                  Notwithstanding
the foregoing, this Section 4.14 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.

 

4.15                           Short
Sales and Confidentiality After The Date Hereof.  Each Purchaser severally and not jointly with
the other Purchasers covenants that neither it nor any affiliates acting on its
behalf or pursuant to any understanding with it will execute any Short Sales
during the period after the beginning of the Discussion Time and ending at the
time that the transactions contemplated by this Agreement are first publicly
announced as described in Section 4.4.  Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.4, such Purchaser will
maintain, the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction).  Each Purchaser understands and acknowledges,
severally and not jointly with any other Purchaser, that the Commission
currently takes the position that coverage of short sales of shares of the
Common Stock “against the box” prior to the Effective Date of the Registration
Statement with the Securities is a violation of Section 5 of the
Securities Act, as set forth in Item 65, Section 5 under Section A,
of the Manual of Publicly Available Telephone Interpretations, dated July 1997,
compiled by the Office of Chief Counsel, Division of Corporation Finance.  Notwithstanding the foregoing, no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in Short
Sales in the securities of the Company after the time that the transactions
contemplated by this Agreement are first publicly announced as described in
Section 4.4.  Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such

 

24

 

Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Further, no Purchaser in the second
Closing shall execute any Short Sales until after the second Closing has
occurred.

 

4.16                           Delivery
of Securities After Closing.  The
Company shall deliver, or cause to be delivered, the respective Securities
purchased by each Purchaser to such Purchaser within 3 Trading Days of the
applicable Closing Date.

 

ARTICLE V.

MISCELLANEOUS

 

5.1                                 Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the first Closing has not been consummated on or before
December 1, 2005; provided, however, that no such
termination will affect the right of any party to sue for any breach by the
other party (or parties).

 

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

 

5.3                                 Entire
Agreement.  The Transaction
Documents, together with the exhibits and schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.

 

5.4                                 Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (a) the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature
pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a
Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.

 

25

 

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

 

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

 

5.7                                 Successors
and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns.  The Company may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of each Purchaser.  Any
Purchaser may assign any or all of its rights under this Agreement to any
Person to whom such Purchaser assigns or transfers any Securities, provided
such transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the “Purchasers”.

 

5.8                                 No
Third-Party Beneficiaries.  This
Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.9.

 

5.9                                 Governing
Law.  All questions concerning the
construction, validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof.  Each party
agrees that all legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the 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
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably 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
improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner

 

26

 

permitted by law.  The parties hereby waive all rights to a
trial by jury.  If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.

 

5.10                           Survival.  The representations and warranties contained
herein shall survive the Closing and the delivery of the Shares and Warrant
Shares.

 

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

 

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

 

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

 

5.14                           Replacement
of Securities.  If any certificate or
instrument evidencing any Securities is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary
and reasonable indemnity, if requested. 
The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Securities.

 

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

 

27

 

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

 

5.17                           Independent
Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any
Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under any Transaction
Document.  Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser
shall be entitled to independently protect and enforce its rights, including
without limitation, the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.  Each Purchaser has been
represented by its own separate legal counsel in their review and negotiation
of the Transaction Documents.  For
reasons of administrative convenience only, Purchasers and their respective
counsel have chosen to communicate with the Company through FW.  FW does not represent all of the Purchasers
but only RBC Capital Markets, who has acted as placement agent to the
transaction.  The Company has elected to
provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do
so by the Purchasers.

 

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

 

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

 

(Signature
Pages Follow)

 

28

 

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

 

 

	
  GEOKINETICS INC.

  	
   

  	
  Address for Notice:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  One Riverway, Suite 2100

  
	
   

  	
  Name:

  	
   

  	
  Houston, TX 77056

  
	
   

  	
  Title:

  	
   

  	
  Tel: (713) 850-7600

  
	
   

  	
   

  	
  Fax:

  	
   

  	
   

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

  	
   

  	
   

  

 

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

29

 

[PURCHASER SIGNATURE PAGES TO
GOKN SECURITIES PURCHASE AGREEMENT]

 

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

 

	
  Name of Purchaser: 

  	
   

  	
   

  
	
  Signature of Authorized Signatory of
  Purchaser:

  	
   

  	
   

  
	
  Name of Authorized Signatory: 

  	
   

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  	
   

  
	
  Email Address of Purchaser:

  	
   

  	
   

  
									

 

Address for Notice of Purchaser:

 

 

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

 

 

Subscription Amount:

Shares:

Warrant Shares:

 

Do you want your Warrants to contain a 9.99%
beneficial ownership blocker provision?

 

o  Yes                                                                                                         o  No

 

Do you want your Warrants to contain a 4.99%
beneficial ownership blocker provision?

 

o  Yes                                                                                                         o  No

 

EIN Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

 

[SIGNATURE PAGES CONTINUE]

 

30Exhibit
10.2

 

EXHIBIT A

 

REGISTRATION
RIGHTS AGREEMENT

 

This Registration Rights
Agreement (this “Agreement”) is made and entered into as of
November 30, 2005, among Geokinetics Inc., a Delaware corporation (the “Company”),
and the purchasers signatory hereto (each such purchaser is a “Purchaser”
and collectively, the “Purchasers”).

 

This Agreement is made
pursuant to the Securities Purchase Agreement, dated as of the date hereof
among the Company and the Purchasers (the “Purchase Agreement”).

 

The Company and the
Purchasers hereby agree as follows:

 

1.                                       Definitions.  Capitalized terms used and not otherwise
defined herein that are defined in the Purchase Agreement shall have the
meanings given such terms in the Purchase Agreement.  As used in this Agreement, the following
terms shall have the following meanings:

“Advice”
shall have the meaning set forth in Section 6(d).

 

“Effectiveness
Date” means, with respect to the initial Registration Statement required to
be filed hereunder, February 28, 2006 (March 31, 2006 in the case of
a “full review” by the Commission) and, with respect to any additional
Registration Statements which may be required pursuant to Section 3(c),
the 90th calendar day following the date on which the Company first
knows, or reasonably should have known, that such additional Registration
Statement is required hereunder; provided, however, in the event
the Company is notified by the Commission that one of the above Registration
Statements will not be reviewed or is no longer subject to further review and
comments, the Effectiveness Date as to such Registration Statement shall be the
fifth Trading Day following the date on which the Company is so notified if
such date precedes the dates required above.

 

“Effectiveness
Period” shall have the meaning set forth in Section 2(a).

 

“Event”
shall have the meaning set forth in Section 2(b).

 

“Event
Date” shall have the meaning set forth in Section 2(b).

 

“Filing
Date” means, with respect to the initial Registration Statement required
hereunder, December 30, 2005 and, with respect to any additional
Registration Statements which may be required pursuant to Section 3(c),
the 30th day following the date on which the Company first knows, or
reasonably should have known that such additional Registration Statement is
required hereunder.

 

“Holder”
or “Holders” means the holder or holders, as the case may be, from time
to time of Registrable Securities.

 

1

 

“Indemnified
Party” shall have the meaning set forth in Section 5(c).

 

“Indemnifying
Party” shall have the meaning set forth in Section 5(c).

 

“Losses”
shall have the meaning set forth in Section 5(a).

 

“Plan
of Distribution” shall have the meaning set forth in Section 2(a).

 

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

 

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

 

“Registrable
Securities” means all of (i) the Shares issuable, (ii) the
Warrant Shares issuable and (iii) any shares of Common Stock issued or
issuable upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the foregoing.

 

“Registration
Statement” means the registration statements required to be filed hereunder
and any additional registration statements contemplated by Section 3(c),
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.

 

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

 

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

 

“Selling
Shareholder Questionnaire” shall have the meaning set forth in
Section 3(a).

 

2

 

2.                                       Shelf
Registration.

 

(a)                                  On
or prior to each Filing Date, the Company shall prepare and file with the
Commission a “Shelf” Registration Statement covering the resale of 100% of the
Registrable Securities on such Filing Date for an offering to be made on a
continuous basis pursuant to Rule 415. 
The Registration Statement shall be on Form S-1 (which, promptly
after the Company becomes eligible to do so, will be amended and converted into
a Form S-3) and shall contain (unless otherwise directed by the Holders)
substantially the “Plan of Distribution” attached hereto as Annex A.  Subject to the terms of this Agreement, the
Company shall use its best efforts to cause a Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event prior to the applicable Effectiveness Date,
and shall use its best efforts to keep such Registration Statement continuously
effective under the Securities Act until all Registrable Securities covered by
such Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company’s transfer agent and the affected Holders  (the “Effectiveness Period”).  The Company shall telephonically request
effectiveness of a Registration Statement as of 5:00 pm Eastern Time on a
Trading Day.   The Company shall
immediately notify the Holders via facsimile of the effectiveness of a
Registration Statement on the same Trading Day that the Company telephonically
confirms effectiveness with the Commission, which shall be the date requested
for effectiveness of a Registration Statement. 
The Company shall, by 9:30 am Eastern Time on the Trading Day after the
Effective Date (as defined in the Purchase Agreement), file a
Form 424(b)(5) with the Commission. 
Failure to so notify the Holder within 1 Trading Day of such
notification shall be deemed an Event under Section 2(b).

 

(b)                                 If:
(i) a Registration Statement is not filed on or prior to its Filing Date
(if the Company files a Registration Statement without affording the Holders
the opportunity to review and comment on the same as required by
Section 3(a), the Company shall not be deemed to have satisfied this clause
(i)), or (ii) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities
Act, within five Trading Days of the date that the Company is notified (orally
or in writing, whichever is earlier) by the Commission that a Registration
Statement will not be “reviewed,” or not subject to further review, or
(iii) prior to its Effectiveness Date, the Company fails to file a
pre-effective amendment and otherwise respond in writing to comments made by
the Commission in respect of such Registration Statement within 20 calendar
days after the receipt of comments by or notice from the Commission that such
amendment is required in order for a Registration Statement to be declared
effective, or (iv) a Registration Statement filed or required to be filed
hereunder is not declared effective by the Commission by its Effectiveness
Date, or (v) after the Effectiveness Date, a Registration Statement ceases
for any reason to remain continuously effective as to all Registrable
Securities for which it is required to be effective, or the Holders are not
permitted to utilize the Prospectus therein to resell such Registrable
Securities for 10 consecutive calendar days but no more than an aggregate of 15
calendar days during any 12-month period (which need not be consecutive Trading
Days) (any such failure or breach being referred to as an “Event”, and
for purposes of

 

3

 

clause (i) or (iv) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five
Trading Day period is exceeded, or for purposes of clause (iii) the date
which such 10 calendar day period is exceeded, or for purposes of clause
(v) the date on which such 10 or 15 calendar day period, as applicable, is
exceeded being referred to as “Event Date”), then in addition to any
other rights the Holders may have hereunder or under applicable law, on each
such Event Date and on each monthly anniversary of each such Event Date (if the
applicable Event shall not have been cured by such date) until the applicable
Event is cured, the Company shall pay to each Holder an amount in cash, as
partial liquidated damages and not as a penalty, equal to 2% of the aggregate
purchase price paid by such Holder pursuant to the Purchase Agreement for any
Registrable Securities then held by such Holder.  If the Company fails to pay any partial
liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a rate of 18%
per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such partial
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. The partial liquidated damages pursuant to the terms hereof
shall apply on a daily pro-rata basis for any portion of a month prior to the
cure of an Event.

 

3.                                       Registration
Procedures

 

In connection with the
Company’s registration obligations hereunder, the Company shall:

 

(a)                                  Not
less than five Trading Days prior to the filing of each Registration Statement
or any related Prospectus or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), the Company shall, (i) furnish to each Holder copies of all
such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Holders, and (ii) cause its officers and directors, counsel
and independent certified public accountants to respond to such inquiries as
shall be necessary, in the reasonable opinion of respective counsel to such
Holders to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file a Registration Statement or any such
Prospectus or any amendments or supplements thereto to which the Holders of a
majority of the Registrable Securities shall reasonably object in good faith,
provided that, the Company is notified of such objection in writing no later
than 5 Trading Days after the Holders have been so furnished copies of such
documents. Each Holder agrees to furnish to the Company a completed Questionnaire
in the form attached to this Agreement as Annex B (a “Selling Shareholder
Questionnaire”) not less than two Trading Days prior to the Filing Date or
by the end of the fourth Trading Day following the date on which such Holder
receives draft materials in accordance with this Section.

 

(b)                                 (i) Prepare
and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep a Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and

 

4

 

prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities
Act all of the Registrable Securities; (ii) cause the related Prospectus
to be amended or supplemented by any required Prospectus supplement (subject to
the terms of this Agreement), and as so supplemented or amended to be filed
pursuant to Rule 424; (iii) respond as promptly as reasonably
possible to any comments received from the Commission with respect to a
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence
from and to the Commission relating to a Registration Statement; and
(iv) comply in all material respects with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable Securities
covered by a Registration Statement during the applicable period in accordance
(subject to the terms of this Agreement) with the intended methods of
disposition by the Holders thereof set forth in such Registration Statement as
so amended or in such Prospectus as so supplemented.

 

(c)                                  If
during the Effectiveness Period, the number of Registrable Securities at any
time exceeds 90% of the number of shares of Common Stock then registered in a
Registration Statement, then the Company shall file as soon as reasonably
practicable but in any case prior to the applicable Filing Date, an additional
Registration Statement covering the resale by the Holders of not less than 130%
of the number of such Registrable Securities.

 

(d)                                 Notify
the Holders of Registrable Securities to be sold (which notice shall, pursuant
to clauses (ii) through (vi) hereof, be accompanied by an instruction
to suspend the use of the Prospectus until the requisite changes have been
made) as promptly as reasonably possible (and, in the case of
(i)(A) below, not less than five Trading Days prior to such filing) and
(if requested by any such Person) confirm such notice in writing no later than
one Trading Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to a Registration Statement
is proposed to be filed; (B) when the Commission notifies the Company
whether there will be a “review” of such Registration Statement and whenever
the Commission comments in writing on such Registration Statement (the Company
shall provide true and complete copies thereof and all written responses
thereto to each of the Holders); and (C) with respect to a Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to a Registration
Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the 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; (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in a Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to a

 

5

 

Registration Statement, Prospectus or other documents
so that, in the case of a Registration Statement or the Prospectus, as the case
may be, 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 light of the circumstances under which they were made,
not misleading; and (vi) the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes may
be material and that, in the determination of the Company, makes it not in the
best interest of the Company to allow continued availability of a Registration
Statement or Prospectus; provided that any and all of such information shall
remain confidential to each Holder until such information otherwise becomes
public, unless disclosure by a Holder is required by law; provided, further,
notwithstanding each Holder’s agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information.

 

(e)                                  Use
its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of (i) any order suspending the effectiveness of a Registration Statement,
or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.

 

(f)                                    Furnish
to each Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Person, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.

 

(g)                                 Promptly
deliver to each Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request in connection with
resales by the Holder of Registrable Securities.  Subject to the terms of this Agreement, the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto, except after the giving on any notice
pursuant to Section 3(d).

 

(h)                                 If
NASDR Rule 2710 requires any broker-dealer to make a filing prior to
executing a sale by a Holder, the Company shall (i) make an Issuer Filing
with the NASDR, Inc. Corporate Financing Department pursuant to NASDR
Rule 2710(b)(10)(A)(i), (ii) respond within five Trading Days to any
comments received from NASDR in connection therewith, and (iii) pay the
filing fee required in connection therewith.

 

(i)                                     Prior
to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from the
Registration or qualification) of such Registrable Securities for the resale by
the Holder under the securities or Blue Sky laws of such jurisdictions within
the United States as any

 

6

 

Holder reasonably requests in writing, to keep each
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things reasonably
necessary to enable the disposition in such jurisdictions of the Registrable
Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any material tax in
any such jurisdiction where it is not then so subject or file a general consent
to service of process in any such jurisdiction.

 

(j)                                     If
requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Holders may
request.

 

(k)                                  Upon
the occurrence of any event contemplated by this Section 3, as promptly as
reasonably possible under the circumstances taking into account the Company’s
good faith assessment of any adverse consequences to the Company and its
stockholders of the premature disclosure of such event, prepare a supplement or
amendment, including a post-effective amendment, to a Registration Statement or
a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document
so that, as thereafter delivered, neither a Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  If the Company notifies
the Holders in accordance with clauses (ii) through (vi) of
Section 3(d) above to suspend the use of any Prospectus until the
requisite changes to such Prospectus have been made, then the Holders shall
suspend use of such Prospectus.  The
Company will use its best efforts to ensure that the use of the Prospectus may
be resumed as promptly as is practicable. 
The Company shall be entitled to exercise its right under this
Section 3(k) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of partial liquidated damages pursuant to
Section 2(b), for a period not to exceed 60 days (which need not be
consecutive days) in any 12 month period.

 

(l)                                     Comply
with all applicable rules and regulations of the Commission.

 

(m)                               The
Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by such
Holder and, if required by the Commission, the person thereof that has voting
and dispositive control over the Shares. During any periods that the Company is
unable to meet its obligations hereunder with respect to the registration of
the Registrable Securities solely because any Holder fails to furnish such
information within three Trading Days of the Company’s request, any liquidated
damages that are accruing at such time as to such Holder only shall be tolled
and any Event that may otherwise occur solely

 

7

 

because of such delay shall be suspended as to such
Holder only, until such information is delivered to the Company.

 

4.                                       Registration
Expenses.  All fees and expenses
incident to the performance of or compliance with this Agreement by the Company
shall be borne by the Company whether or not any Registrable Securities are
sold pursuant to a Registration Statement. 
The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to
filings required to be made with the Trading Market on which the Common Stock
is then listed for trading, (B) in compliance with applicable state
securities or Blue Sky laws reasonably agreed to by the Company in writing
(including, without limitation, fees and disbursements of counsel for the
Company in connection with Blue Sky qualifications or exemptions of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as requested by
the Holders) and (C) if not previously paid by the Company in connection
with an Issuer Filing, with respect to any filing that may be required to be
made by any broker through which a Holder intends to make sales of Registrable
Securities with NASD Regulation, Inc. pursuant to the NASD Rule 2710,
so long as the broker is receiving no more than a customary brokerage
commission in connection with such sale, (ii) printing expenses
(including, without limitation, expenses of printing certificates for Registrable
Securities and of printing prospectuses if the printing of prospectuses is
reasonably requested by the holders of a majority of the Registrable Securities
included in a Registration Statement), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement.  In addition, the Company
shall be responsible for all of its internal expenses incurred in connection
with the consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit and the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange as required hereunder. In no
event shall the Company be responsible for any broker or similar commissions
or, except to the extent provided for in the Transaction Documents, any legal
fees or other costs of the Holders.

 

5.                                       Indemnification

 

(a)                                  Indemnification
by the Company.  The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys’ fees)
and expenses (collectively, “Losses”), as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
in a Registration Statement, any Prospectus or any form of prospectus or in any

 

8

 

amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that
(i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in a Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (it being understood that
the Holder has approved Annex A hereto for this purpose) or (ii) in the
case of an occurrence of an event of the type specified in
Section 3(d)(ii)-(vi), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 6(d). 
The Company shall notify the Holders promptly of the institution, threat
or assertion of any Proceeding arising from or in connection with the
transactions contemplated by this Agreement of which the Company is aware.

 

(b)                                 Indemnification
by Holders. Each Holder shall, severally and not jointly, indemnify and
hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred,
to the extent arising out of or based solely upon: (x) such Holder’s failure to
comply with the prospectus delivery requirements of the Securities Act or (y)
any untrue or alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading
(i) to the extent, but only to the extent, that such untrue statement or
omission is contained in any information so furnished in writing by such Holder
to the Company specifically for inclusion in such Registration Statement or
such Prospectus or (ii) to the extent that (1) such untrue statements
or omissions are based solely upon information regarding such Holder furnished
in writing to the Company by such Holder expressly for use therein, or to the extent
that such information relates to such Holder or such Holder’s proposed method
of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in a Registration
Statement (it being understood that the Holder has approved Annex A hereto for
this purpose), such Prospectus or such form of Prospectus or in any amendment
or supplement thereto or (2) in the case of an occurrence of an event of
the type specified in Section 3(d)(ii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt
by such Holder of the Advice contemplated in Section 6(d). In no event shall
the liability of any selling Holder hereunder be greater in amount than the
dollar amount of the net proceeds received by

 

9

 

such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.

 

(c)                                  Conduct
of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have prejudiced the Indemnifying Party.

 

An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees
and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall reasonably believe that a material conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense thereof and the reasonable fees and expenses of one
separate counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.

 

Subject
to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent
incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Trading Days of written notice
thereof to the Indemnifying Party; provided that the Indemnified Party shall
promptly reimburse the Indemnifying Party for that portion of such fees and
expenses applicable to such actions for which such Indemnified Party is not entitled
to indemnification hereunder, determined based upon the relative faults of the
parties.

 

10

 

(d)                                 Contribution.
If the indemnification under Section 5(a) or 5(b) is unavailable
to an Indemnified Party or insufficient to hold an Indemnified Party harmless
for any Losses, then each Indemnifying Party shall contribute to the amount
paid or payable by such Indemnified Party, in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party and Indemnified Party
in connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.

 

The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation
or by any other method of allocation that does not take into account the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which
the proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, except in the case of
fraud by such Holder.

 

The
indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

 

6.                                       Miscellaneous

 

(a)                                  Remedies.
In the event of a breach by the Company or by a Holder, of any of their
obligations under this Agreement, each Holder or the Company, as the case may
be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement.  The Company and each Holder agree that
monetary damages would not provide adequate compensation for any losses
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.

 

11

 

(b)                                 No
Piggyback on Registrations.  Except
as set forth on Schedule 6(b) attached hereto, neither the
Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in the initial
Registration Statement other than the Registrable Securities.  No Person has any right to cause the Company
to effect the registration under the Securities Act of any securities of the
Company.  The Company shall not file any
other registration statements until the initial Registration Statement required
hereunder is declared effective by the Commission, provided that this
Section 6(b) shall not prohibit the Company from filing amendments to
registration statements already filed.

 

(c)                                  Compliance.  Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
a Registration Statement.

 

(d)                                 Discontinued
Disposition.  Each Holder agrees by
its acquisition of Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in
Section 3(d), such Holder will forthwith discontinue disposition of such
Registrable Securities under a Registration Statement until such Holder’s
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement or until it is advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. 
The Company will use its best efforts to ensure that the use of the
Prospectus may be resumed as promptly as it practicable.  The Company agrees and acknowledges that any
periods during which the Holder is required to discontinue the disposition of
the Registrable Securities hereunder shall be subject to the provisions of
Section 2(b).

 

(e)                                  Piggy-Back
Registrations.  If at any time during
the Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall determine to
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with the stock option or other employee benefit plans, then the
Company shall send to each Holder a written notice of such determination and,
if within fifteen days after the date of such notice, any such Holder shall so
request in writing, the Company shall include in such registration statement
all or any part of such Registrable Securities such Holder requests to be
registered; provided, however, that, the Company shall not be
required to register any Registrable Securities pursuant to this
Section 6(e) that are eligible for resale pursuant to
Rule 144(k) promulgated under the Securities Act or that are the subject
of a then effective Registration Statement.

 

(f)                                    Amendments
and Waivers. The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the

 

12

 

same shall be in writing and signed by the Company and
each Holder of the then outstanding Registrable Securities.  Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of all of
the Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified,
or supplemented except in accordance with the provisions of the immediately
preceding sentence.

 

(g)                                 Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be delivered as set forth in the Purchase
Agreement.

 

(h)                                 Successors
and Assigns. This Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of each of the parties and shall
inure to the benefit of each Holder. The Company may not assign its rights or
obligations hereunder without the prior written consent of all of the Holders
of the then-outstanding Registrable Securities. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.

 

(i)                                     No
Inconsistent Agreements. Neither the Company nor any of its subsidiaries
has entered, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities, that would have the effect of impairing the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof.  Except as set forth
on Schedule 6(i), neither the Company nor any of its subsidiaries
has previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person that have not been satisfied in
full.

 

(j)                                     Execution
and Counterparts.  This Agreement may
be executed in any number of counterparts, each of which when so executed shall
be deemed to be an original and, all of which taken together shall constitute
one and the same Agreement.  In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

 

(k)                                  Governing
Law.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be determined with the provisions of the Purchase Agreement.

 

(l)                                     Cumulative
Remedies.  The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.

 

(m)                               Severability.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth

 

13

 

herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties hereto shall
use their commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.

 

(n)                                 Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the meaning
hereof.

 

(o)                                 Independent
Nature of Holders’ Obligations and Rights. 
The obligations of each Holder hereunder are several and not joint with
the obligations of any other Holder hereunder, and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder hereunder.  Nothing contained
herein or in any other agreement or document delivered at any closing, and no
action taken by any Holder pursuant hereto or thereto, shall be deemed to
constitute the Holders as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Holders are in any way
acting in concert with respect to such obligations or the transactions
contemplated by this Agreement.  Each
Holder shall be entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.

 

*************************

 

14

 

IN WITNESS WHEREOF, the
parties have executed this Registration Rights Agreement as of the date first
written above.

 

 

	
   

  	
  GEOKINETICS INC.

  
	
   

  	
   

  	
   

  	 

	
   

  	
  By:

  	
   

  	
   

  	 

	
   

  	
   

  	
  Name: 

  
	
   

  	
   

  	
  Title:

  
					

 

 

[SIGNATURE PAGE OF
HOLDERS FOLLOWS]

 

 

[SIGNATURE PAGE OF
HOLDERS TO GOKN RRA]

 

	
  Name of Holder:

  	
   

  	
   

  
	
  Signature
  of Authorized Signatory of Holder:

  	
   

  	
   

  
	
  Name of Authorized
  Signatory:

  	
   

  	
   

  
	
  Title of Authorized
  Signatory:

  	
   

  	
   

  
								

 

 

[SIGNATURE PAGES
CONTINUE]

 

16

 

ANNEX
A

 

Plan of
Distribution

 

Each Selling Stockholder
(the “Selling Stockholders”) of the common stock (“Common Stock”)
of Geokinetics Inc., a Delaware corporation (the “Company”) and any of
their pledgees, assignees and successors-in-interest may, from time to time,
sell any or all of their shares of Common Stock on the Trading Market or any
other stock exchange, market or trading facility on which the shares are traded
or in private transactions.  These sales
may be at fixed or negotiated prices.  A
Selling Stockholder may use any one or more of the following methods when
selling shares:

 

•                  ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;

 

•                  block
trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;

 

•                  purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;

 

•                  an
exchange distribution in accordance with the rules of the applicable
exchange;

 

•                  privately
negotiated transactions;

 

•                  settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a part;

 

•                  broker-dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per share;

 

•                  a
combination of any such methods of sale;

 

•                  through
the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise; or

 

•                  any
other method permitted pursuant to applicable law.

 

The Selling Stockholders
may also sell shares under Rule 144 under the Securities Act of 1933, as
amended (the “Securities Act”), if available, rather than under this
prospectus.

 

Broker-dealers engaged by
the Selling Stockholders may arrange for other brokers-dealers to participate
in sales.  Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage

 

17

 

commission in compliance
with NASDR Rule 2440; and in the case of a principal transaction a markup
or markdown in compliance with NASDR IM-2440.

 

In connection with the
sale of the Common Stock or interests therein, the Selling Stockholders may
enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the Common Stock in
the course of hedging the positions they assume.  The Selling Stockholders may also sell shares
of the Common Stock short and deliver these securities to close out their short
positions, or loan or pledge the Common Stock to broker-dealers that in turn
may sell these securities.  The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Stockholders
and any broker_dealers or agents that are involved in selling the shares may be
deemed to be “underwriters” within the meaning of the Securities Act in
connection with such sales.  In such
event, any commissions received by such broker_dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.  Each Selling Stockholder has informed the
Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock. In no event
shall any broker-dealer receive fees, commissions and markups which, in the
aggregate, would exceed eight percent (8%).

 

The Company is required
to pay certain fees and expenses incurred by the Company incident to the
registration of the shares.  The Company
has agreed to indemnify the Selling Stockholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities
Act.

 

Because Selling
Stockholders may be deemed to be “underwriters” within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of
the Securities Act.  In addition, any
securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather
than under this prospectus.  Each Selling
Stockholder has advised us that they have not entered into any written or oral
agreements, understandings or arrangements with any underwriter or
broker-dealer regarding the sale of the resale shares.  There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the
Selling Stockholders.

 

We agreed to keep this
prospectus effective until the earlier of (i) the date on which the shares
may be resold by the Selling Stockholders without registration and without
regard to any volume limitations by reason of Rule 144(e) under the
Securities Act or any other rule of similar effect or (ii) all of the
shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect.  The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not be
sold unless they have been registered or

 

18

 

qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

 

Under applicable
rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market
making activities with respect to the Common Stock for the applicable
restricted period, as defined in Regulation M, prior to the commencement of the
distribution.  In addition, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of the Common Stock by the
Selling Stockholders or any other person. 
We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.

 

19

 

Annex B

 

GEOKINETICS
INC.

 

Selling
Securityholder Notice and Questionnaire

 

The undersigned
beneficial owner of common stock, par value $.01 per share (the “Common
Stock”), of Geokinetics Inc., a Delaware corporation (the “Company”),
(the “Registrable Securities”) understands that the Company has filed or
intends to file with the Securities and Exchange Commission (the “Commission”)
a registration statement on Form S-1 (the “Registration Statement”)
for the registration and resale under Rule 415 of the Securities Act of
1933, as amended (the “Securities Act”), of the Registrable Securities,
in accordance with the terms of the Registration Rights Agreement, dated as of
November     , 2005 (the “Registration Rights
Agreement”), among the Company and the Purchasers named therein.  A copy of the Registration Rights Agreement
is available from the Company upon request at the address set forth below.  All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Registration Rights
Agreement.

 

Certain legal
consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel
regarding the consequences of being named or not being named as a selling
securityholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The undersigned beneficial
owner (the “Selling Securityholder”) of Registrable Securities hereby
elects to include the Registrable Securities owned by it and listed below in
Item 3 (unless otherwise specified under such Item 3) in the Registration
Statement.

 

20

 

The undersigned hereby
provides the following information to the Company and represents and warrants
that such information is accurate:

 

QUESTIONNAIRE

 

1.                                      Name.

 

	
  (a)

  	
   

  	
  Full Legal Name of
  Selling Securityholder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Full Legal Name of
  Registered Holder (if not the same as (a) above) through which
  Registrable Securities Listed in Item 3 below are held:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Full Legal Name of
  Natural Control Person (which means a natural person who directly or
  indirectly alone or with others has power to vote or dispose of the
  securities covered by the questionnaire):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

2.  Address for Notices
to Selling Securityholder:

 

	
   

  
	
   

  
	
   

  
	
  Telephone:

  	
   

  
	
  Fax:

  	
   

  
	
  Contact Person:

  	
   

  
				

 

3.  Beneficial
Ownership of Registrable Securities:

 

	
  (a)

  	
   

  	
  Type and Number of
  Registrable Securities beneficially owned:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

21

 

4.  Broker-Dealer
Status:

 

	
  (a)

  	
   

  	
  Are you a
  broker-dealer?

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Yes   o      No   o

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  If “yes” to
  Section 4(a), did you receive your Registrable Securities as
  compensation for investment banking services to the Company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Yes   o      No   o

  
	
   

  	
   

  	
   

  	
   

  
	
  Note:

  	
   

  	
  If no, the Commission’s
  staff has indicated that you should be identified as an underwriter in the
  Registration Statement.

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Are you an affiliate of
  a broker-dealer?

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Yes   o      No   o

  
	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  If you are an affiliate
  of a broker-dealer, do you certify that you bought the Registrable Securities
  in the ordinary course of business, and at the time of the purchase of the
  Registrable Securities to be resold, you had no agreements or understandings,
  directly or indirectly, with any person to distribute the Registrable
  Securities?

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Yes   o      No   o

  
	
   

  	
   

  	
   

  
	
  Note:

  	
   

  	
  If no, the Commission’s
  staff has indicated that you should be identified as an underwriter in the
  Registration Statement.

  

 

5.  Beneficial
Ownership of Other Securities of the Company Owned by the Selling
Securityholder.

 

	
  Except
  as set forth below in this Item 5, the undersigned is not the beneficial or
  registered owner of any securities of the Company other than the Registrable
  Securities listed above in Item 3.

  
	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Type and Amount of
  Other Securities beneficially owned by the Selling Securityholder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

22

 

6.  Relationships with
the Company:

 

	
  Except
  as set forth below, neither the undersigned nor any of its affiliates,
  officers, directors or principal equity holders (owners of 5% of more of the
  equity securities of the undersigned) has held any position or office or has
  had any other material relationship with the Company (or its predecessors or
  affiliates) during the past three years.

  
	
   

  	
   

  	
   

  
	
  State any exceptions
  here:

  
	
   

  
	
   

  
	
   

  

 

The undersigned agrees to
promptly notify the Company of any inaccuracies or changes in the information
provided herein that may occur subsequent to the date hereof at any time while
the Registration Statement remains effective.

 

By signing below, the
undersigned consents to the disclosure of the information contained herein in
its answers to Items 1 through 6 and the inclusion of such information in the
Registration Statement and the related prospectus and any amendments or
supplements thereto.  The undersigned
understands that such information will be relied upon by the Company in
connection with the preparation or amendment of the Registration Statement and
the related prospectus.

 

IN WITNESS WHEREOF the
undersigned, by authority duly given, has caused this Notice and Questionnaire
to be executed and delivered either in person or by its duly authorized agent.

 

	
  Dated:

  	
   

  	
   

  	
  Beneficial Owner:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
						

 

PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:

 

23

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