Document:

Unassociated Document

    
      

    

    Exhibit
      10.1

     

     

    SECURITIES
      PURCHASE AGREEMENT

    

    BY
      AND AMONG

    

    GULF
      WESTERN PETROLEUM CORPORATION

    

    AND

    

    METAGE
      FUNDS LIMITED

    

    AND

    

    NCIM
      LIMITED

     

     

    Dated
      as of September 10, 2007

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

     

    
      	 	
              Page

            
	 	 
	
              SECTION
                1. Purchase and Sale of Securities

            	
              5

            
	
              1.1

            	
              Purchase
                and Sale of Note, Closing Shares and Warrant

            	
              5

            
	
              1.2

            	
              The
                Closing Date

            	
              5

            
	
              1.3

            	
              Form
                of Payment

            	
              5

            
	 	 
	
              SECTION
                2. Buyer’s Representations And Warranties

            	
              6

            
	
              2.1

            	
              Investment
                Purpose

            	
              6

            
	
              2.2

            	
              Economic
                Loss, Suitability and Sophistication

            	
              6

            
	
              2.3

            	
              Accredited
                Investor Status

            	
              6

            
	
              2.4

            	
              Reliance
                on Exemptions

            	
              6

            
	
              2.5

            	
              Information

            	
              6

            
	
              2.6

            	
              No
                Governmental Review

            	
              7

            
	
              2.7

            	
              Transfer
                or Resale

            	
              7

            
	
              2.8

            	
              Legends

            	
              7

            
	
              2.9

            	
              Authorization;
                Enforcement; Validity

            	
              8

            
	
              2.10

            	
              Residency

            	
              8

            
	
              2.11

            	
              Recent
                Activity

            	
              8

            
	 	 
	
              SECTION
                3. Representations And Warranties Of The Company

            	
              8

            
	
              3.1

            	
              Organization
                and Qualification

            	
              9

            
	
              3.2

            	
              Authorization;
                Enforcement; Validity

            	
              9

            
	
              3.3

            	
              Capitalization

            	
              10

            
	
              3.4

            	
              Issuance
                of Securities

            	
              11

            
	
              3.5

            	
              No
                Conflicts

            	
              11

            
	
              3.6

            	
              SEC
                Documents; Financial Statements

            	
              13

            
	
              3.7

            	
              Absence
                of Certain Changes

            	
              14

            
	
              3.8

            	
              Absence
                of Litigation

            	
              14

            
	
              3.9

            	
              No
                Undisclosed Events, Liabilities, Developments or
                Circumstances

            	
              14

            
	
              3.10

            	
              Acknowledgment
                Regarding Buyer’s Purchase of Note and Warrant

            	
              14

            
	
              3.11

            	
              Employee
                Relations

            	
              15

            
	
              3.12

            	
              Intellectual
                Property Rights

            	
              15

            
	
              3.13

            	
              Environmental
                Laws

            	
              15

            
	
              3.14

            	
              Title

            	
              16

            
	
              3.15

            	
              Insurance

            	
              17

            
	
              3.16

            	
              Regulatory
                Permits

            	
              17

            
	
              3.17

            	
              Internal
                Accounting Controls; Disclosure Controls and Procedures; Books and
                Records

            	
              18

            
	
              3.18

            	
              Tax
                Status

            	
              18

            
	
              3.19

            	
              Transactions
                With Affiliates

            	
              19

            
	
              3.20

            	
              Application
                of Takeover Protections; Rights Agreement

            	
              19

            
	
              3.21

            	
              Foreign
                Corrupt Practices

            	
              19

            
	
              3.22

            	
              Outstanding
                Indebtedness, Permitted Indebtedness and Liens

            	
              19

            
	
              3.23

            	
              Ranking
                of Note

            	
              20

            
	
              3.24

            	
              Oil
                and Gas Property

            	
              20

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              3.25

            	
              Leases,
                Performance of Obligations

            	
              21

            
	
              3.26

            	
              Operation
                of Oil and Gas Property, Marketing

            	
              21

            
	
              3.27

            	
              Tangible
                Assets

            	
              22

            
	
              3.28

            	
              Investment
                Company

            	
              22

            
	 	 
	
              SECTION
                4. Affirmative Covenants

            	
              22

            
	
              4.1

            	
              Best
                Efforts

            	
              22

            
	
              4.2

            	
              Reporting
                Status

            	
              22

            
	
              4.3

            	
              Use
                of Proceeds

            	
              22

            
	
              4.4

            	
              Financial
                Information

            	
              22

            
	
              4.5

            	
              Reservation
                of Shares

            	
              23

            
	
              4.6

            	
              Listing

            	
              23

            
	
              4.7

            	
              Disclosure
                of Transactions and Other Material Information

            	
              23

            
	
              4.8

            	
              Notices

            	
              23

            
	
              4.9

            	
              Compliance
                with Laws and Maintenance of Permits

            	
              24

            
	
              4.10

            	
              Inspection
                and Audits

            	
              24

            
	
              4.11

            	
              Insurance

            	
              25

            
	
              4.12

            	
              Collateral

            	
              26

            
	
              4.13

            	
              Taxes

            	
              26

            
	
              4.14

            	
              Intellectual
                Property

            	
              26

            
	
              4.15

            	
              Patriot
                Act, Investor Secrecy Act and Office of Foreign Assets
                Control

            	
              26

            
	
              4.16

            	
              Drilling
                Title Opinions

            	
              27

            
	
              4.17

            	
              Security
                Covenants

            	
              27

            
	
              4.18

            	
              Subsidiary
                Interests

            	
              28

            
	
              4.19

            	
              Submission
                of Matters to a Stockholder Vote

            	
              28

            
	
              4.20

            	
              Subsidiary
                Certificates

            	
              28

            
	 	 
	
              SECTION
                5. Negative Covenants

            	
              29

            
	
              5.1

            	
              Stay,
                Extension and Usury Laws

            	
              29

            
	
              5.2

            	
              Payment
                Restrictions Affecting Subsidiaries

            	
              29

            
	
              5.3

            	
              Prepayments

            	
              29

            
	
              5.4

            	
              Indebtedness

            	
              29

            
	
              5.5

            	
              Liens

            	
              29

            
	
              5.6

            	
              Sale
                of Collateral

            	
              30

            
	
              5.7

            	
              Corporate
                Existence; Leases

            	
              30

            
	
              5.8

            	
              Restrictions
                on Loans; Investments; Subsidiary Equity

            	
              30

            
	
              5.9

            	
              Equipment

            	
              31

            
	
              5.10

            	
              Affiliate
                Transactions

            	
              31

            
	
              5.11

            	
              Settling
                of Accounts

            	
              31

            
	
              5.12

            	
              Limitation
                on Sale and Leaseback Transactions

            	
              31

            
	
              5.13

            	
              Investment
                Company

            	
              31

            
	
              5.14

            	
              Leases

            	
              31

            
	
              5.15

            	
              Restriction
                on Purchases or Payments

            	
              32

            
	
              5.16

            	
              No
                Avoidance of Obligations

            	
              32

            
	
              5.17

            	
              Regulation
                M

            	
              32

            
	 	 
	
              SECTION
                6. Conditions To The Obligation Of The Company To Sell

            	
              32

            
	 	 
	
              SECTION
                7. Conditions To The Obligation Of The Buyer To Purchase

            	
              33

            

    

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

    
      	
              SECTION
                8. Indemnification

            	
              35

            
	 	 
	
              SECTION
                9. Right to Participate in Future Financing

            	
              37

            
	 	 
	
              SECTION
                10. Governing Law; Miscellaneous.

            	
              38

            
	
              10.1

            	
              Governing
                Law; Jurisdiction; Jury Trial

            	
              38

            
	
              10.2

            	
              Counterparts

            	
              38

            
	
              10.3

            	
              Headings

            	
              39

            
	
              10.4

            	
              Severability

            	
              39

            
	
              10.5

            	
              Entire
                Agreement; Amendments

            	
              39

            
	
              10.6

            	
              Notices

            	
              39

            
	
              10.7

            	
              Successors
                and Assigns

            	
              40

            
	
              10.8

            	
              No
                Third Party Beneficiaries

            	
              40

            
	
              10.9

            	
              Survival

            	
              40

            
	
              10.10

            	
              Further
                Assurances

            	
              40

            
	
              10.11

            	
              Termination

            	
              41

            
	
              10.12

            	
              No
                Strict Construction

            	
              41

            
	
              10.13

            	
              Remedies

            	
              41

            
	
              10.14

            	
              Payment
                Set Aside

            	
              41

            
	
              10.15

            	
              Transfer
                Agent Instructions

            	
              41

            
	
              10.16

            	
              Interpretative
                Matters

            	
              42

            

    

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

     

    SECURITIES
      PURCHASE AGREEMENT

     

    SECURITIES
      PURCHASE AGREEMENT (the “Agreement”), dated as of
      September 10, 2007, by and among Gulf Western Petroleum Corporation, a Nevada
      corporation, with principal offices located at 4801 Woodway Drive, Suite 306
      W,
      Houston, Texas, 77056 (together with its predecessors, the
“Company”), and Metage Funds Limited and NCIM Limited (together
      with their respective successors and assigns, individually and collectively,
      “Buyer”).

     

    WHEREAS:

     

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

     

    B.           Buyer
      wishes to purchase from the Company and the Company, wishes to sell to Buyer,
      upon the terms and conditions stated in this Agreement, (1) 1,500,000 shares
      (the “Closing Shares”) of the Company’s common stock, par value
      $0.001 per share (“Common Stock”), (2) senior secured notes, in
      the form attached as Exhibit A, in an original aggregate principal amount
      of $3,700,000 (such notes collectively, as they may be amended, supplemented,
      restated or modified and in effect from time to time, the
“Note”), and (3) a warrant, in the form attached as Exhibit
      B, to acquire an aggregate number of shares of the Company’s Common Stock,
      equal to the quotient of $900,000 divided by the Warrant Exercise Price (as
      defined in the Warrant), at a exercise price per share equal to the Warrant
      Exercise Price (such warrant, as it may be amended, supplemented, restated
      or
      modified and in effect from time to time, being referred to as the
“Warrant”; and the shares of Common Stock issuable from time to
      time upon exercise of the Warrant being referred to as the “Warrant
      Shares”).

     

    C.           The
      Note shall be convertible into shares of Common Stock in accordance with the
      terms of the Note (the shares of Common Stock issuable upon conversion of the
      Note being referred to herein as the “Conversion
      Shares”).

     

    D.           Contemporaneously
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement (as the same may be
      amended, supplemented, restated or modified and in effect from time to time,
      the
“Registration Rights Agreement”), pursuant to which the Company
      agrees to provide certain registration rights under the 1933 Act and all other
      securities laws, with respect to the Closing Shares, the Conversion Shares
      and
      the Warrant Shares.

     

    E.           Contemporaneously
      with the closing of the purchase and sale of the Note and the Warrant (the
      “Closing”), the parties hereto and the Subsidiaries (as defined
      in Section 3.1) will execute and deliver a Security Agreement (as the same
      may
      be amended, supplemented, restated or modified and in effect from time to time,
      the “Security Agreement”), pursuant to which the Company and
      its Subsidiaries will agree to provide the Collateral Agent, as agent for Buyer,
      with a security interest in substantially all assets of the
      Company.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    F.           Contemporaneously
      with the Closing, the Subsidiaries will execute and deliver a Guaranty (as
      the
      same may be amended, supplemented, restated or modified and in effect from
      time
      to time, together, the “Guaranty”), pursuant to which the
      Subsidiaries will agree to guarantee certain obligations of the Company (the
      guarantees under the Guaranty, including any such guarantee added after the
      Closing, being referred to herein as the
“Guarantees”).

     

    G.           Contemporaneously
      with the Closing, the parties hereto will execute and deliver a Pledge Agreement
      (as the same may be amended, supplemented, restated or modified and in effect
      from time to time, together, the “Pledge Agreement”), pursuant
      to which the Company will agree to pledge all of the capital stock and other
      equity in the Subsidiaries to Metage Funds Limited, as the Collateral Agent
      for
      the Buyer (the “Collateral Agent”), as collateral for the
      Note.

     

    H.           Contemporaneously
      with the Closing, Buyer and the Debtors (as defined in the Security Agreement)
      will execute and deliver one or more mortgages, deeds of trust, assignments
      of
      production, security agreements, fixture filings and financing statements (the
      “Mortgages”), pursuant to which the Debtors will agree to grant
      to Buyer a security interest in certain real and personal property, rights,
      titles, interests and estates described therein.

     

    NOW
      THEREFORE, the Company and Buyer hereby agree as follows:

     

    SECTION
      1.

    PURCHASE
      AND SALE OF SECURITIES

     

    1.1           Purchase
      and Sale of Note, Closing Shares and Warrant.  Subject
      to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
      7
      below, the Company shall issue and sell to Buyer, and Buyer agrees to purchase
      from the Company, (i) the Closing Shares, (ii) the Note in the principal amount
      of $3,700,000 and (iii) the Warrant to purchase a number of shares of Common
      Stock equal to $900,000, divided by the Warrant Exercise Price.  The
      aggregate purchase price (the “Purchase Price”) for the Note,
      the Closing Shares and Warrant purchased by Buyer shall be
      $3,700,000.  All references herein and in each of the other
      Transaction Documents (as defined in Section 7) to “dollars” or
“$” shall mean the lawful money of the United
      States of
      America.

     

    1.2           The
      Closing Date.  The
      date and time of the Closing (the “Closing Date”) shall be
      10:00 a.m., Houston, Texas time, on the first Business Day following the date
      of
      this Agreement, subject to the satisfaction (or waiver) of all of the conditions
      to the Closing set forth in Sections 6 and 7 (or such later or earlier date
      as
      is mutually agreed to by the Company and Buyer).  The Closing shall
      occur on the Closing Date at the offices of Porter & Hedges, L.L.P., 1000
      Main Street, 36th Floor,
      Houston,
      Texas 77002, or at such other place as the Company and Buyer may designate
      in
      writing.  As used in this Agreement, “Business Day”
means any day other than Saturday, Sunday or other day on
      which commercial banks
      in Houston, Texas are authorized or required by law to remain
      closed.

     

    1.3           Form
      of Payment.  On
      the Closing Date, (i) Buyer shall pay the Purchase Price to the Company for
      the
      Closing Shares, Note and Warrant to be issued and sold to Buyer on the Closing
      Date, by wire transfer of immediately available funds in accordance with the
      Company’s written wire instructions, and (ii) the Company shall deliver to Buyer
      (A) certificates representing the Closing Shares, (B) the Note, and (C) the
      Warrant, in each case duly executed on behalf of the Company and registered
      in
      the name of Buyer.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SECTION
      2.

    BUYER'S REPRESENTATIONS
      AND WARRANTIES

     

    Buyer
      represents and warrants, as of the date of this Agreement and the Closing Date,
      with respect to only itself, that:

     

    2.1           Investment
      Purpose.  Buyer
      (i) is acquiring the Note (along with the related Guaranty), the Closing Shares
      and the Warrant purchased by Buyer hereunder, and (ii) upon conversion (if
      any)
      of the Note will acquire the Conversion Shares issuable upon conversion thereof,
      and (iii) upon any exercise of the Warrant will acquire the Warrant Shares
      issuable upon such exercise thereof, (the Note, the Conversion Shares, the
      Closing Shares, the Guarantees, the Warrant and the Warrant Shares being
      collectively referred to herein as the “Securities”) for
      Buyer’s own account and not with a view towards, or for resale in connection
      with, the public sale or distribution thereof, except pursuant to sales
      registered under, or exempted from the registration requirements of, the 1933
      Act.

     

    2.2           Economic
      Loss, Suitability and Sophistication.  Buyer
      (i) is able to bear the economic risk of losing its entire investment in the
      Securities and (ii) is able to bear such risk for an indefinite period of
      time.  Buyer has evaluated the risks involved in investing in the
      Securities and has determined that the Securities are a suitable investment
      for
      Buyer.  Buyer’s overall commitment to investments which are not
      readily marketable is not disproportionate to its net worth.  Buyer’s
      investment in the Securities will not cause such overall commitment to become
      excessive.  Buyer has such knowledge and experience in financial and
      business matters that it is capable of evaluating the risks and merits of this
      investment.

     

    2.3           Accredited
      Investor Status.  Buyer
      is an “accredited investor” as that term is defined in Rule 501(a) of Regulation
      D inasmuch as Buyer is a company not formed for the specific purpose of making
      an investment in the Securities and Buyer’s total assets are in excess of
      $5,000,000.

     

    2.4           Reliance
      on Exemptions.  Buyer
      understands that the Securities are being offered and sold to it in reliance
      on
      specific exemptions from the registration requirements of securities laws and
      that the Company is relying in part upon the truth and accuracy of, and Buyer’s
      compliance with, the representations, warranties, agreements, acknowledgments
      and understandings of Buyer set forth herein in order to determine the
      availability of such exemptions and the eligibility of Buyer to acquire the
      Securities.  For purposes hereof, “securities laws”
means the securities laws, legislation and regulations of,
      and the instruments,
      policies, rules, orders, codes, notices and interpretation notes of, the
      securities regulatory authorities (including the SEC) of the United States
      and
      any applicable states and other jurisdictions.

     

    2.5           Information.  Buyer
      and its advisors, if any, have been furnished with all materials relating to
      the
      business, finances and operations of the Company and materials relating to
      the
      offer and sale of the Securities that have been requested by
      Buyer.  Buyer and its advisors, if any, have been afforded the
      opportunity to ask questions of the Company.  Buyer understands that
      its investment in the Securities involves a high degree of
      risk.  Buyer has sought such accounting, legal and tax advice as it
      has considered necessary to make an informed investment decision with respect
      to
      its acquisition of the Securities.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.6           No
      Governmental Review.  Buyer
      understands that no Governmental Entity has passed on or made any recommendation
      or endorsement of the Securities or the fairness or suitability of an investment
      in the Securities nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.  As used in this Agreement,
“Governmental Entity” means the government of the United States
      or any other nation, or any political subdivision thereof, whether state,
      provincial or local, or any agency (including any self-regulatory agency or
      organization), authority, instrumentality, regulatory body, court, central
      bank
      or other entity exercising executive, legislative, judicial, taxing, regulatory
      or administration powers or functions of or pertaining to government over the
      Company or any of its Subsidiaries, or any of their respective properties,
      assets or undertakings.

     

    2.7           Transfer
      or Resale.  Buyer
      understands that, except as provided in the Registration Rights Agreement,
      (i)
      the Securities have not been and are not being registered under the 1933 Act
      or
      any other securities laws, and may not be offered for sale, sold, assigned
      or
      transferred unless (A) subsequently registered thereunder, (B) Buyer shall
      have
      delivered to the Company an opinion of counsel, in generally acceptable form
      and
      substance to the Company, to the effect that such Securities to be sold,
      assigned or transferred may be sold, assigned or transferred pursuant to one
      or
      more specified exemptions from such registration, or (C) Buyer provides the
      Company with reasonable assurance that such Securities can be sold, assigned
      or
      transferred pursuant to Rule 144 promulgated under the 1933 Act, as amended
      (or
      a successor rule thereto) (“Rule 144”); (ii) any sale of the
      Securities made in reliance on Rule 144 may be made only in accordance with
      the
      terms of Rule 144, and further, if Rule 144 is not applicable, any resale of
      the
      Securities under circumstances in which the seller (or the person through whom
      the sale is made) may be deemed to be an underwriter (as that term is defined
      in
      the 1933 Act) may require compliance with some other exemption under the 1933
      Act or any other securities laws; (iii) except as set forth in the
      Registration Rights Agreement, neither the Company nor any other person is
      under
      any obligation to register the Securities under the 1933 Act or any other
      securities laws; and (iv) the ability of the Company to register the Closing
      Shares, the Conversion Shares and the Warrant Shares may be limited by the
      rules
      and regulations of the SEC, state securities authorities, and the published
      and
      unpublished interpretations of their respective staffs.

     

    2.8           Legends.  Buyer
      understands that the certificates or other instruments representing the Note
      and
      the Warrant and, until such time as the sale of the Closing Shares, the
      Conversion Shares and the Warrant Shares have been registered under the
      1933 Act as contemplated by the Registration Rights Agreement, the stock
      certificates representing the Closing Shares, the Conversion Shares and Warrant
      Shares, except as set forth below, shall bear a restrictive legend in the
      following form (the “1933 Act Legend”) (and a stop-transfer
      order may be placed against transfer of such stock
      certificates):

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
      OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
      STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
      OR
      APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN GENERALLY
      ACCEPTABLE FORM AND SUBSTANCE, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
      ACT
      OR APPLICABLE STATE SECURITIES LAWS PURSUANT TO SPECIFIED EXEMPTIONS THEREFROM
      OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT AND APPLICABLE
      EXEMPTIONS FROM STATE SECURITIES LAWS.

     

    The
      legend set forth above shall be removed and the Company shall issue a
      certificate without the 1933 Act Legend to the holder of the Securities upon
      which it is stamped, if (i) such Securities are registered and sold under
      the 1933 Act, (ii) in connection with a sale transaction, such holder
      provides the Company with an opinion of counsel, in generally acceptable form
      and substance, to the effect that a public sale, assignment or transfer of
      the
      Securities may be made without registration under the 1933 Act and other
      securities laws pursuant to one or more specified exemptions, (iii) such
      holder provides the Company with reasonable assurances that the Securities
      can
      be sold pursuant to Rule 144(k) promulgated under the 1933 Act (or a
      successor rule thereto), or (iv) such holder provides the Company
      reasonable assurances that the Securities have been or are being sold pursuant
      to Rule 144.

     

    2.9    Authorization;
      Enforcement; Validity.  Buyer
      is validly existing and has the requisite power and authority to purchase the
      Securities pursuant to this Agreement.  This Agreement and the
      Registration Rights Agreement have been duly and validly authorized, executed
      and delivered on behalf of Buyer and are valid and binding agreements of Buyer
      enforceable against Buyer in accordance with their respective
      terms.  The Security Agreement, the Registration Rights Agreement and
      each of the other agreements entered into and other documents executed by Buyer
      in connection with the transactions contemplated hereby and thereby as of the
      Closing will have been duly and validly authorized, executed and delivered
      on
      behalf of Buyer as of the Closing and will be valid and binding agreements
      of
      Buyer, enforceable against Buyer in accordance with their respective
      terms.

     

    2.10    Residency.  Metage
      Funds Limited is a Cayman domiciled entity and is organized and operated from
      the Cayman Islands.  NCIM Capital Limited is organized under the laws
      of England and its principal place of business is in London,
      England

     

    2.11    Recent
      Activity.  Neither
      Buyer nor any “affiliate” (as such term is defined in Rule 405 under the 1933
      Act) of Buyer or any broker or dealer acting on their behalf has sold or
      purchased, or offered to sell or purchase, the Common Stock within the preceding
      60 days.

     

    SECTION
      3.

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    The
      Company represents and warrants, as of the date of this Agreement and on the
      Closing Date, to Buyer, that:

     

    3.1           Organization
      and Qualification.  Set
      forth in Schedule 3.1 is a true and correct list of the Company’s
      Subsidiaries and the jurisdiction in which each is organized or incorporated,
      together with their respective jurisdictions of organization and the percentage
      of the outstanding capital stock or other equity interests of each such entity
      that is held by the Company or any of its Subsidiaries.  Other than
      with respect to the entities listed on Schedule 3.1, the Company does not
      directly or indirectly own any security or beneficial ownership interest, in
      any
      other Person (including through joint venture or partnership agreements) or
      have
      any interest in any other Person.  Each of the Company and its
      Subsidiaries is a corporation, limited liability company, partnership or other
      entity and is duly organized or formed and validly existing in good standing
      under the laws of the jurisdiction in which it is incorporated or organized
      and
      has the requisite corporate, partnership, limited liability company or other
      organizational power and authority to own its properties and to carry on its
      business as now being conducted and as proposed to be conducted by the Company
      and its Subsidiaries.  Each of the Company and its Subsidiaries is
      duly qualified to do business and is in good standing in every jurisdiction
      in
      which such qualification is required, except to the extent that the failure
      to
      be so qualified or be in good standing could not have and could not be,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.  As used in this Agreement, “Material Adverse
      Effect” means any material adverse effect on (i) the business,
      properties, assets, operations, results of operations, or condition (financial
      or otherwise) of the Company and its Subsidiaries, taken as a whole, or (ii)
      the
      authority or ability of the Company or any other Person (other than Buyer)
      party
      to any of the Transaction Documents to enter into the Transaction Documents
      and
      perform its obligations thereunder.  The Company holds all right,
      title and interest in and to 100% of the capital stock, equity or similar
      interests of each of its Subsidiaries, in each case, free and clear of any
      Liens
      (as defined below) other than Permitted Liens, including any restriction on
      the
      use, voting, transfer, receipt of income or other exercise of any attributes
      of
      free and clear ownership by a current holder (other than restrictions arising
      under federal or state securities laws), and no such Subsidiary owns capital
      stock or holds an equity or similar interest in any other Person. As used in
      this Agreement, “Lien” means with respect to any asset, any
      mortgage, lien, pledge, hypothecation, charge, security interest, or
      encumbrance of any kind (including any of the foregoing created by, arising
      under or evidenced by any conditional sale or other title retention agreement,
      the interest of a lessor with respect to a Capital Lease Obligation, or any
      financing lease having substantially the same economic effect as any of the
      foregoing); “Subsidiary” means any entity in which the Company,
      directly or indirectly, owns capital stock or holds an equity or similar
      interest (at the time of this Agreement or at any time thereafter);
“Capital Lease Obligation” means, as to any Person, any
      obligation that is required to be classified and accounted for as a capital
      lease on a balance sheet of such Person prepared in accordance with U.S.
      generally accepted accounting principles (“GAAP”), and the
      amount of such obligation shall be the capitalized amount thereof, determined
      in
      accordance with GAAP; and “Person” means an individual, a
      limited liability company, a partnership, a joint venture, a corporation, a
      trust, an unincorporated organization, a Governmental Entity or any other legal
      entity.

     

    3.2           Authorization;
      Enforcement; Validity.  The
      Company and each of the Subsidiaries have the requisite corporate, limited
      liability company or limited partnership power and authority (as the case may
      be) to enter into and perform their obligations under this Agreement, the
      Registration Rights Agreement, the Irrevocable Transfer Agent Instructions
      (as
      set forth in Section 9(q)), the Note, the Warrant, the Security Agreement,
      the
      Mortgages, the Guaranty, the Pledge Agreement and each of the other agreements
      or instruments to which they are a party or by which they are bound and which
      are entered into by the parties hereto in connection with the transactions
      contemplated hereby and thereby (collectively, the “Transaction
      Documents”), and to issue the Securities in accordance with the terms
      hereof and thereof assuming in each case the truth and accuracy of Buyer’s
      representations and warranties in the Transaction Documents.  The
      execution and delivery of the Transaction Documents by the Company and each
      of
      the Subsidiaries and the consummation by the Company and each of the
      Subsidiaries of the transactions contemplated hereby and thereby, including
      the
      issuance of the Note, the Closing Shares and the Warrant and the reservation
      for
      issuance and the issuance of the Conversion Shares and the Warrant Shares,
      have
      been duly authorized by the respective boards of directors, members, managers,
      stockholders or other equityholders, as applicable, of the Company and each
      of
      the Subsidiaries and no further consent or authorization is required by the
      Company, any of the Subsidiaries or any of their respective boards of directors,
      members, managers, stockholders or other equityholders, as
      applicable.  This Agreement and the other Transaction Documents dated
      of even date herewith have been duly executed and delivered by the Company
      and
      each other Person (other than Buyer or the Collateral Agent) party thereto,
      and
      constitute the valid and binding obligations of the Company and each of the
      Subsidiaries, enforceable against the Company and each of the Subsidiaries
      in
      accordance with their respective terms, except as may be limited by bankruptcy,
      insolvency, fraudulent conveyance or similar laws affecting creditors’ rights
      generally and general principles of equity.  As of the Closing, the
      Transaction Documents dated after the date of this Agreement and on or prior
      to
      the Closing Date shall have been duly executed and delivered by the Company
      and
      each of the Subsidiaries and shall constitute the valid and binding obligations
      of the Company and each of the Subsidiaries, enforceable against the Company
      and
      each of the Subsidiaries in accordance with their respective terms, except
      as
      may be limited by bankruptcy, insolvency, fraudulent conveyance or similar
      laws
      affecting creditors’ rights generally and general principles of
      equity.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.3           Capitalization.  As
      of the date of this Agreement and as of the Closing Date, (i) the authorized
      capital stock of the Company consists of (i) 1,200,000,000 shares of Common
      Stock, of which 52,289,662 shares are issued and outstanding, 9,000,000 shares
      are reserved for issuance pursuant to the Company’s 2007 Non Qualified Stock
      Option Plan (the “Option Plan”), including 3,625,000 shares
      issuable pursuant to outstanding awards under the Option Plan, and 13,170,000
      shares are issuable and reserved for issuance pursuant to securities issued
      or
      to be issued (other than the Note, the Warrant and the Closing Shares, and
      other
      than pursuant to the Option Plan), exercisable or exchangeable for, or
      convertible into, shares of Common Stock, (ii) no shares of Common Stock are
      reserved for issuance under any plan or agreement, other than with respect
      to
      the Note and Warrant and the shares of Common Stock reserved for issuance under
      the Option Plan, and (iii) there are no other securities of the Company issued,
      outstanding or reserved for issuance.  All of such outstanding or
      issuable shares have been, or upon issuance will be, validly issued and are,
      or
      upon issuance will be, fully paid and nonassessable.  Except as set
      forth on Schedule 3.3 or as provided for in the Option Plan, (A) no
      shares of the capital stock of the Company are subject to preemptive rights
      or
      any other similar rights; (B) there are no outstanding options, warrants, scrip,
      rights to subscribe to, calls or commitments of any character whatsoever
      relating to, or securities or rights convertible into or exercisable for, any
      shares of capital stock of the Company or any of its Subsidiaries, or contracts,
      commitments, understandings or arrangements by which the Company or any of
      its
      Subsidiaries is or may become bound to issue additional shares of capital stock
      of the Company or any of its Subsidiaries or options, warrants, scrip, rights
      to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into or exercisable for, any shares of capital
      stock of the Company or any of its Subsidiaries; (C) there are no outstanding
      securities or instruments of the Company or any of its Subsidiaries that contain
      any redemption or similar provisions, and there are no contracts, commitments,
      understandings or arrangements by which the Company or any of its Subsidiaries
      is or may become bound to redeem a security of the Company or any of its
      Subsidiaries, and there are no other stockholder agreements or similar
      agreements to which the Company, any of its Subsidiaries, or, to the Company’s
      Knowledge, any holder of the Company’s capital stock is a party; (D) there
      are no securities or instruments containing anti-dilution or similar provisions
      that will or may be triggered by the issuance of the Securities; and (E) the
      Company does not have any stock appreciation rights or “phantom stock” plans or
      agreements or any similar plan or agreement.  The Company has
      furnished to Buyer true and correct copies of the Company’s Certificate of
      Incorporation, as amended and in effect on the date of this Agreement (the
      “Certificate of Incorporation”), and the Company’s Bylaws, as
      amended and in effect on the date of this Agreement (the
“Bylaws”), the organizational documents of each of the
      Company’s Subsidiaries, as amended and in effect on the date of this Agreement,
      and all documents and instruments containing the terms of all securities, if
      any, that are convertible into, or exercisable or exchangeable for, Common
      Stock, and the material rights of the holders thereof in respect
      thereto.  All of the equity interests of each of the Subsidiaries are
      certificated or otherwise represented in tangible form. “To the
      Company’s Knowledge” and similar language means the actual knowledge of
      W. Milton Cox, Bassam “Sam” Nastat, and Donald L. Systma (the
“Management Members”).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.4           Issuance
      of Securities.  The
      Closing Shares are duly authorized and, upon issuance in accordance with the
      terms hereof, will be validly issued, fully paid and nonassessable and free
      from
      all taxes and Liens with respect to the issuance thereof, with the holders
      being
      entitled to all rights accorded to a holder of shares of Common
      Stock.  Upon issuance and payment therefor in accordance with this
      Agreement, the Note will be duly authorized and shall be (i) free from all
      taxes
      and Liens with respect to the issuance thereof and (ii) entitled to the rights
      set forth therein.  At least 14,500,000 shares of Common Stock
      (subject to adjustment pursuant to the Company’s covenant set forth in Section
      4.7 below) have been duly authorized and reserved for issuance upon exercise
      of
      the Warrant and conversion of the Note.  Upon conversion of the Note
      or upon exercise in accordance with such Warrant, the Conversion Shares or
      Warrant Shares (as the case may be) will be validly issued, fully paid and
      nonassessable and free from all taxes and Liens with respect to the issuance
      thereof, with the holders being entitled to all rights accorded to a holder
      of
      shares of Common Stock issued upon each such exercise, subject to restrictions
      on transfer pursuant to the Transaction Documents and federal and state
      securities laws.

     

    3.5           No
      Conflicts.  The
      execution and delivery of this Agreement and the other Transaction Documents
      by
      the Company and each of the Subsidiaries, the performance by the Company and
      each of the Subsidiaries of its obligations thereunder and the consummation
      by
      the Company and each of the Subsidiaries of the transactions contemplated
      thereby (including the reservation for issuance and issuance of the Warrant
      Shares) will not (i) result in a violation of the certificate or articles of
      incorporation, certificate or articles of organization, bylaws, operating
      agreement, partnership agreement or any other governing documents, as
      applicable, of any such Person; (ii) conflict with, or constitute a breach
      or default (or an event which, with the giving of notice or passage of time
      or
      both, constitutes or would constitute a breach or default) under, or give to
      others any right of termination, amendment, acceleration or cancellation of,
      or
      other remedy with respect to, any agreement, indenture or instrument to which
      any such Person is a party; (iii) result in a violation of any law, rule,
      regulation, order, judgment or decree (including securities laws and the rules
      and regulations, if any, of the Principal Market (as defined in Section 3.16))
      applicable to any such Person or by which any property or asset of any such
      Person is bound or affected.  Neither the Company nor any of the
      Subsidiaries is or has been in violation of any term of or in default under
      (or
      with the giving of notice or passage of time or both would be in violation
      of or
      default under) any contract, agreement, mortgage, indebtedness, indenture,
      instrument, judgment, decree or order or any Law applicable to the Company
      or
      its Subsidiaries, except where such violation or default could not reasonably
      be
      expected to have a Material Adverse Effect or to result in the acceleration
      of
      any Indebtedness (as defined below) or other obligation.  The business
      of the Company and its Subsidiaries has not been and is not being conducted,
      in
      violation of any Law of any Governmental Entity except as could not,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.  Except for the filings and listings expressly
      contemplated by the Registration Rights Agreement and the filing of instruments
      to perfect security interests, and filings to be made pursuant to Section 4.2
      hereof, neither the Company nor any of the Subsidiaries is or has been required
      to obtain any consent, authorization or order of, or make any filing or
      registration with, any court or Governmental Entity in order for it to execute,
      deliver or perform any of its obligations under or contemplated by the
      Transaction Documents in accordance with the terms hereof or
      thereof.  As used in this Agreement, “Laws” means all
      present federal, state, local or foreign laws, statutes, rules, regulations,
      ordinances and codes, together with all administrative or judicial orders or
      decrees, consent agreements, licenses, authorizations and permits of, and
      agreements with, any Governmental Entity; “Indebtedness” of any
      Person means, without duplication (A) all indebtedness for borrowed money,
      (B)
      all obligations issued, undertaken or assumed as the deferred purchase price
      of
      property or services (other than unsecured account trade payables that are
      (i)
      entered into or incurred in the ordinary course of the Company’s and its
      Subsidiaries’ business, (ii) on terms that require full payment within 90 days
      from the date entered into or incurred, and (iii) not unpaid in excess of 120
      days from the date entered into or incurred, or are being contested in good
      faith and as to which such reserve as is required by GAAP has been made, (C)
      all
      reimbursement or payment obligations with respect to letters of credit, surety
      bonds and other similar instruments, (D) all obligations evidenced by notes,
      bonds, debentures, redeemable capital stock or similar instruments, including
      obligations so evidenced incurred in connection with the acquisition of
      property, assets or businesses, (E) all indebtedness created or arising under
      any conditional sale or other title retention agreement, or incurred as
      financing, in either case with respect to any property or assets acquired with
      the proceeds of such indebtedness (even though the rights and remedies of the
      seller, bank or other financing source under such agreement in the event of
      default are limited to repossession or sale of such property), (F) all Capital
      Lease Obligations, (G) all indebtedness referred to in clauses (A) through
      (F)
      above secured by (or for which the holder of such indebtedness has an existing
      right, contingent or otherwise, to be secured by) any mortgage, lien, pledge,
      charge, security interest or other encumbrance upon or in any property or assets
      (including accounts and contract rights) owned by any Person, even though the
      Person that owns such assets or property has not assumed or become liable for
      the payment of such indebtedness, and (H) all Contingent Obligations in respect
      of indebtedness or obligations of others of the kinds referred to in clauses
      (A)
      through (G) above; and “Contingent Obligation” means, as to any
      Person, any direct or indirect liability, contingent or otherwise, of that
      Person with respect to any indebtedness, lease, dividend or other obligation
      of
      another Person if the primary purpose or intent of the Person incurring such
      liability, or the primary effect thereof, is to provide assurance to the obligee
      of such liability that such liability will be paid or discharged, or that any
      agreements relating thereto will be complied with, or that the holders of such
      liability will be protected (in whole or in part) against loss with respect
      thereto.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.6           SEC
      Documents; Financial Statements.  Since
      June 30, 2006, the Company has filed all reports, schedules, forms, statements
      and other documents required to be filed by it with the SEC pursuant to the
      reporting requirements of the Securities and Exchange Act of 1934, as amended
      (the “1934 Act”) (all of the foregoing filed prior to the date
      this representation is made (including all exhibits included therein and
      financial statements and schedules thereto and documents incorporated by
      reference therein) being referred to herein as the “SEC
      Documents” and the Company’s consolidated balance sheet as of May 31,
      2007, as included in the Company’s quarterly report on Form 10-QSB for the
      period then ended, as filed with the SEC on July 17, 2007, being referred to
      herein as the “Most Recent Balance Sheet”).  A
      complete and accurate list of the SEC Documents is available on the SEC’s web
      site at www.sec.gov.  As of their respective dates, the SEC Documents
      complied in all material respects with the securities laws.  None of
      the SEC Documents, at the time they were filed with the SEC, contained any
      untrue statement of a material fact or omitted to state a material fact required
      to be stated therein or necessary in order to make the statements therein,
      in
      light of the circumstances under which they were made, not
      misleading.  As of their respective dates, the consolidated financial
      statements of the Company and its Subsidiaries included in the SEC Documents
      complied as to form in all material respects with applicable accounting
      requirements and the securities laws with respect thereto.  Such
      consolidated financial statements have been prepared in accordance with
      generally accepted accounting principles, consistently applied, during the
      periods involved (except (i) as may be otherwise indicated in such financial
      statements or the notes thereto, or (ii) in the case of unaudited interim
      statements, to the extent they may exclude footnotes) and fairly present in
      all
      material respects the financial position of the Company and its Subsidiaries
      as
      of the dates thereof and the results of their operations and cash flows for
      the
      periods then ended (subject, in the case of unaudited statements, to normal
      year-end audit adjustments).  The accounting firm that has expressed
      its opinion with respect to the consolidated financial statements included
      in
      the Company’s registration statement on Form SB-2, File No. 333-B3759 (the
“Audit Opinion”) is independent of the Company pursuant to the
      standards set forth in Rule 2-01 of Regulation S-X promulgated by the SEC and
      such firm was otherwise qualified to render the Audit Opinion under applicable
      securities laws.  Each other accounting firm that since such filing
      has conducted or will conduct a review or audit of any of the Company’s
      consolidated financial statements is independent of the Company pursuant to
      the
      standards set forth in Rule 2-01 of Regulation S-X promulgated by the SEC and
      is
      otherwise qualified to conduct such review or audit and render an audit opinion
      under applicable securities laws.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.7           Absence
      of Certain Changes.  Neither
      the Company nor any of the Subsidiaries has taken any steps, and neither the
      Company nor any such Subsidiary expects to take any steps to seek protection
      pursuant to any bankruptcy law nor, to the Company’s Knowledge, is there any (i)
      reason to believe that the creditors of such Person intend to initiate
      involuntary bankruptcy proceedings or (ii) any fact that would reasonably lead
      a
      creditor to do so.  Neither the Company nor any Subsidiary is as of
      the date this representation is made, nor after giving effect to the
      transactions contemplated hereby or by any of the other Transaction Documents
      will be, Insolvent (as defined below).  As used in this Agreement,
“Insolvent” means, with respect to any Person, (i) the present
      fair saleable value of such Person’s assets is less than (A) the total amount of
      liabilities (including contingent liabilities) of such Person or (B) the
      amount required to pay such Person’s probable liabilities on its existing total
      indebtedness, contingent or otherwise, as such indebtedness becomes absolute
      and
      due (ii) such Person is unable to pay its debts and liabilities, subordinated,
      contingent or otherwise, as such debts and liabilities become absolute and
      matured, (iii) such Person intends to incur, or believes that it will
      incur, debts that would be beyond its ability to pay as such debts mature or
      (iv) such Person has unreasonably small capital with which to conduct the
      business in which it is engaged as such business is now conducted and is
      proposed to be conducted.

     

    3.8           Absence
      of Litigation.  There
      is not any action, suit, proceeding, inquiry or investigation
      (“Litigation”) before or by any court, public board,
      Governmental Entity, self-regulatory organization or body pending or, to the
      Company’s Knowledge, threatened against or affecting the Company or any of its
      Subsidiaries.  To the Company’s Knowledge, no director or officer of
      the Company or any of its Subsidiaries has been involved in securities-related
      Litigation during the past five years.

     

    3.9           No
      Undisclosed Events, Liabilities, Developments or Circumstances.  Except
      as set forth on Schedule 3.9, since December 31, 2006, there has been no
      Material Adverse Effect and no circumstances exist that, individually or in
      the
      aggregate, could reasonably be expected to be, cause or have a Material Adverse
      Effect except as disclosed in the Schedules to this Agreement.  Except
      (A) as and to the extent disclosed or reserved against on the Most Recent
      Balance Sheet, (B) as incurred since the date thereof in the ordinary course
      of
      business consistent with past practice, (C) as incurred at the Closing Date
      under the Note and the other Transaction Documents or in connection with the
      transactions contemplated thereby, or (D) as set forth on Schedule 3.9,
      neither the Company, nor any of its Subsidiaries has any liabilities or
      obligations of any nature, whether known or unknown, absolute, accrued,
      contingent or otherwise and whether due or to become due.

     

    3.10    Acknowledgment
      Regarding Buyer’s Purchase of Note and Warrant.  The
      Company acknowledges and agrees that Buyer is acting solely in the capacity
      of
      an arm’s length purchaser with respect to the Company in connection with this
      Agreement and the other Transaction Documents and the transactions contemplated
      hereby and thereby.  The Company further acknowledges that Buyer is
      not acting as a financial advisor or fiduciary of any party to this Agreement
      or
      any of the other Transaction Documents (or in any similar capacity) with respect
      to this Agreement and the other Transaction Documents and the transactions
      contemplated hereby and thereby, and any advice given by Buyer or any of its
      representatives or agents in connection with the Transaction Documents and
      the
      transactions contemplated hereby and thereby is merely incidental to Buyer’s
      purchase of the Securities.  The Company further represents to Buyer
      that the decision of each of the Company and the Subsidiaries to enter into
      the
      Transaction Documents has been based solely on the independent evaluation by
      the
      Company, the Subsidiaries and their representatives.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.11    Employee
      Relations.  Neither
      the Company nor any of its Subsidiaries is involved in any labor union dispute
      nor, to the Knowledge of the Company, is any such dispute
      threatened.  None of the employees of either the Company or any of its
      Subsidiaries is or has been a member of a union that relates to such employee’s
      relationship with the Company and neither the Company nor any of its
      Subsidiaries is a party to a collective bargaining
      agreement.  Schedule 3.11 lists each individual who will be
      employed by the Company or retained by the Company as of the Closing
      Date.  Such individuals constitute all of the employees and
      consultants necessary to conduct the Company’s business as presently
      conducted.  Except as set forth on Schedule 3.11, to the
      Company’s Knowledge, no such individual is, has been, or is expected to be, in
      violation of any material term of any employment contract, confidentiality,
      disclosure or proprietary information agreement or non-competition agreement,
      or
      any other contract or agreement or any restrictive covenant, and, to the
      Company’s Knowledge, the employment of each such individual does not, has not
      and will not subject the Company or any of its Subsidiaries to any liability
      with respect to any of the foregoing matters.  The Company and each of
      its Subsidiaries is and has been in compliance with all Laws relating to
      employment and employment practices, terms and conditions of employment and
      wages and hours except as could not reasonably be expected to have a Material
      Adverse Effect.

     

    3.12    Intellectual
      Property Rights.  The
      Company and its Subsidiaries own or possess adequate rights or licenses to
      use
      all trademarks, trademark applications and registrations, trade names, service
      marks, service mark registrations, service names, patents, patent rights, patent
      applications, copyrights (whether or not registered), inventions, licenses,
      approvals, governmental authorizations, trade secrets and other intellectual
      property rights (collectively, “Intellectual Property”)
      necessary to conduct their respective businesses as now
      conducted.  The Company and its Subsidiaries have taken reasonable
      security measures to protect the secrecy, confidentiality and value of all
      of
      their material Intellectual Property.

     

    3.13    Environmental
      Laws.  Each
      of the Company and its Subsidiaries (i) is, and has at all times been, in
      compliance in all material respects with any and all Environmental Laws (as
      defined below) and has not violated any Environmental Laws, (ii) has no,
      and has never had any, liability for failure to comply with any Environmental
      Law, (iii) has received all permits, licenses or other approvals required of
      it
      under applicable Environmental Laws to conduct its business as presently
      conducted, and (iv) is in com­pliance with all terms and conditions of
      any such permit, license or approval except with respect to clauses (i) through
      (iv) as could not reasonably be expected to have a Material Adverse
      Effect.  As used in this Agreement, “Environmental
      Laws” means all Laws relating to any matter arising out of or relating
      to public health and safety, or pollution or protection of the environment
      (including ambient air, surface water, groundwater, land surface or subsurface
      strata) or workplace, including any of the foregoing relating to the presence,
      use, production, generation, handling, transport, treatment, storage, disposal,
      distribution, discharge, emission, release, threatened release, control or
      cleanup of any Hazardous Materials, including the Comprehensive Environmental
      Response, Compensation and Liability Act of 1980, 42 U.S.C. §9601 et seq., as
      amended (“CERCLA”), the Resource Conservation and Recovery Act of 1976, as
      amended, 42 U.S.C. §6901, et seq., the Clean Air Act, 42 U.S.C. §7401, et seq.,
      as amended, the Federal Water Pollution Control Act, 33 U.S.C. §1251, et seq.,
      as amended, the Oil Pollution Act of 1990, 33 U.S.C. §2701, et seq., and the
      Toxic Substances Control Act, 15 U.S.C. §2601, et seq.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.14    Title.  Except
      as set forth in Schedule 3.14, neither the Company nor any of its
      Subsidiaries has any interest in Oil and Gas Property or any oil, gas or other
      mineral drilling, exploration or development rights.  The Company and
      each of its Subsidiaries has valid title to all personal property currently
      possessed by them that is material to the business of such Person, in each
      case
      free and clear of all Liens except such as are described in
Schedule 3.14 and Permitted Liens.  The Company and each
      of its Subsidiaries has indefeasible title to all Oil and Gas Property owned
      (rather than leased) by such Person (the “Owned Oil and Gas
      Property”) as set forth on Schedule 3.14, in each case free and
      clear of all Liens, other than Permitted Liens, except such as are described
      in
Schedule 3.14.  As used in this Agreement, “Permitted
      Lien” means (I) Liens created by the Security Documents; (II) Liens for
      taxes or other governmental charges not at the time due and payable, or which
      are being contested in good faith by appropriate proceedings diligently
      prosecuted, so long as foreclosure, distraint, sale or other similar proceedings
      have not been initiated, and in each case for which the Company and its
      Subsidiaries maintain adequate reserves in accordance with GAAP in respect
      of
      such taxes and charges; (III) Liens arising in the ordinary course of business
      in favor of carriers, warehousemen, mechanics and materialmen, or other similar
      Liens imposed by law, which remain payable without penalty or which are being
      contested in good faith by appropriate proceedings diligently prosecuted, which
      proceedings have the effect of preventing the forfeiture or sale of the property
      subject thereto, and in each case for which adequate reserves in accordance
      with
      GAAP are being maintained; (IV) Liens arising in the ordinary course of business
      in connection with worker’s compensation, unemployment compensation and other
      types of social security (excluding Liens arising under ERISA); (V) attachments,
      appeal bonds (and cash collateral securing such bonds), judgments and other
      similar Liens, for sums not exceeding $100,000 in the aggregate for the Company
      and its Subsidiaries, arising in connection with court proceedings,
provided that the execution or other enforcement of such Liens is
      effectively stayed; (VI) easements, rights of way, restrictions, minor defects
      or irregularities in title and other similar Liens arising in the ordinary
      course of business and not materially detracting from the value of the property
      subject thereto and not interfering in any material respect with the ordinary
      conduct of the business of the Company or any of its Subsidiaries; (VII) surety
      bonds, bids, performance bonds, and similar obligations (exclusive of
      obligations for the payment of borrowed money) obtained by the Company and
      its
      Subsidiaries in the ordinary course of business for the purpose of satisfying
      federal, state, provincial and territorial and/or local legal requirements
      for
      owning and operating their oil and gas properties; (VIII) Oil and Gas Liens;
      and
      (IX) Liens arising solely by virtue of any statutory or common law provision
      relating to banker’s liens, rights of set-off or similar rights and remedies and
      burdening only deposit accounts or other funds maintained with a creditor
      depository institution, provided that no such deposit account is a
      dedicated cash collateral account or is subject to restrictions against access
      by the depositor in excess of those set forth by regulations promulgated by
      the
      Board of Governors of the U.S. Federal Reserve System and that no such deposit
      account is intended by the Company or any of its Subsidiaries to provide
      collateral to the depository institution.  As used in this Agreement,
“Security Documents” means the Security Agreement, the
      Guaranty, the Pledge Agreement, the Mortgages and any other agreements,
      documents and instruments executed concurrently herewith or at any time
      hereafter pursuant to which the Company, its Subsidiaries, or any other Person
      either (i) guarantees payment or performance of all or any portion of the
      obligations hereunder or under any other instruments delivered in connection
      with the transactions contemplated hereby and by the other Transaction
      Documents, and/or (ii) provides, as security for all or any portion of such
      obligations, a Lien on any of its assets in favor of Buyer, as any or all of
      the
      same may be amended, supplemented, restated or otherwise modified from time
      to
      time.  “Oil and Gas Liens” means (i) Liens of
      operators and non operators under joint operating agreements arising in the
      ordinary course of the business of the Company or its Subsidiaries to secure
      amounts owing, which amounts are not yet due and will be paid in accordance
      with
      customary business practices, as same exist on the date hereof, or are being
      contested in good faith by appropriate proceedings diligently prosecuted, so
      long as foreclosure, distraint, sale or other similar proceedings have not
      been
      initiated, and in each case for which the Company and its Subsidiaries maintain
      adequate reserves in accordance with GAAP in respect of such taxes and charges;
      (ii) Liens on an oil or gas producing property to secure obligations incurred
      or
      guarantees of obligations incurred (in each case, other than Indebtedness)
      in
      connection with or necessarily incidental to commitments for the purchase or
      sale of, or the transportation or distribution of, the production from such
      property which obligations are not yet due and will be paid in accordance with
      customary business practices, as same exist on the date hereof, or are being
      contested in good faith by appropriate proceedings diligently prosecuted, so
      long as foreclosure, sale or other similar proceedings have not been initiated;
      and (iii) Liens on pipelines or pipelines facilities that arise by operation
      of
      law securing obligations which are not yet due and will be paid in accordance
      with customary business practices, as same exist on the date hereof, or are
      being contested in good faith by appropriate proceedings diligently prosecuted,
      so long as foreclosure, sale or other similar proceedings have not been
      initiated, and in each case for which the Company and its Subsidiaries maintain
      adequate reserves in accordance with GAAP in respect of such taxes and
      charges.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.15    Insurance.  The
      Company and each of its Subsidiaries have insurance policies (or the operators
      of its non-operated properties are required to carry insurance policies) against
      such losses and risks and in such amounts as management of the Company believes
      to be prudent and customary in the businesses in which the Company and its
      Subsidiaries are engaged.

     

    3.16    Regulatory
      Permits.  Except
      as could not, individually or in the aggregate, reasonably be expected to have
      a
      Material Adverse Effect (as defined in Section 3.1) or a material adverse effect
      on the production, extraction, transportation or sale of oil, gas, minerals
      or
      other hydrocarbons from any portion of the Owned Oil and Gas Property (as
      defined in Section 3.14) that is producing oil, gas, minerals and/or other
      hydrocarbons at the time this representation is made, the Company and its
      Subsidiaries possess all certificates, authorizations, approvals, licenses
      and
      permits issued by the appropriate federal, state or foreign regulatory
      authorities necessary to conduct their respective businesses as conducted at
      the
      time this representation is made (“Permits”), and neither the
      Company nor any such Subsidiary has received any notice of proceedings relating
      to the revocation or modification of any such Permit.  Without
      limiting the foregoing, the Company and its Subsidiaries possess all Permits
      necessary to produce, extract, transport and sell the oil, gas and other
      minerals in that portion of Oil and Gas Property that is producing oil, gas,
      minerals and/or other hydrocarbons at the time this representation is
      made.  Except as could not reasonably be expected to have a Material
      Adverse Effect, the Company and its Subsidiaries have no reason to believe
      that
      they will not be able to obtain necessary Permits as and when necessary to
      enable the Company to produce, extract, transport and sell the oil, gas,
      minerals and other hydrocarbons in the Oil and Gas Property.  The
      Company is not in violation of any of the rules, regulations or requirements
      of
      the OTC Bulletin Board (the “Principal
      Market”).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.17    Internal
      Accounting Controls; Disclosure Controls and Procedures; Books and
      Records.  The
      Company has, and has caused each of its Subsidiaries to, at all times keep
      books, records and accounts with respect to all of such Person’s business
      activities, in accordance with sound accounting practices and GAAP consistently
      applied.  The Company and each of its Subsidiaries maintains a system
      of internal accounting controls sufficient to provide reasonable assurance
      that
      (i) transactions are executed in accordance with management’s general or
      specific authorizations, (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with generally accepted
      accounting principles and to maintain asset and liability accountability, (iii)
      access to assets or incurrence of liability is permitted only in accordance
      with
      management’s general or specific authorization and (iv) the recorded
      accountability for assets and liabilities is compared with the existing assets
      and liabilities at reasonable intervals and appropriate action is taken with
      respect to any differences.  The Company has filed all certifications
      and statements required by (A) Rule 13a-14 or Rule 15d-14 under
      the 1934 Act and (B) Section 906 of Sarbanes Oxley with respect to any
      Company SEC Documents.  The Company maintains disclosure controls and
      procedures required by Rule 13a-15 or Rule 15d-15 under the
      1934 Act; except as set forth in Schedule 3.17, such disclosure
      controls and procedures are, and at all times have been, effective to ensure
      that the information required to be disclosed by the Company in the reports
      that
      it files with or submits to the SEC (X) is recorded, processed, summarized
      and reported accurately within the time periods specified in the SEC’s rules and
      forms and (Y) is accumulated and communicated to the Company’s management,
      including its principal executive officer and principal financial officer,
      as
      appropriate to allow timely decisions regarding required
      disclosure.  The Company maintains internal control over financial
      reporting required by Rule 13a-14 or Rule 15d-14 under the
      1934 Act; except as set forth in Schedule 3.17, such internal
      control over financial reporting is, and has at all times been, effective and
      does not contain, and has not contained, any material weaknesses.

     

    3.18    Tax
      Status.  Except
      as set forth in Schedule 3.18, the Company and each of its Subsidiaries
      (i) has made or filed all foreign, federal and state income and all other tax
      returns, reports and declarations required by any jurisdiction to which it
      is
      subject, (ii) has paid all taxes and other governmental assessments and charges
      that are material in amount, shown or determined to be due on such returns,
      reports and declarations, except those being contested in good faith and for
      which the Company has made appropriate reserves on its books, and (iii) has
      set
      aside on its books provisions reasonably adequate for the payment of all taxes
      for periods subsequent to the periods to which such returns, reports or
      declarations (referred to in clause (i) above) apply.  Except as set
      forth in Schedule 3.18, there are no unpaid taxes in any material amount
      claimed in writing to be due from the Company or any of its Subsidiaries by
      the
      taxing authority of any jurisdiction, and there is no basis for any such
      claim.  Neither the Company nor any of its Subsidiaries is a “United
      States real property holding corporation” (“USRPHC”) as that
      term is defined in Section 897(c)(2) of the Internal Revenue Code of 1986,
      as
      amended, and the Treasury Regulations promulgated thereunder.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.19    Transactions
      With
      Affiliates.  Except
      as set forth on Schedule 3.19, no Related Party (as defined below) of the
      Company or any of its Subsidiaries, nor any Affiliate thereof, is presently,
      or
      will be as a result of the transactions contemplated by this Agreement and
      the
      other Transaction Documents, a party to any transaction, contract, agreement,
      instrument, commitment, understanding or other arrangement or relationship
      with
      the Company or any of its Subsidiaries, whether for the furnishing of services
      to or by, providing for rental of real or personal property to or from, or
      otherwise requiring payments or consideration to or from any such Related
      Party.  Except as set forth on Schedule 3.19, no Related Party
      of the Company or any of its Subsidiaries, or any of their respective
      Affiliates, has any direct or indirect ownership interest in any Person (other
      than ownership of less than 2% of the outstanding common stock of a publicly
      traded corporation) in which the Company or any of its Subsidiaries has any
      direct or indirect ownership interest or with which the Company or any of its
      Subsidiaries competes or has a business
      relationship.  “Related Party” means a Person’s or
      any of its subsidiary’s officers, directors, persons who were officers or
      directors at any time, from and as of December 31, 2007, stockholders (other
      than any holder of less than 5% of the outstanding shares of such Person),
      or
      Affiliates of such Person.  As used in this Agreement,
“Affiliate” means, with respect to any Person, another Person
      that, directly or indirectly, (i) has a 5% equity interest in that Person,
      (ii) has a common ownership with that Person, (iii) controls that Person,
      (iv) is controlled by that Person or (v) shares common control with that Person;
      and “control” or “controls” means that a
      Person has the power, direct or indirect, to conduct or govern the policies
      of
      another Person.

     

    3.20    Application
      of
      Takeover Protections; Rights Agreement.  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, or other similar anti-takeover provision under the Certificate
      of
      Incorporation or any certificates of designations or the laws of the
      jurisdiction of its formation or incorporation to the transactions contemplated
      by this Agreement, the Company’s issuance of the Securities in accordance with
      the terms hereof and any Buyer’s ownership of the Securities.  The
      Company has not adopted a stockholder rights plan or similar arrangement
      relating to accumulations of beneficial ownership of Common Stock or a change
      in
      control of the Company.

     

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

     

    3.22    Outstanding
      Indebtedness, Permitted Indebtedness and Liens.  Except
      as set forth on Schedule 3.22, (i) neither the Company nor any of
      its Subsidiaries has any, and upon consummation of the transactions contemplated
      hereby and by the other Transaction Documents will not have any, outstanding
      Indebtedness or trade account payables other than pursuant to the Transaction
      Documents, (ii) there are no, and upon consummation of the transactions
      contemplated hereby and by the other Transaction Documents there will not be
      any, Liens other than Permitted Liens on any of the assets of the Company and
      its Subsidiaries, and (iii) there are no, and upon consummation of the
      transactions contemplated hereby and by the other Transaction Documents there
      will not be any, Uniform Commercial Code financing statements or similar
      filings, registrations or recordings evidencing Liens in respect of any
      obligations of Indebtedness of any amounts filed against the Company or any
      of
      its Subsidiaries or any of their respective assets, other than under the
      Security Agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.23    Ranking
      of
      Note.  No
      Indebtedness of the Company is, or will be upon consummation of the transactions
      contemplated hereby and by the other Transaction Documents, senior to or pari
      passu with the Note in right of payment, whether with respect of payment of
      redemptions, interest or principal.

     

    3.24    Oil
      and
      Gas Property.  Schedule
      3.24 contains a complete and correct list of all the (i) real property;
      leasehold interests; fee interests; oil, gas and other mineral interests
      drilling, exploration and development rights; pooling, spacing, communitization
      and unitization rights and interests; royalty interests, overriding royalty
      interests, and other interests in payments out of or pursuant to production;
      other rights and interests in and to oil, gas and other minerals, including
      contractual rights to production, concessions, back in after payout interests,
      net profits interests, working interests, carried working interests and
      participation interests (including all Hydrocarbon Property (as defined in
      the
      Mortgages)); and (ii) any options, acquisition agreements, joint development
      agreements, area of mutual interest agreements, farmins, farmouts, exploration
      agreements or other contractual rights for the acquisition or earning of any
      interests of the types set forth in subpart (i) hereof (including any of the
      foregoing acquired after the date of this Agreement and all facilities, fixtures
      and equipment relating or incidental to such interests, singularly, an
“Oil and Gas Property” and collectively, the “Oil and
      Gas Properties”), which list identifies all of the Oil and Gas
      Properties and specifies which of the Company and its Subsidiaries leases,
      owns
      or possesses each of the Oil and Gas Properties.  The oil, gas and/or
      mineral leases, deeds, pooling, spacing, communitization and unitization orders,
      rights and agreement and contracts and other agreements, as set forth in
Schedule 3.24 included in the Oil and Gas Properties (not including
      easements, rights of way, access agreements, surface damage agreements, surface
      use agreements or similar agreements that pertain to the Oil and Gas Property)
      are collectively referred to herein as the
“Leases”.  Except as set forth in Schedule
      3.24, the Company or one of its Subsidiaries possesses indefeasable title to
      the Oil and Gas Property, free and clear of all Liens (other than Permitted
      Liens) and encumbrances that could impair the ability of the Company and its
      Subsidiaries to realize the benefits of the rights provided to any of them
      under
      the Leases.  Except as set forth on Schedule 3.24, there are no
      pending or, to the Company’s Knowledge, threatened in writing condemnation,
      eminent domain or similar proceedings, or litigation or other proceedings
      affecting any Oil and Gas Property, or any portion or portions
      thereof.  Except as set forth on Schedule 3.24, no well
      included in the Oil and Gas Properties is subject to a Payout Balance and
Schedule 3.24 correctly reflects the Payout Balance for each well listed
      thereon as being subject to a Payout Balance.  “Payout
      Balance” means the status, as of the date set forth in Schedule
      3.24 of the recovery by the Company, its Subsidiaries or a third person of
      a
      cost amount specified in the contract relating to a well out of the revenue
      from
      such well where the net revenue interest of the Company or any of its
      Subsidiaries therein will be reduced or the working interest therein will be
      increased when such amount has been recovered.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.25    Leases,
      Performance of Obligations.  All
      of the Leases are valid and in full force and effect and are enforceable against
      all parties thereto.  Neither the Company nor any of its Subsidiaries
      nor, to the Company’s Knowledge, any other party thereto is in default in any
      material respect under any of such Leases and no event has occurred which with
      the giving of notice and/or the passage of time could constitute a default
      under, or otherwise give any party the right to terminate, any of such Leases,
      or affect the Company’s or any of its Subsidiaries’ interest in and title to the
      Oil and Gas Property arising under any of such Leases.  No Lease is
      subject to termination, modification or acceleration as a result of the
      transactions contemplated hereby and the transactions contemplated hereby
      (including the granting of the Mortgages) will not make any right of first
      refusal exercisable by any third party with respect to any of the Oil and Gas
      Properties.  Except as set forth in Schedule 3.25, all of the
      Leases will remain in full force and effect upon, and permit, the consummation
      of the transactions contemplated hereby and by the other Transaction Documents
      (including the granting of leasehold mortgages).  There are no
      restrictions applicable to any Oil and Gas Property that would interfere with
      the Company’s or any of its Subsidiary’s making an assignment or granting of a
      Mortgage to any Buyer as contemplated by the Security Documents, including
      any
      requirement under any Lease.  The Leases will by their terms remain in
      effect for at least as long as oil, gas or other minerals are produced in paying
      quantities, all required royalty payments are made or they are otherwise
      maintained by operations.

     

    3.26    Operation
      of Oil and Gas Property, Marketing.  Except
      as set forth in Schedule 3.26, all of the wells on the Oil and Gas
      Properties have been drilled and completed, or plugged and abandoned, at legal
      locations within the boundaries set forth in the appropriate Lease; and no
      such
      well is subject to penalties on allowables after the date hereof because of
      any
      overproduction or violation of applicable laws, rules, regulations, permits
      or
      judgments, orders or decrees of any court or governmental body or agency which
      would prevent such well from being entitled to its full legal and regular
      allowance from and after the date hereof as prescribed by any court or
      Governmental Entity.  Except as set forth in Schedule 3.26,
      there are no joint operating agreements applicable to any Oil and Gas
      Property.  The Company and the Subsidiaries will not be obligated, as
      of the Closing Date or thereafter, including by virtue of a prepayment
      arrangement, make-up right under a production sales contract containing a “take
      or pay” or similar provision, production payment, buydowns, buyouts, or any
      other arrangement, (i) to deliver hydrocarbons, or proceeds from the sale
      thereof, attributable to any of the Oil and Gas Properties at some future time
      without then or thereafter receiving the full contract price therefor, or (ii)
      to deliver oil or gas (or cash in lieu thereof) from any Oil and Gas Property
      to
      other owners of interests as a result of past production by the Company or
      the
      Subsidiaries or any of their predecessors in excess of the share to which it
      was
      entitled with respect to such Oil and Gas Property.  Except as set
      forth in Schedule 3.26, no Person has any call upon, option to purchase
      or similar right to obtain production from any portion of the Oil and Gas
      Property and no Oil and Gas Property or production therefrom is subject to
      any
      forward sales contract or other hedging arrangement.  Except as set
      forth in Schedule 3.26, all oil and gas production proceeds payable by
      the Company or its Subsidiaries to others from the Oil and Gas Properties under
      the applicable terms of the Leases or under applicable Laws, including all
      royalties, overriding royalties and net profits interests, have been disbursed
      and all deductions from those oil and gas production proceeds have been made
      in
      accordance with the applicable terms and conditions of those Leases and Laws,
      except for revenues which are properly being suspended or held in accordance
      with applicable Laws, and (iii) the Company and its Subsidiaries are in
      compliance in all material respects with all applicable Laws pertaining to
      escheatment.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.27    Tangible
      Assets.  The
      Company and its Subsidiaries have defensible title to all of their tangible
      assets (the “Assets”), all of which are free and clear of any
      Lien, other than Permitted Liens, and include all assets necessary for the
      conduct of the Company’s business as presently proposed to be
      conducted.  The Assets that are pipelines, facilities, fixtures,
      equipment, and other personal property have been maintained in all material
      respects in accordance with normal industry practice, and are in good operating
      condition and repair (subject to normal wear and tear), and are suitable for
      the
      purposes for which they are now used and proposed to be used.  There
      are no existing agreements, options, commitments or rights with, of or to any
      Person to acquire any assets, or any interests therein.

     

    3.28    Investment
      Company.  The
      Company is not, and upon each Closing will not be, an “investment company,” a
      company controlled by an “investment company,” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company,” as such
      terms are defined in the Investment Company Act of 1940, as amended (the
“Investment Company Act”).

     

    SECTION
      4.

    AFFIRMATIVE
      COVENANTS

     

    4.1           Best
      Efforts.  Each
      party shall use its reasonable best efforts to timely satisfy each of the
      conditions to be satisfied by it as provided in Sections 6 and 7 of this
      Agreement.

     

    4.2           Reporting
      Status.  Until
      the latest of (i) the date that is one year after the date as of which the
      Investors (as that term is defined in the Registration Rights Agreement) may
      sell all of the Closing Shares and all of the Warrant Shares without restriction
      pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto)
      and (ii) the date on which neither the Note nor the Warrant remains outstanding
      (the period ending on such latest date, the “Reporting
      Period”), the Company shall file all reports required to be filed with
      the SEC pursuant to the 1934 Act in a timely manner (including any extensions
      of
      the applicable time frames permitted by Rule 12b-25 under the 1934 Act pursuant
      to timely filed Forms 12b-25), and the Company shall not terminate its status
      as
      an issuer required to file reports under the 1934 Act even if the securities
      laws would otherwise permit such termination.

     

    4.3           Use
      of Proceeds.  The
      Company will use the proceeds from the sale of the Closing Shares, Note and
      Warrant as set forth on Schedule 4.3.

     

    4.4           Financial
      Information.  The
      Company agrees to send the following to each Investor (as defined in the
      Registration Rights Agreement) during the Reporting Period (i) unless the
      following are filed with the SEC through EDGAR and are immediately available
      to
      the public through the EDGAR system, within one Business Day after the filing
      thereof with the SEC, a copy of each of its quarterly reports on Form 10-QSB
      or
      10-Q and annual reports on Form 10-KSB or 10-K, as the case may be (each, a
      “Periodic Report”), Current Reports on Form 8-K, registration
      statements (other than on Form S-8) and amendments and supplements to each
      of
      the foregoing, (ii) unless immediately available through Bloomberg Financial
      Markets (or any successor thereto), facsimile copies of all press releases
      issued by the Company or any of its Subsidiaries, contemporaneously with the
      issuance thereof, and (iii) copies of any notices and other information made
      available or given to the stockholders of the Company generally,
      contemporaneously with the making available or giving thereof to the
      stockholders.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.5           Reservation
      of Shares.  The
      Company shall take all action necessary to at all times have authorized, and
      reserved for the purpose of issuance, no less than the aggregate number of
      shares of Common Stock issuable upon Conversion of the Note and exercise of
      the
      Warrant.

     

    4.6           Listing.  The
      Company shall take all actions necessary to remain eligible for quotation of
      its
      Common Stock on the OTC Bulletin Board and to cause all of the Registrable
      Securities (as defined in the Registration Rights Agreement) covered by a
      registration statement to be quoted thereon, unless listed on a national
      securities exchange.

     

    4.7           Disclosure
      of Transactions and Other Material Information.  Contemporaneous
      with or prior to the earlier of (i) the Company’s first public announcement of
      the transactions contemplated hereby and (ii) 4:00 p.m. (New York City time)
      on
      the fourth Business Day following the Closing Date, the Company shall file
      the
      Announcing 8-K with the SEC.  The “Announcing Form
      8-K,” (x) shall describe the terms of the transactions contemplated by
      the Transaction Documents, including the purchase of the Closing Shares, Note
      and Warrant, (y) shall include as exhibits to such Form 8-K this Agreement
      (including the schedules hereto), the form of Note, the Registration Rights
      Agreement, the form of Warrant, the form of Security Agreement, the form of
      Guaranty, the form of Pledge Agreement, and the form of Mortgage, and (z) shall
      include any other information required to be disclosed therein pursuant to
      any
      securities laws or other Laws.  Unless required by Law, the Company
      shall not make any public announcement regarding the transactions contemplated
      hereby prior to the Closing.  From and after the filing of the
      Announcing Form 8-K with the SEC, Buyer shall not be in possession of any
      material non-public information received from the Company, any of its
      Subsidiaries or any of their respective officers, directors, employees or
      agents.  In the event that the Company believes that a notice or
      communication to any Buyer or Investor after the filing date of the Announcing
      8-K, contains material, non-public information relating to the Company or any
      of
      its Subsidiaries, the Company so shall indicate to Buyer or Investor
      contemporaneously with delivery of such notice or communication, and such
      indication shall provide Buyer or Investor the means to refuse to receive such
      notice or communication; and in the absence of any such indication, the holders
      of the Securities shall be allowed to presume that all matters relating to
      such
      notice or communication do not constitute material, non-public information
      relating to the Company or any of its Subsidiaries.  If the Buyer or
      Investor elects to receive material, non-public information from the Company,
      each Buyer or Investor shall as a condition to receiving such information
      execute and deliver to the Company a confidentiality agreement with respect
      thereto in such form as the Company may request to comply with federal and
      state
      securities laws.

     

    4.8           Notices.  From
      the date of this Agreement until the first date following the Closing Date
      on
      which no Note is outstanding and the Security Agreement has terminated, the
      Company shall and shall cause each of its Subsidiaries to:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (i)           Locations.  Promptly
      (but in no event less than 20 days prior to the occurrence thereof) notify
      Buyer
      of the proposed opening of any new place of business or new location of
      Collateral (as defined in the Security Agreement), the closing of any existing
      place of business or location of Collateral, any change in the location of
      such
      Person’s books, records and accounts (or copies thereof), the opening or closing
      of any post office box, the opening or closing of any bank account or, if any
      of
      the Collateral consists of Goods (as defined in the Security Agreement) of
      a
      type normally used in more than one state, the use of any such Goods in any
      state other than a state in which such Person has previously advised Buyer
      that
      such Goods will be used.

     

    (ii)           Names
      and Trade Names.  Notify Buyer in writing (A) at least 30 days in
      advance of any change in such Person’s legal name and (B) within 10 days of the
      change of the use of any trade name, assumed name, fictitious name or division
      name not previously disclosed to Buyer in writing.

     

    All
      of
      the foregoing notices shall be provided by the Company or applicable Subsidiary
      to Buyer in writing.

     

    4.9           Compliance
      with Laws and Maintenance of Permits.  From
      the date of this Agreement until the first date following the Closing Date
      on
      which neither the Note nor the Warrant is outstanding and the Security Agreement
      has terminated, the Company shall, and shall cause each of its Subsidiaries
      to,
      maintain all governmental consents, franchises, certificates, licenses,
      authorizations, approvals and permits, the lack of which would reasonably be
      expected to have individually or in the aggregate a Material Adverse Effect,
      and
      the Company and each of its Subsidiaries shall remain in compliance with all
      Laws (including Environmental Laws and Laws relating to taxes, employer and
      employee contributions and similar items, securities, ERISA or employee health
      and safety) the failure with which to comply would reasonably be expected to
      have individually or in the aggregate a Material Adverse Effect on such
      Person.

     

    4.10    Inspection
      and Audits.  From
      the date of this Agreement until the first date following the Closing Date
      on
      which the Note is no longer outstanding and the Security Agreement has
      terminated, (i) the Company shall, and shall cause each of its Subsidiaries
      to,
      permit Buyer, or any Persons designated by Buyer, to call at such Person’s
      places of business at any reasonable times, and, without hindrance or delay,
      to
      inspect, examine and audit the Collateral and to inspect, audit, check and
      make
      extracts from such Person’s books, records, journals, orders, receipts and any
      correspondence and other data relating to such Person’s business, the Collateral
      or any transactions between the parties hereto, and shall have the right to
      make
      such verification concerning such Person’s business as Buyer may consider
      reasonable under the circumstances; and (ii) Buyer, through its officers,
      employees or agents shall have the right, at any time and from time to time,
      in
      Buyer’s name, to verify the validity, amount or any other matter relating to any
      of the Company’s and its Subsidiaries’ Accounts (as defined in the Security
      Agreement), by mail, telephone, telecopy, electronic mail or
      otherwise.  Notwithstanding anything to the contrary herein, upon
      written request to the Company by any Buyer, the Company shall promptly provide
      Buyer with any financial, operating or other type of information requested
      by
      Buyer, subject to Buyer’s execution of a confidentiality agreement reasonably
      acceptable to the Company with respect to such information, which execution
      shall constitute a waiver, with respect to any material non-public information
      regarding the Company and the Subsidiaries provided to Buyer directly in
      response to such written request, of the restriction herein on the Company’s
      disclosure to Buyer of material non-public information.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.11    Insurance.  From
      the date of this Agreement until the first date following the Closing Date
      on
      which the Note is no longer outstanding and the Security Agreement has
      terminated, the Company shall, and shall cause each of its Subsidiaries
      to:

     

    (i)           Keep
      the Collateral properly housed (to the extent customary in the oil and gas
      business) and insured for the full insurable value thereof against loss or
      damage by fire, theft, explosion, sprinklers, collision (in the case of motor
      vehicles) and such other risks with companies that regularly insure Persons
      engaged in businesses similar to that of the Company or applicable Subsidiary,
      such coverage and the premiums payable in respect thereof to be acceptable
      in
      scope and amount to the Collateral Agent.  Within 60 days after the
      filing of the Announcing 8-K, original (or certified) copies of such policies
      of
      insurance shall be delivered to Buyer, together with evidence of payment of
      all
      premiums therefor, and shall contain an endorsement, in form and substance
      reasonably acceptable to Collateral Agent, showing loss under such insurance
      policies payable to Collateral Agent.  Such endorsement, or an
      independent instrument furnished to the Collateral Agent, shall provide that
      the
      insurance company shall give the Collateral Agent at least 30 days’ written
      notice before any such policy of insurance is altered or canceled and that
      no
      act, whether willful or negligent, or default of such Company or applicable
      Subsidiary or any other Person shall affect the right of the Collateral Agent
      to
      recover under such policy of insurance in case of loss or damage.

     

    (ii)           Maintain,
      at its expense, such public liability and third party property damage insurance
      with companies that regularly insure Persons engaged in businesses similar
      to
      that of the Company or applicable Subsidiary, such coverage and the premiums
      payable in respect thereof to be acceptable in scope and amount to the
      Collateral Agent.  Within 60 days after the filing of the Announcing
      8-K, original (or certified) copies of such policies have been delivered to
      Buyer, together with evidence of payment of all premiums therefor; each such
      policy shall contain an endorsement showing the Collateral Agent as an
      additional insured thereunder and providing that the insurance company shall
      give Collateral Agent at least 30 days’ written notice before any such policy
      shall be altered or canceled.

     

    If
      the
      Company or any of its Subsidiaries at any time or times hereafter shall fail
      to
      obtain or maintain any of the policies of insurance required above or to pay
      any
      premium relating thereto, Buyer, without waiving or releasing any obligation
      or
      default by the Company hereunder, may (but shall be under no obligation to)
      obtain and maintain such policies of insurance and pay such premiums and take
      such other actions with respect thereto as Buyer deems
      advisable.  Such insurance, if obtained by Buyer, may, but need not,
      protect the Company’s and its Subsidiaries’ interests or pay any claim made by
      or against the Company and its Subsidiaries with respect to the
      Collateral.  Such insurance may be more expensive than the cost of
      insurance the Company and its Subsidiaries may be able to obtain on their own
      and may be cancelled only upon the Company and its Subsidiaries’ providing
      evidence that they have obtained the insurance as required above.  All
      sums disbursed by Buyer in connection with any such actions, including court
      costs, expenses, other charges relating thereto and reasonable attorneys’ fees,
      shall constitute Indebtedness under the Note, shall be payable on demand by
      the
      Company to Buyer and, until paid, shall bear interest at the highest rate then
      applicable to principal under the Note.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.12    Collateral.  From
      the date of this Agreement until the first date following the Closing Date
      on
      which the Note is no longer outstanding, the Company shall, and shall cause
      its
      Subsidiaries to maintain the Collateral in good condition, repair and order
      (ordinary wear and tear excepted) and shall make all necessary repairs to the
      Equipment (as defined in the Security Agreement) and replacements thereof so
      that the operating efficiency and the value thereof shall at all times be
      preserved and maintained.

     

    4.13    Taxes.  From
      the date of this Agreement until the first date following the Closing Date
      on
      which the Note is no longer outstanding, the Company shall, and shall cause
      each
      of its Subsidiaries to file all required tax returns and pay all of its taxes
      when due, subject to any extensions granted by the applicable taxing authority,
      including taxes imposed by federal, state or municipal agencies, and shall
      cause
      any Liens for taxes to be promptly released; provided, that Person shall
      have the right to contest the payment of such taxes in good faith by appropriate
      proceedings so long as (i) the amount so contested is shown on such
      Person’s financial statements; (ii) the contesting of any such payment does
      not give rise to a Lien for taxes; (iii) such Person keeps on deposit with
      the Collateral Agent (such deposit to be held without interest) an amount of
      money which, in the sole judgment of the Collateral Agent, is sufficient to
      pay
      such taxes and any interest or penalties that may accrue thereon; and
      (iv) if such Person fails to prosecute such contest with reasonable
      diligence, the Collateral Agent may apply the money so deposited in payment
      of
      such taxes.  If the Company or applicable Subsidiary fails to pay any
      such taxes (other than taxes not yet due, subject to an extension or subject
      to
      a contest) and in the absence of any such contest by such Person, Buyer may
      (but
      shall be under no obligation to) advance and pay any sums required to pay any
      such taxes and/or to secure the release of any Lien therefor, and any sums
      so
      advanced by Buyer shall constitute Indebtedness under the Note, shall be payable
      by the Company to Buyer on demand, and, until paid, shall bear interest at
      the
      highest rate then applicable to principal under the Note.

     

    4.14    Intellectual
      Property.  From
      the date of this Agreement until the first date following the Closing Date
      on
      which the Note is no longer outstanding, the Company shall and shall cause
      each
      of its Subsidiaries to maintain adequate licenses, patents, patent applications,
      copyrights, service marks and trademarks to continue its business as presently
      proposed to be conducted by it or as hereafter conducted by it, unless the
      failure to maintain any of the foregoing would not reasonably be expected to
      have a Material Adverse Effect.

     

    4.15    Patriot
      Act, Investor Secrecy Act and Office of Foreign Assets Control.  As
      required by federal law and Buyer’s policies and practices, Buyer may need to
      obtain, verify and record certain customer identification information and
      documentation in connection with opening or maintaining accounts, or
      establishing or continuing to provide services, and, from the date of this
      Agreement until the first date following the Closing Date on which the Note
      is
      no longer outstanding, the Company agrees to, and shall cause each of its
      Subsidiaries to, provide such information as reasonably requested by
      Buyer.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.16    Drilling
      Title Opinions.  From
      the date of this Agreement until the first date following the Closing Date
      on
      which the Note is no longer outstanding, prior to the Company’s or any of its
      Subsidiaries’ drilling on any of the Oil and Gas Property, the Company or such
      Subsidiary will obtain a customary drilling title opinion with respect to such
      drillsite.  Upon written request to the Company by Buyer, the Company
      shall promptly provide Buyer with a copy of such drilling title
      opinion.

     

    4.17    Security
      Covenants.  From
      the date of this Agreement until the first date following the Closing Date
      on
      which the Note is no longer outstanding, Company shall, and shall cause each
      of
      its Subsidiaries to, at its own cost and expense, cause to be promptly and
      duly
      taken, executed, acknowledged and delivered all such further acts, documents
      and
      assurances as may from time to time be necessary or as Buyer or the Collateral
      Agent may from time to time request in order to carry out the intent and
      purposes of this Agreement, the Security Documents and the other Transaction
      Documents and the transactions contemplated hereby and thereby, including all
      such actions to establish, create, preserve, protect and perfect a first
      priority Lien (subject only to Permitted Liens) in favor of the Collateral
      Agent
      for the benefit of Buyer on the Collateral (as each term is defined in the
      Security Agreement, and including Collateral acquired after the date hereof),
      including on any and all assets of the Company and each of its Subsidiaries,
      whether now owned or hereafter acquired.

     

    (i)           Without
      limiting the generality of the foregoing, in the event that the Company or
      any
      of its Subsidiaries shall, at any time from the date of this Agreement until
      the
      first date following the Closing Date on which the Note is no longer
      outstanding, acquire or form any new Subsidiary after the date hereof, the
      Company shall, or shall cause the respective Subsidiary to cause such new
      Subsidiary, upon such acquisition or concurrently with such formation, as
      applicable, (A) to execute, and thereafter perform its obligations under, the
      Security Agreement and the Guaranty and to take such other action (including
      authorizing the filing of such UCC financing statements and delivering
      certificates in respect of the equity securities of such Subsidiary) as shall
      be
      necessary or appropriate to establish, create, preserve, protect and perfect
      a
      first priority Lien (subject only to Permitted Liens) in favor of Collateral
      Agent for the benefit of Collateral Agent and Buyer on all assets, both real
      and
      personal, in which such new Subsidiary has or may thereafter acquire any
      interest, (B) to execute such other Security Documents, in form and content
      acceptable to Collateral Agent, as may be required or requested by Collateral
      Agent in connection with the actions contemplated by the preceding clause (A),
      and (C) to deliver such proof of corporate (or comparable) action, incumbency
      of
      officers, opinions of counsel and other documents as Collateral Agent shall
      have
      required or requested.

     

    (ii)           From
      the date of this Agreement until the first date following the Closing Date
      on
      which the Note is no longer outstanding, (A) the Company shall, and shall cause
      each of its Subsidiaries to, take such action from time to time as shall be
      necessary to ensure that each of its Subsidiaries is a wholly-owned Subsidiary,
      and that Collateral Agent shall have, for the benefit of Collateral Agent and
      Buyer, a first priority Lien on all capital stock or other equity securities
      of
      each of its Subsidiaries concurrently with acquisition or formation of such
      Subsidiary; and (B) in the event that any additional capital stock or other
      equity securities shall be issued by any of its Subsidiaries, the Company shall
      or shall cause each of its Subsidiaries to, concurrently with such issuance,
      deliver to Collateral Agent, to the extent required by the applicable Security
      Documents, the certificates evidencing such securities, accompanied by undated
      powers executed in blank and to take such other action as Collateral Agent
      shall
      request to perfect the security interest created therein pursuant to such
      Security Documents.  As used in this Agreement, “Capital
      Stock” means any and all shares, interests, participations or other
      equivalents (however designated) of capital stock of a corporation, any and
      all
      equivalent ownership interests in a Person (other than a corporation) and any
      and all warrants, rights or options to purchase any of the
      foregoing.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iii)           At
      any time from the date of this Agreement until the first date following the
      Closing Date on which the Note is no longer outstanding, concurrently with
      the
      acquisition by the Company or any of its Subsidiaries, of any real estate or
      Oil
      and Gas Property leasehold interests, the Company shall deliver or cause to
      be
      delivered to the Collateral Agent, with respect to such real estate, (A) a
      mortgage or deed of trust, as applicable, in form and substance satisfactory
      to
      the Collateral Agent, executed by the title holder thereof, (B) with
      respect to any real estate owned by the Company not constituting Oil and Gas
      Property, an ALTA lender’s title insurance policy issued by a title insurer
      reasonably satisfactory to the Collateral Agent in form and substance and in
      amounts reasonably satisfactory to the Collateral Agent ensuring the Collateral
      Agent’s first priority Lien on such real estate, free and clear of all defects,
      encumbrances and Liens except Permitted Liens.

     

    (iv)           From
      the date of this Agreement until the first date following the Closing Date
      on
      which the Note is no longer outstanding, the Company shall, and shall cause
      each
      of its Subsidiaries to, (A) refrain from engaging to any substantial extent
      in
      any business other than the exploration and development of natural gas and
      oil
      reserves within the United States and business reasonably related thereto or
      in
      furtherance thereof, and (B) preserve, renew and keep in full force and effect
      their respective material rights, privileges and franchises necessary or
      desirable in the normal conduct of their business.

     

    4.18    Subsidiary
      Interests.  From
      the date of this Agreement until the first date following the Closing Date
      on
      which the Note is no longer outstanding, all of the equity interests of each
      of
      the Subsidiaries shall be certificated or otherwise represented in tangible
      form.

     

    4.19    Submission
      of Matters to a Stockholder Vote.  From
      the date of this Agreement until the earlier of the (i) second anniversary
      of
      the Closing Date, the Company shall comply with the requirements of Section
      312.03 of the New York Stock Exchange Listed Company Manual as to matters
      requiring the prior approval of the Company’s stockholders or (ii) the date on
      which the Common Stock is listed on the Toronto Stock Exchange.

     

    4.20    Subsidiary
      Certificates.  By
      no later than the third date following the Closing Date, the Company shall
      deliver to the Buyer certificates representing 100% of the ownership interests
      in each of the Subsidiaries (and corresponding stock powers executed in
      blank).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SECTION
      5.

    NEGATIVE
      COVENANTS

     

    From
      the
      date hereof until the date the Note is no longer outstanding, the Company
      covenants and agrees as follows:

     

    5.1           Stay,
      Extension and Usury Laws.  The
      Company covenants (to the extent that it may lawfully do so) that it shall
      not
      at any time insist upon, plead, or in any manner whatsoever claim or take the
      benefit or advantage of, any stay, extension or usury law or other law that
      would prohibit or forgive it from paying all or any portion of any principal
      of,
      or interest or premium on the Note as contemplated herein or therein, wherever
      enacted, now or at any time hereafter in force, or which may affect the
      covenants or the performance of any of the Transaction Documents; and the
      Company (to the extent it may lawfully do so) hereby expressly waives all
      benefit or advantage of any such Law, and covenants that it will not, by resort
      to any such law, hinder, delay or impede the execution of any power herein
      granted to any Buyer, but will suffer and permit the execution of every such
      power as though no such law has been enacted.

     

    5.2           Payment
      Restrictions Affecting Subsidiaries.  The
      Company shall not, nor will it permit any of its Subsidiaries to, enter into
      or
      assume any agreement prohibiting or otherwise restricting the creation or
      assumption of any Lien upon its properties or assets, whether now owned or
      hereafter acquired, or requiring the grant of any security for an obligation,
      except to the extent any such agreement provides for Permitted
      Liens.  Except as provided herein, the Company shall not and shall not
      cause or permit its Subsidiaries to directly or indirectly create or otherwise
      cause or suffer to exist or become effective any consensual encumbrance or
      consensual restriction of any kind on the ability of any such Subsidiary
      to:  (1) pay dividends or make any other distribution on any of such
      Subsidiary’s capital stock owned by the Company or any other Subsidiary; (2) pay
      any Indebtedness owed to the Company or any other Subsidiary; (3) make loans
      or
      advances to the Company or any other Subsidiary; or (4) transfer any of its
      property or assets to the Company or any other Subsidiary.

     

    5.3           Prepayments.  The
      Company shall not, nor will it permit any of its Subsidiaries to, prepay any
      Indebtedness that is in parity with or subordinate to the Note by structure
      or
      contract.

     

    5.4           Indebtedness.  The
      Company shall not, and shall cause each of its Subsidiaries not to, create,
      incur, assume, extend the term of, or guaranty or otherwise become obligated
      with respect to, any Indebtedness other than Indebtedness under the Note issued
      pursuant to this Agreement, except that the Company and its Subsidiaries may
      incur Indebtedness for borrowed money and trade payables in an aggregate amount
      outstanding not in excess of $1,750,000 in addition to permitted Indebtedness
      identified in Schedule 3.22 outstanding on the Closing Date.

     

    5.5           Liens.  The
      Company shall not, and shall cause each of its Subsidiaries not to, grant any
      Lien, claim, security interest or other encumbrance whatsoever on any of its
      assets, other than Permitted Liens.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.6           Sale
      of Collateral.  Neither
      the Company nor any of the Subsidiaries shall sell, transfer, farm-out, assign
      or dispose of any Oil and Gas Property (and any of the Collateral used in
      connection with the operation of such Oil and Gas Property) (a
“Collateral Disposition”), without the prior written consent of
      the holders of at least 51% of the aggregate principal amount of the Notes
      then
      outstanding, which consent shall not be unreasonably withheld.

     

    5.7           Corporate
      Existence; Leases.  The
      Company shall maintain its corporate existence and shall not sell all or any
      material portion of the Company’s assets (including, for the avoidance of any
      doubt, all or any material portion of the assets of the Subsidiaries in the
      aggregate).  From the date of this Agreement until the first date
      following the Closing Date on which the Note is not outstanding, the Company
      shall, and shall cause each of its Subsidiaries to, refrain from violating,
      breaching or defaulting under in any respect, or taking or failing to take
      any
      action that (with or without notice or lapse of time or both) would constitute
      a
      violation or breach of, or default under, any term or provision of any Lease
      to
      which the Company or any of its Subsidiaries is a party, except to the extent
      such violation, breach or default, action or inaction would not and would not
      be
      reasonably expected to have, either individually or in the aggregate, a Material
      Adverse Effect

     

    5.8           Restrictions
      on Loans; Investments; Subsidiary Equity.  The
      Company shall not, and shall not permit any of its Subsidiaries to, (i) except
      for Permitted Investments (as defined herein) in which the Collateral Agent
      or
      any other holder of the Note has a valid, perfected first priority security
      interest, make any loans to, or investments in, any other person or entity,
      including through lending money, deferring the purchase price of property or
      services (other than trade accounts receivable on terms of 90 days or less),
      purchasing any note, bond, debenture or similar instrument, entering into any
      letter of credit, guaranteeing (or taking any action that has the effect of
      guaranteeing) any obligations of any other person or entity, or acquiring any
      equity securities of, or other ownership interest in, or making any capital
      contribution to any other entity, (ii) invest in, participate in, lease,
      purchase, obtain or otherwise acquire any real property, facilities, or oil,
      gas
      or other mineral drilling, exploration or development rights, concessions,
      working interests or participation interests (collectively,
“Interests”) in which the Collateral Agent, on behalf of Buyer
      and any other holder of the Note, is not provided with a valid, perfected first
      priority security interest, subject to Permitted Liens, in such Interests on
      or
      prior to the date that is the earliest of (A) the tenth Business Day of the
      subsequent calendar quarter, (B) 20 Business Days after the date on which the
      aggregate acquisition price of such investments, participations, leases,
      purchases or acquisitions exceeds $500,000 during a calendar quarter, and (C)
      concurrently with any investment, participation, lease, purchase or acquisition
      that has an acquisition price that individually exceeds $1,000,000, or (iii)
      issue, transfer or pledge any capital stock or equity interest in any Subsidiary
      to any Person other than the Company.  “Permitted
      Investments” means any investment in (A) direct obligations of the
      United States or obligations guaranteed by the United States, in each
      case which mature and become payable within 90 days of the investment by the
      Company or any Subsidiary, (B) commercial paper rated at least A-1 by Standard
      & Poor’s Ratings Service and P-1 by Moody’s Investors Services, Inc., (C)
      time deposits with, including certificates of deposit issued by, any office
      located in the United States of any bank or trust company which is
      organized under the laws of the United States or any State thereof and has
      capital, surplus and undivided profits aggregating at least $250,000,000 and
      which issues (or the parent of which issues) certificates of deposit or
      commercial paper with a rating described in clause (B) above, in each case
      which
      mature and become payable within 90 days of the investment by the Company or
      any
      Subsidiary, (D) repurchase agreements with respect to securities described
      in
      clause (A) above entered into with an office of a bank or trust company meeting
      the criteria specified in clause (C) above, provided in each case that
      such investment matures and becomes payable within 90 days of the investment
      by
      the Company or any Subsidiary, (E) any money market or mutual fund which invests
      only in the foregoing types of investments and the liquidity of which is
      satisfactory to the Collateral Agent, or (F) non-monetary proceeds of Permitted
      Collateral Dispositions.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.9           Equipment.  The
      Company shall not, and shall cause each of its Subsidiaries not to, (i) permit
      any Equipment to become a fixture to Oil and Gas Property unless such Oil and
      Gas Property is owned or leased by such Person and is subject to a mortgage
      in
      favor of the Collateral Agent, for the benefit of Buyer, and if such Oil and
      Gas
      Property is leased, is subject to a landlord’s agreement in favor of Buyer on
      terms acceptable to the Collateral Agent, or (ii) permit any Equipment to become
      an accession to any other personal property unless such personal property is
      subject to a first priority perfected Lien, subject to Permitted Liens, in
      favor
      of the Collateral Agent, for the benefit of Buyer and any other holders of
      the
      Note. 

     

    5.10    Affiliate
      Transactions.  The
      Company shall not, and shall cause each of its Subsidiaries not to, enter into,
      amend, modify or supplement any transaction, contract, agreement, instrument,
      commitment, understanding or other arrangement with any Related Party, except
      for customary employment arrangements and benefit programs, on reasonable terms,
      that are not otherwise prohibited by this Agreement.

     

    5.11    Settling
      of Accounts.  The
      Company shall not, and shall cause each of its Subsidiaries not to, sell,
      discount, settle or adjust any Account (as defined in the Security Agreement);
      provided, that the Company and its Subsidiaries may (i) discount or
      settle past due Accounts on an arm’s length basis in the ordinary course of
      business, and (ii) provide early payment discounts in respect of Accounts in
      the
      ordinary course of business, consistent with past practice.

     

    5.12    Limitation
      on Sale and Leaseback Transactions.  The
      Company shall not, and shall cause each of its Subsidiaries not to, directly
      or
      indirectly, enter into any arrangement with any Person whereby in a
      substantially contemporaneous transaction the Company or any of its Subsidiaries
      sells or transfers all or substantially all of its right, title and interest in
      an asset and, in connection therewith, acquires or leases back the right to
      use
      such asset.

     

    5.13    Investment
      Company.  The
      Company shall not become an “investment company,” a company controlled by an
“investment company,” or an “affiliated person” of, or “promoter” or “principal
      underwriter” for, an “investment company,” as such terms are defined in the
      Investment Company Act of 1940.

     

    5.14    Leases.  The
      Company shall not, and shall cause each of its Subsidiaries not to, violate,
      breach or default under in any respect, or take or fail to take any action
      that
      (with or without notice or lapse of time or both) would constitute a violation
      or breach of, or default under, any term or provision of, or would result in
      a
      reversion of rights to a Person under, any Lease to which the Company or any
      of
      its Subsidiaries is a party, except to the extent such violation, breach or
      default, action or in-action could not reasonably be expected, individually
      or
      in the aggregate, to have a Material Adverse Effect.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.15    Restriction
      on
      Purchases or Payments.  The
      Company shall not, and shall cause each of its Subsidiaries not to, (i) declare,
      set aside or pay any dividends on or make any other distributions (other than
      dividends or distributions to the Company’s stockholders consisting solely of
      the Company’s capital stock) in respect of any capital stock; provided
      however, that any Subsidiary may declare, set aside or pay any dividends on
      or
      make any other distributions (whether in cash, stock, equity securities or
      property) in respect of any of its capital stock that is held solely by the
      Company or by a domestic Subsidiary, provided that 100% of the equity of such
      domestic Subsidiary is directly or indirectly owned by the Company, such
      domestic Subsidiary is controlled by the Company and such domestic Subsidiary
      is
      a party to the Guaranty Agreement and the Security Agreement, or (ii) purchase,
      redeem or otherwise acquire, directly or indirectly, any shares of the Company’s
      capital stock, except repurchases of unvested shares in connection with the
      termination of the employment relationship with any employee pursuant to stock
      option or purchase agreements in effect on the date of this Agreement or
      provisions of stock options or restricted stock issued under the Option Plan
      permitting “net exercise” or retention of shares to pay taxes.

     

    5.16    No
      Avoidance of Obligations.  The
      Company shall not, and shall cause each of its Subsidiaries not to, enter into
      any agreement which would limit or restrict the Company’s or any of its
      Subsidiaries’ ability to perform under, or take any other voluntary action to
      avoid or seek to avoid the observance or performance of any of the terms to
      be
      observed or performed by it under, this Agreement, the Note and the other
      Transaction Documents.

     

    5.17    Regulation
      M.  Neither
      the Company, nor its Subsidiaries nor any Affiliates of the foregoing will
      take
      any action prohibited by Regulation M under the 1934 Act, in connection with
      the
      offer, sale and delivery of the Securities contemplated hereby.

     

    5.18    Company
      Contracts.  The
      Company shall not, and shall not permit its Subsidiaries to, enter into any
      gas
      purchase agreement, or any similar agreement, until each prospective customer
      or
      joint-operator, as the case may be, delivers to the Company and the Collateral
      Agent a duly executed acknowledgment and agreement to the Notice of Assignment
      of Proceeds substantially in the form of Exhibit B to the Security
      Agreement.

     

    SECTION
      6.

    CONDITIONS
      TO THE OBLIGATION OF THE COMPANY TO SELL

     

    The
      obligation of the Company to issue and sell the Closing Shares, Note and Warrant
      to Buyer at the Closing is subject to the satisfaction, at or before the Closing
      Date, of each of the following conditions, provided that these conditions are
      for the Company’s sole benefit and may be waived by the Company at any time in
      its sole discretion by providing Buyer with prior written notice
      thereof:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               

            	
              (a)

            	
              Buyer
                shall have executed each of the Transaction Documents to which it
                is a
                party and delivered the same to the
                Company.

            

    

     

    
      	
               

            	
              (b)

            	
              Buyer
                shall have delivered to the Company the Purchase Price for the Closing
                Shares, Note and Warrant being purchased by Buyer at the Closing
                by wire
                transfer of immediately available funds pursuant to the wire instructions
                provided by the Company.

            

    

     

    
      	
               

            	
              (c)

            	
              The
                representations and warranties of Buyer herein shall be true and
                correct
                as of the date when made and as of the Closing Date as though made
                at that
                time (except for representations and warranties that speak as of
                a
                specific date, which shall be true and correct as of such date),
                and Buyer
                shall have performed, satisfied and complied with the covenants,
                agreements and conditions required by the Transaction Documents to
                be
                performed, satisfied or complied with by Buyer at or prior to the
                Closing
                Date.

            

    

     

    SECTION
      7.

    CONDITIONS
      TO THE OBLIGATION OF THE BUYER TO PURCHASE

     

    The
      obligation of Buyer to purchase the Closing Shares, Note and Warrant from the
      Company at the Closing is subject to the satisfaction, at or before the Closing
      Date, of each of the following conditions, provided that these conditions are
      for Buyer’s sole benefit and may be waived only by Buyer at any time in its sole
      discretion by providing the Company with prior written notice
      thereof:

     

    
      	
               

            	
              (a)

            	
              Each
                of the Company and each other Person (other than Buyer and the Collateral
                Agent) party to the Transaction Documents shall have executed and
                delivered the same to Buyer.

            

    

     

    
      	
               

            	
              (b)

            	
              The
                representations and warranties of the Company herein and in all
                Transaction Documents shall be true and correct as of the date when
                made
                and as of the Closing Date as though made at that time (except for
                representations and warranties that speak as of a specific date,
                which
                shall be true and correct as of such date) and the Company shall
                have
                performed, satisfied and complied with the covenants, agreements
                and
                conditions required by the Transaction Documents to be performed,
                satisfied or complied with by the Company at or prior to the Closing
                Date.  Buyer shall have received a certificate, executed by the
                chief executive officer of the Company, dated as of the Closing Date,
                to
                the foregoing effect and as to such other matters as may be reasonably
                requested by Buyer.

            

    

     

    
      	
               

            	
              (c)

            	
              Buyer
                shall have received the opinions of Porter & Hedges, LLP, Rice Silbey
                Reuther & Sullivan, LLP and Morris, Laing, Evans, Brock & Kennedy,
                Chartered, each dated as of the Closing Date, which opinions will
                collectively address, among other things, certain laws of the States
                of
                Nevada, Texas, and Kansas applicable to the transactions contemplated
                hereby and the security interests provided pursuant to the Security
                Agreement, in form, scope and substance reasonably satisfactory to
                Buyer.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               

            	
              (d)

            	
              The
                Company shall have executed and delivered to Buyer the Note and
                Warrant.

            

    

     

    
      	
               

            	
              (e)

            	
              The
                Board of the Company shall have adopted, and not rescinded or otherwise
                amended or modified, resolutions consistent with Section 3(b)
                above and in a form reasonably acceptable to Buyer (the
                “Resolutions”).

            

    

     

    
      	
               

            	
              (f)

            	
              As
                of the Closing Date, the Company shall have reserved out of its authorized
                and unissued Common Stock a sufficient number of shares to cover
                the
                exercise of the Warrant and the Conversion of the
                Note.

            

    

     

    
      	
               

            	
              (g)

            	
              The
                Company shall have delivered to Buyer a certificate evidencing the
                incorporation (or other organization) and good standing of the Company
                and
                each Subsidiary in such entity’s state or other jurisdiction of
                incorporation or organization issued by the Secretary of State (or
                other
                applicable authority) of such state or jurisdiction of incorporation
                or
                organization as of a date within 20 days of the Closing
                Date.

            

    

     

    
      	
               

            	
              (h)

            	
              The
                Company shall have delivered to Buyer a secretary’s certificate, dated as
                of the Closing Date, certifying as to (A) the Resolutions,
                (B) the Certificate of Incorporation, certified as of a date within
                20 days of the Closing Date, by the Secretary of State of Nevada,
                (C) the Bylaws of the Company, (D) the certificate or articles of
                incorporation or other organizational documents of each of the Company’s
                Subsidiaries, each certified as of a date within 20 days of the Closing
                Date, by the Secretary of State of the state of such entity’s jurisdiction
                of incorporation or organization, and (E) the bylaws or other similar
                documents of each of the Company’s Subsidiaries, each as in effect at the
                Closing.

            

    

     

    
      	
               

            	
              (i)

            	
              The
                Company shall have delivered to Buyer a letter from the Company’s transfer
                agent certifying the number of shares of Common Stock outstanding
                as of a
                date within five Business Days of the Closing
                Date.

            

    

     

    
      	
               

            	
              (j)

            	
              The
                Company and its Subsidiaries shall have delivered and pledged to
                Buyer all
                the Collateral, in each case in accordance with the Security Agreement,
                the Pledge Agreement and the other Security
                Documents.

            

    

     

    
      	
               

            	
              (k)

            	
              The
                Company and its Subsidiaries shall have given, executed, delivered,
                filed
                and/or recorded all Security Documents, Mortgages with respect to
                all of
                the Oil and Gas Property, and any other financing statements, notices,
                instruments, documents, agreements and other papers that may be necessary
                or desirable (in the reasonable judgment of Buyer) to create, preserve,
                perfect or validate the security interest in all of the assets of
                the
                Company and its Subsidiaries granted to Buyer pursuant to the Security
                Agreement and to enable Buyer to exercise and enforce its rights
                with
                respect to such security interest.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               

            	
              (l)

            	
              The
                Company shall have delivered to Buyer drill site title opinions,
                in form
                and substance acceptable to Buyer, with respect to all of the Oil
                and Gas
                Property that is producing, or on which drilling has commenced or
                is
                imminent for, oil, gas, minerals and/or other hydrocarbons (the
                “Producing
                Property”).

            

    

     

    
      	
               

            	
              (m)

            	
              The
                Company shall have delivered to Buyer “landman reports,” in form and
                substance acceptable to Buyer, with respect to all of the Oil and
                Gas
                Property (other than the Producing
                Property).

            

    

     

    
      	
               

            	
              (n)

            	
              The
                Company shall have reimbursed Buyer’s expenses in connection with the
                transactions contemplated by this Agreement and the other Transaction
                Documents pursuant to Section 8(b)
                hereof.

            

    

     

    
      	
               

            	
              (o)

            	
              The
                Company shall have delivered to Buyer such other documents relating
                to the
                transactions contemplated by this Agreement as Buyer or its counsel
                may
                reasonably request.

            

    

     

    SECTION
      8.

    INDEMNIFICATION;
      EXPENSES; TAXES

     

    (i)           In
      consideration of Buyer’s execution and delivery of the Transaction Documents and
      acquiring the Securities thereunder and in addition to all of the Company’s and
      its Subsidiaries’ other obligations under the Transaction Documents, the Company
      shall defend, protect, indemnify and hold harmless Buyer and each other holder
      of the Securities and all of their stockholders, partners, officers, directors,
      members, managers, employees and direct or indirect investors and any of the
      foregoing Persons’ agents or other representatives (including those retained in
      connection with the transactions contemplated by this Agreement) (collectively,
      the “Indemnitees”) from and against any and all actions, causes
      of action, suits, claims, losses, costs, penalties, fees, liabilities and
      damages, and expenses in connection therewith (irrespective of whether any
      such
      Indemnitees is a party to the action for which indemnification hereunder is
      sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by any Indemnitees as a
      result of, or arising out of, or relating to (a) any misrepresentation or
      breach of any representation or warranty made by the Company or any of its
      Subsidiaries in any of the Transaction Documents or any other certificate,
      instrument or document contemplated hereby or thereby, (b) any breach of
      any covenant, agreement or obligation of the Company or any of its Subsidiaries
      contained in the Transaction Documents or any other certificate, instrument
      or
      document contemplated hereby or thereby, (c) any cause of action, suit or
      claim brought or made against such Indemnitees and arising out of or resulting
      from the execution, delivery, performance or enforcement of the Transaction
      Documents in accordance with the terms thereof or any other certificate,
      instrument or document contemplated hereby or thereby in accordance with the
      terms thereof (other than a cause of action, suit or claim brought or made
      against an Indemnitee by such Indemnitee’s owners, investors or Affiliates),
      (d) any other transaction financed or to be financed in whole or in part,
      directly or indirectly, with the proceeds of the issuance of the Securities,
      or
      (e) the status of Buyer or holder of the Securities as an investor in the
      Company.  To the extent that the foregoing undertaking by the Company
      may be unenforceable for any reason, the Company shall make the maximum
      contribution to the payment and satisfaction of each of the Indemnified
      Liabilities that is permissible under applicable law.  Except as
      otherwise set forth herein, the mechanics and procedures with respect to the
      rights and obligations under this Section 8 shall be the same as those set
      forth
      in Section 6 of the Registration Rights Agreement, including those
      procedures with respect to the settlement of claims and the Company’s rights to
      assume the defense of claims.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (ii)           The
      Company shall reimburse Buyer’s expenses in connection with the transactions
      contemplated by this Agreement and the other Transaction Documents to the extent
      that the amount of such expenses exceeds $10,000.

     

    (iii)           Any
      and all payments by or on account of any obligation of the Company or any of
      its
      Subsidiaries under this Agreement, the Note, the Warrant or any other
      Transaction Document shall be made without any set-off, counterclaim or
      deduction and free and clear of and without deduction for any Indemnified Taxes;
      provided that if the Company or any of its Subsidiaries shall be required to
      deduct any Indemnified Taxes from such payments, then (i) the sum payable shall
      be increased as necessary so that after making all required deductions
      (including Indemnified Taxes imposed or asserted on or attributable to amounts
      payable under this Section 8), Buyer receives an amount equal to the sum it
      would have received had no such deductions been made, (ii) the Company, or
      such
      Subsidiary as applicable, shall make such deductions and (iii) the Company
      or
      such Subsidiary shall pay the full amount deducted to the relevant Governmental
      Authority in accordance with applicable law.  “Indemnified
      Taxes” means, with respect to Buyer, or any other recipient of payment
      to be made by or on account of any obligations of the Company or any of its
      Subsidiaries under this Agreement, the Note, the Warrant or under any other
      Transaction Document, all Taxes other than income or franchise taxes imposed
      on
      (or measured by) such recipient’s net income by the United States of America or
      such other jurisdiction under the laws of which such recipient is organized
      or
      its principal offices are located.  “Taxes” means any
      present or future tax, levy, impost, duty, fee, assessment, deduction,
      withholding or other charge of any nature and whatever called, by whomsoever,
      on
      whomsoever and wherever imposed, levied, collected, withheld or assessed,
      including interest, penalties, additions to tax and any similar liabilities
      with
      respect thereto.

     

    (iv)           The
      Company shall indemnify Buyer, within ten (10) Business Days after written
      demand therefor, for the full amount of any Indemnified Taxes paid by Buyer,
      on
      or with respect to any payment by or on account of any obligation of the Company
      or any of its Subsidiaries under this Agreement, the Note, the Warrant and
      the
      other Transaction Documents (including Indemnified Taxes imposed or asserted
      on
      or attributable to amounts payable under this Section 8) and any penalties,
      interest and reasonable expenses arising therefrom or with respect thereto,
      whether or not such Indemnified Taxes were correctly or legally imposed or
      asserted by the relevant Governmental Authority.  A certificate of
      Buyer as to the amount of such payment or liability under this Section 8 shall
      be delivered to the Company and shall be conclusive absent manifest
      error.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SECTION
      9.

    RIGHT
      TO PARTICIPATE IN FUTURE FINANCING

     

    Subject
      to the exceptions described below, each of the Company and its Subsidiaries
      agrees that during the period beginning on the date hereof and ending on the
      later of (i) the six-month anniversary of the Closing and (ii) 60 days after
      the
      first date following the Closing on which no Note remains outstanding, neither
      the Company nor its Subsidiaries will (x) contract with any party for any debt
      or equity financing (including any debt financing with an equity component),
      (y)
      issue any debt or equity securities of the Company or any Subsidiary or
      securities convertible, exchangeable or exercisable into or for debt
      or equity securities of the Company or any Subsidiary
      (including debt securities with an equity component) or (z) engage in “farm-out”
financing transactions or similar transactions which do not have operating
      obligations by the financing party as a material component, in any form (a
      “Future Offering”), unless, after it has received an offer
      regarding a Future Offering that it has a bona fide intention to accept, it
      shall have first delivered to Buyer (or its designee appointed by Buyer) written
      notice (the “Future Offering Notice”) reporting that it has
      received and is prepared to accept such offer and providing Buyer an option
      (the
“Buyer Purchase Option”) to purchase up to 25% of the total
      amount of securities to be issued in such Future Offering (the limitations
      referred to in this and the preceding sentence are collectively referred to
      as
      the “Capital Raising Limitations”).  No Future
      Offering Notice shall contain any material non-public information regarding
      the
      Company or any of its Subsidiaries.  Upon the written request of any
      Buyer made within five Business Days after its receipt of a Future Offering
      Notice (an “Additional Information Request”), the Company shall
      provide Buyer with such additional information regarding the proposed Future
      Offering, including terms and conditions and use of proceeds thereof, as Buyer
      shall reasonably request.  Buyer may exercise its Buyer Purchase
      Option by delivering written notice to the Company within five Business Days
      after the later of (i) Buyer’s receipt of a Future Offering Notice or (ii)
      Buyer’s receipt of all of the information reasonably requested by Buyer in an
      Additional Information Request (the “Buyer Purchase Notice
      Date”), which notice shall state the quantity or percentage of
      securities being offered in the Future Offering that Buyer will
      purchase.  The Company shall have 60 days following the Buyer Purchase
      Notice Date to sell the securities of the Future Offering (other than the
      securities to be purchased by Buyer pursuant to this Section 9.16), upon terms
      and conditions no more favorable to the purchasers thereof than specified in
      the
      Future Offering Notice.  The exercise of the Buyer Purchase Option
      shall be contingent upon, and contemporaneous with, the consummation of such
      Future Offering.  In connection with such consummation, Buyer (if it
      exercises the Buyer Purchase Option) shall deliver to the Company duly and
      properly executed originals of any documents reasonably required by the Company,
      and in form and substance reasonably satisfactory to Buyer, to effectuate such
      Future Offering together with payment of the purchase price for the securities
      being purchased by Buyer in such Future Offering, and the Company shall promptly
      issue to Buyer the securities purchased thereby.  In the event the
      Company has not sold such securities of the Future Offering within such 60-day
      period, the Company shall not thereafter issue or sell such securities or any
      other securities subject to this Section 9.16 without first offering such
      securities to Buyer in the manner provided in this Section
      9.16.  Buyer shall not be required to participate or exercise its
      right of participation with respect to a particular Future Offering in order
      to
      exercise its right of participation with respect to later Future
      Offerings.  The Capital Raising Limitations shall not apply to (i) any
      transaction involving the Company’s issuances of securities (A) as consideration
      in a merger or consolidation (the primary purpose or material result of which
      is
      not to raise or obtain equity capital or cash), (B) in connection with any
      strategic partnership or joint venture (the primary purpose or material result
      of which is not to raise or obtain equity capital or cash), or (C) as
      consideration for the acquisition of a business, product, license or other
      assets by the Company (the primary purpose or material result of which is not
      to
      raise or obtain equity capital or cash) or (ii) Exempted Issuances (as defined
      in the Warrant).

     

    SECTION
      10.

    GOVERNING
      LAW; MISCELLANEOUS.

     

    10.1    Governing
      Law; Jurisdiction; Jury Trial.  All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdiction) that would
      cause the application of the laws of any jurisdiction other than the State
      of
      New York.  Each party hereby irrevocably submits to the exclusive
      jurisdiction of the state and federal courts sitting in New York City (Borough
      of Manhattan), New York, for the adjudication of any dispute hereunder or in
      connection herewith or with any transaction contemplated hereby or discussed
      herein, and hereby irrevocably waives, and agrees not to assert in any suit,
      action or proceeding, any claim that it is not personally subject to the
      jurisdiction of any such court, that such suit, action or proceeding is brought
      in an inconvenient forum or that the venue of such suit, action or proceeding
      is
      improper.  Each party hereby irrevocably waives personal service of
      process and consents to process being served in any such suit, action or
      proceeding by mailing a copy thereof to such party at the address for such
      notices to it under this Agreement and agrees that such service shall constitute
      good and sufficient service of process and notice thereof.  Nothing
      contained herein shall be deemed to limit in any way any right to serve process
      in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES
      ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
      ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING
      OUT
      OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

     

    10.2    Counterparts.  This
      Agreement and any amendments hereto may be executed and delivered in one or
      more
      counterparts, and by the different parties hereto in separate counterparts,
      each
      of which when executed shall be deemed to be an original, but all of which
      taken
      together shall constitute one and the same agreement, and shall become effective
      when counterparts have been signed by each party hereto and delivered to the
      other parties hereto, it being understood that all parties need not sign the
      same counterpart.  In the event that any signature to this Agreement
      or any amendment hereto is delivered by facsimile transmission or by e-mail
      delivery of a “.pdf” format data file, 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 or “.pdf”
signature page were an original thereof.  At the request of any party
      each other party shall promptly re-execute an original form of this Agreement
      or
      any amendment hereto and deliver the same to the other party.  No
      party hereto shall raise the use of a facsimile machine or e-mail delivery
      of a
“.pdf” format data file to deliver a signature to this Agreement or any
      amendment hereto or the fact that such signature was transmitted or communicated
      through the use of a facsimile machine or e-mail delivery of a “.pdf” format
      data file as a defense to the formation or enforceability of a contract, and
      each party hereto forever waives any such defense.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    10.3    Headings.  The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement.

     

    10.4    Severability.  If
      any provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction.

     

    10.5    Entire
      Agreement; Amendments.  This
      Agreement supersedes all other prior oral or written agreements between Buyer,
      the Company, its Subsidiaries, their Affiliates and Persons acting on their
      behalf with respect to the matters discussed herein, and this Agreement and
      the
      instruments referenced herein contain the entire understanding of the parties
      with respect to the matters covered herein and therein and, except as
      specifically set forth herein or therein, neither the Company nor Buyer makes
      any representation, warranty, covenant or undertaking with respect to such
      matters.  No provision of this Agreement may be amended, modified or
      supplemented other than by an instrument in writing signed by the Company and
      the holders of at least 51% of the aggregate principal amount of the Notes
      than
      outstanding.  Any such amendment shall bind all holders of the Note
      and the Warrant.  No such amendment shall be effective to the extent
      that it applies to less than all of the holders of the Note or Warrant then
      outstanding.

     

    10.6    Notices.  Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered:  (i) upon receipt, when delivered personally;
      (ii) upon receipt, when sent by facsimile (provided confirmation of
      transmission is mechanically or electronically generated and kept on file by
      the
      sending party); or (iii) one Business Day after deposit with a nationally
      recognized overnight delivery service, in each case properly addressed to the
      party to receive the same.  The addresses and facsimile numbers for
      such communications shall be:

     

    If
      to the
      Company:

    

    Gulf
      Western Petroleum Corporation

    4801
      Woodway Drive, Suite 306W

    Houston,
      Texas  77056

    Facsimile:  (713)
      979-3728

    Attention:  Donald
      L. Sytsma

    

    If
      to the
      Holder:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Metage
      Funds Limited

    8
      Pollen
      Street

    London,
      England W1S 1NG

    Attention:  Tom
      Sharp

    Facsimile:  +44
      207 318 5271

    

    NCIM
      Limited

    5th
      Floor, Manfield
      House

    1
      Southampton Street

    London,
      England WC2R OLR

    Attention:  Mervyn
      Roberts

    Facsimile:  +44
      207 557 4379

    

    

    or
      at
      such other address and/or facsimile number and/or to the attention of such
      other
      person as the recipient party has specified by written notice to the other
      party
      at least five Business Days prior to the effectiveness of such
      change.  Written confirmation of receipt (A) given by the recipient of
      such notice, consent, waiver or other communication, (B) mechanically or
      electronically generated by the sender’s facsimile machine containing the time,
      date, recipient facsimile number and an image of the first page of such
      transmission or (C) provided by a nationally recognized overnight delivery
      service shall be rebuttable evidence of personal service, receipt by facsimile
      or deposit with a nationally recognized overnight delivery service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    10.7    Successors
      and Assigns.  This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns, including any purchasers of the
      Securities.  The Company shall not assign this Agreement or any rights
      or obligations hereunder without the prior written consent of
      Buyer.  Buyer may assign some or all of its rights hereunder without
      the consent of the Company; provided, however, that any such assignment
      shall not release Buyer from its obligations hereunder unless such obligations
      are assumed by such assignee (as evidenced in
      writing).  Notwithstanding anything to the contrary contained in the
      Transaction Documents, Buyer shall be entitled to pledge the Securities in
      connection with a bona fide margin account or other loan or financing
      arrangement secured by the Securities.

     

    10.8    No
      Third
      Party Beneficiaries.  This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns and, to the extent provided in Section 8
      hereof, each Indemnitee, and is not for the benefit of, nor may any provision
      hereof be enforced by, any other Person.

     

    10.9    Survival.  Unless
      this Agreement is terminated under Section 10.11, the representations and
      warranties of the Company and Buyer contained in Sections 2 and 3, the
      agreements and covenants set forth in Sections 4, 5 and 9, and the
      indemnification and contribution provisions set forth in Section 8, shall
      survive the Closing.  Buyer shall be responsible only for its own
      representations, warranties, agreements and covenants hereunder.

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    10.11    Termination.  In
      the event that the Closing shall not have occurred on or before the third
      Business Day following the date of this Agreement due to the Company’s or
      Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above
      (and the nonbreaching party’s failure to waive such unsatisfied condition(s)),
      the nonbreaching party shall have the option to terminate this Agreement with
      respect to such breaching party at the close of business on such date without
      liability of any party to any other party.

     

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

     

    10.13    Remedies.  Buyer
      and each holder of the Securities shall have all rights and remedies set forth
      in the Transaction Documents and all rights and remedies that Buyer and holders
      have been granted at any time under any other agreement or contract and all
      of
      the rights that Buyer and holders have under any law.  Any Person
      having any rights under any provision of this Agreement shall be entitled to
      enforce such rights specifically, to recover damages by reason of any breach
      of
      any provision of this Agreement and to exercise all other rights granted by
      law.

     

    10.14    Payment
      Set Aside.  To
      the extent that the Company or any of its Subsidiaries makes a payment or
      payments to Buyer pursuant to this Agreement, the Registration Rights Agreement,
      the Note, the Warrant, the Guaranty or any other Transaction Document or Buyer
      enforces or exercises its rights hereunder or 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 or any of its Subsidiaries, by a trustee, receiver
      or
      any other Person under any law (including 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.

     

    10.15    Transfer
      Agent Instructions.  The
      Company shall issue irrevocable instructions to its transfer agent in the form
      attached hereto as Exhibit C (the “Irrevocable Transfer Agent
      Instructions”), and any subsequent transfer agent, to issue
      certificates or credit shares to the applicable balance accounts at the
      Depository Trust Company (“DTC”), registered in the name of
      Buyer or its nominee(s), for the Closing Shares, the Conversion Shares and
      the
      Warrant Shares.  Prior to registration and sale of the Closing Shares,
      Conversion Shares and the Warrant Shares under the 1933 Act, all such
      certificates shall bear the restrictive legend specified in Section
      2.8.  The Company warrants that no instruction other than the
      Irrevocable Transfer Agent Instructions referred to in this Section 10.15 and
      stop transfer instructions to give effect to Section 2.7 with respect to the
      Closing Shares, the Conversion Shares or Warrant Shares prior to their
      registration and sale, respectively, under the 1933 Act will be given by the
      Company to its transfer agent.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    10.16    Interpretative
      Matters.  Unless
      the context otherwise requires, (a) all references to Sections, Schedules
      or Exhibits are to Sections, Schedules or Exhibits contained in or attached
      to
      this Agreement, (b) each accounting term not otherwise defined in this Agreement
      has the meaning assigned to it in accordance with GAAP as applied by the
      Company, (c) words in the singular or plural include the singular and
      plural and pronouns stated in either the masculine, the feminine or neuter
      gender shall include the masculine, feminine and neuter, and (d) the use of
      the word “including” in this Agreement shall be by way of example rather than
      limitation.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, Buyer and the Company have caused this Securities
      Purchase Agreement to be duly executed as of the date first written
      above.

     

    COMPANY:

    

    GULF
      WESTERN PETROLEUM CORPORATION

    

    

    
      	
              By:

            	
              /s/  Wm.
                M. Cox

            	 
	
              Name:  
                

            	
              William
                M. Cox

            	 
	
              Title:

            	
              Chairman
                and CEO

            	 

    

    

     

    [Additional
      signature page follows]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    BUYER:

    

    

    METAGE
      FUNDS LIMITED

    

     

    
      	
              By:

            	
              /s/  Tom
                Sharp

            	 
	
              Name:  
                

            	
              Tom
                Sharp

            	 
	
              Title:

            	
              Investment
                Manager

            	 

    

     

     

    
      NCIM
        LIMITED

     

    
      	
              By:

            	
              /s/  J.M.
                Roberts

            	 
	
              Name:  
                

            	
              J.M.
                Roberts

            	 
	
              Title:

            	
              ManagerUnassociated Document

    
      

    

    Exhibit
      10.2

     

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE
      SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
      THE
      ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
      THE
      SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR
      (B)
      AN OPINION OF COUNSEL, GENERALLY ACCEPTABLE IN FORM AND SUBSTANCE, THAT
      REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
      LAWS
      OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.  ANY
      TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
      INCLUDING SECTION 3(b) HEREOF.  THE PRINCIPAL AMOUNT REPRESENTED BY
      THIS NOTE MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT
      TO
      SECTION 3(b) HEREOF.

     

    SENIOR
      SECURED CONVERTIBLE NOTE

     

    
      	
              September
                10, 2007

            	
              $3,200,000.00

            

    

    

     

    FOR
      VALUE RECEIVED, GULF WESTERN PETROLEUM
      CORPORATION, a Nevada corporation (the
“Company”), hereby promises to pay to the
      order of Metage Funds
      Limited and its permitted assigns (collectively, the “Holder”)
      the principal amount of Three Million Two Hundred Thousand Dollars and No/100
      ($3,200,000.00) when due, whether upon maturity, acceleration, redemption or
      otherwise, and to pay interest (“Interest”) on the unpaid
      principal balance hereof on each Interest Payment Date (as defined in Section
      2)
      and upon maturity, or earlier upon conversion, acceleration or prepayment
      pursuant to the terms hereof, at the Interest Rate (as defined in Section
      2).  Interest on this Note payable on each Interest Payment Date
      (provided that, on the first Interest Payment Date, interest that has
      accrued from the date of this Note that has not been paid shall be paid on
      the
      first Interest Payment Date) and upon maturity, or earlier upon conversion,
      acceleration or prepayment pursuant to the terms hereof, shall accrue from
      the
      Issuance Date (as defined in Section 2) until paid and shall be computed on
      the
      basis of a 365-day year and actual days elapsed.  The principal amount
      of this Note shall be funded to the Company in two advances as
      follows:  (1) upon issuance of this Note, $2,100,000 shall be advanced
      to the Company, and (2) the remaining $1,100,000 shall be advanced to the
      Company upon the Holder receiving evidence from the operator, that based upon
      the log evaluation and the initial production test conducted by an independent
      testing company that the Frio well drilled is capable of producing no less
      than
      225,000 cubic feet of natural gas per day.

     

    (1)           Payments
      of Principal and Interest.  All payments under this Note (to the
      extent such principal is not converted into Shares (as defined in Section 2),
      in
      accordance with the terms hereof) shall be made in lawful money of the United
      States of America by wire transfer of immediately available funds to such
      account as the Holder may from time to time designate by written notice in
      accordance with the provisions of this Note.  Interest on the
      Principal shall be paid monthly in arrears on each Interest Payment Date (as
      defined in Section 2).  The Company may make payments of Principal of
      this Note prior to the Maturity Date (as defined in Section 2) at any time
      and
      from time to time after the six-month anniversary of the Closing Date with
      a
      prepayment premium in an amount equal to 2.50% of the Principal being
      prepaid.  Whenever any amount expressed to be due by the terms of this
      Note is due on any day that is not a Business Day (as defined in Section 2),
      the
      same shall instead be due on the next succeeding day that is a Business
      Day.  This Note and all notes issued in exchange or substitution
      therefor or replacement thereof are collectively referred to in this Note as
      the
“Note.”

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (2)           Certain
      Defined Terms.  Each capitalized term used in this Note, and not
      otherwise defined, shall have the meaning ascribed thereto in the Securities
      Purchase Agreement, dated as of even date herewith, pursuant to which this
      Note
      was originally issued (as such agreement may be amended, restated, supplemented
      or modified from time to time as provided therein, the “Securities
      Purchase Agreement”).  For purposes of this Note, the
      following terms shall have the following meanings:

     

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

     

    (b)           “Capital
      Lease Obligation” means, as to any Person, any obligation that is
      required to be classified and accounted for as a capital lease on a balance
      sheet of such Person prepared in accordance with GAAP, and the amount of such
      obligation shall be the capitalized amount thereof, determined in accordance
      with GAAP.

     

    (c)           “Cash
      and Cash Equivalents” means (I) cash, (II) certificates of deposit or
      time deposits, having in each case a tenor of not more than six months, issued
      by any United States commercial bank or any branch or agency of a non-United
      States bank licensed to conduct business in the United States having combined
      capital and surplus of not less than $250,000,000, and (III) money market funds,
      provided that substantially all of the assets of such funds consist of
      securities of the type described in clauses (I) or (II) immediately above,
      all
      as determined in accordance with GAAP applied on a consistent
      basis.

     

    (d)           “Change
      of Control” means (i) the consolidation, merger or other business
      combination of the Company with or into another Person, (ii) the sale or
      transfer of all or substantially all of the Company’s assets (including, for the
      avoidance of doubt, the sale of all or substantially all of the assets of the
      Subsidiaries in the aggregate), or (iii) the consummation of a purchase, tender
      or exchange offer made to and accepted by the holders of more than 50% of the
      outstanding shares of Common Stock.

     

    (e)           “Collateral
      Agent” shall have the meaning ascribed to such term in the Security
      Agreement.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (f)           “Common
      Stock” means (A) the Company’s common stock, $0.001 par value per
      share, and (B) any capital stock resulting from a reclassification of such
      common stock.

     

    (g)           “Contingent
      Obligation” means, as to any Person, any direct or indirect liability,
      contingent or otherwise, of that Person with respect to any indebtedness, lease,
      dividend or other obligation of another Person if the primary purpose or intent
      of the Person incurring such liability, or the primary effect thereof, is to
      provide assurance to the obligee of such liability that such liability will
      be
      paid or discharged, or that any agreements relating thereto will be complied
      with, or that the holders of such liability will be protected (in whole or
      in
      part) against loss with respect thereto. 

     

    (h)           “Conversion
      Amount” means the sum of (1) the Principal of this Note to be
      converted, redeemed or otherwise with respect to which this determination is
      being made and (2) the Interest Amount with respect to the amount referred
      to in
      the immediately preceding clause (1).

     

    (i)           “Conversion
      Price” means $0.39, subject to adjustment in
      accordance with Section 4(e).

     

    (j)           “Current
      Market Price” means the higher of the five day arithmetic average of
      the share price at closing and the thirty day arithmetic average of the price
      at
      closing as found on the Bloomberg screen for Gulf Western under “Gulf US EQUITY
      HP.”

     

    (k)           “Current
      Report” means a current report on Form 8-K under the 1934
      Act.

     

    (l)           “Dollars”
      or “$” means United States Dollars.

     

    (m)          [Intentionally
      Omitted]

     

    (n)           “Governmental
      Authority” means the government of the United States of America or any
      other nation, or any political subdivision thereof, whether state, provincial
      or
      local, or any agency, authority, instrumentality, regulatory body, court,
      central bank or other entity exercising executive, legislative, judicial,
      taxing, regulatory or administration powers or functions of or pertaining to
      government over the Company or any of its Subsidiaries, or any of their
      respective properties, assets or undertakings.

     

    (o)           “Indebtedness”
      means, without duplication (A) all indebtedness for borrowed money, (B) all
      obligations issued, undertaken or assumed as the deferred purchase price of
      property or services (other than unsecured account trade payables that are
      (i)
      entered into or incurred in the ordinary course of the Company’s and its
      Subsidiaries’ business, (ii) on terms that require full payment within 90 days,
      and (iii) not unpaid in excess of 120 days from the receipt of invoice or are
      being contested in good faith and as to which such reserve as is required by
      GAAP has been made, (C) all reimbursement or payment obligations with respect
      to
      letters of credit, surety bonds and other similar instruments, (D) all
      obligations evidenced by notes, bonds, debentures, redeemable capital stock
      or
      similar instruments, including obligations so evidenced incurred in connection
      with the acquisition of property, assets or businesses, (E) all indebtedness
      created or arising under any conditional sale or other title retention
      agreement, or incurred as financing, in either case with respect to any property
      or assets acquired with the proceeds of such indebtedness (even though the
      rights and remedies of the seller or bank under such agreement in the event
      of
      default are limited to repossession or sale of such property), (F) all Capital
      Lease Obligations, (G) all indebtedness referred to in clauses (A) through
      (F)
      above secured by (or for which the holder of such Indebtedness has an existing
      right, contingent or otherwise, to be secured by) any mortgage, Lien, pledge,
      change, security interest or other encumbrance upon or in any property or assets
      (including accounts and contract rights) owned by any Person, even though the
      Person that owns such assets or property has not assumed or become liable for
      the payment of such indebtedness, and (H) all Contingent Obligations in respect
      of indebtedness or obligations of others of the kinds referred to in clauses
      (A)
      through (G) above.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (p)           [Intentionally
      Omitted]

     

    (q)           “Interest
      Amount” means as of any date, with respect to any Principal, all
      accrued and unpaid Interest on such Principal through and including such
      date.

     

    (r)           “Interest
      Payment Date” means the tenth day of each calendar month, beginning
      with March 10, 2008 through and including the Maturity Date; provided that
      if
      any such day is not a Business Day, the Interest Payment Date shall be the
      next
      succeeding Business Day.

     

    (s)           “Interest
      Rate” means a fixed interest rate equal to 15% per annum.

     

    (t)           “Irrevocable
      Transfer Agent Instructions” means the irrevocable transfer agent
      instructions issued by the Company pursuant to the Securities Purchase
      Agreement.

     

    (u)           “Issuance
      Date” means the original date of issuance of this Note pursuant to the
      Securities Purchase Agreement, regardless of any exchange or replacement
      hereof.

     

    (v)           “Lien”
      means, with respect to any asset, any mortgage, lien, pledge, hypothecation,
      charge, security interest, encumbrance or adverse claim of any kind and any
      restrictive covenant, condition, restriction or exception of any kind that
      has
      the practical effect of creating a mortgage, lien, pledge, hypothecation,
      charge, security interest, encumbrance or adverse claim of any kind (including
      any of the foregoing created by, arising under or evidenced by any conditional
      sale or other title retention agreement, the interest of a lessor with respect
      to a Capital Lease Obligation, or any financing lease having substantially
      the
      same economic effect as any of the foregoing).

     

    (w)          “Maturity
      Date” means September 10, 2008, unless such date is not a Business Day,
      in which case “Maturity Date” shall mean the first Business Day following
      September 10, 2008.

     

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

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (y)          “Original
      Principal Amount” means Three Million Two Hundred Thousand Dollars and
      No/100 ($3,200,000.00).

     

    (z)           “Periodic
      Report” means a quarterly report on Form 10-Q (or Form 10-QSB), or an
      annual report on Form 10-K (or Form 10-KSB) under the 1934 Act.

     

    (aa)         “Person”
      means an individual, a limited liability company, a partnership, a joint
      venture, a corporation, a trust, an unincorporated organization or a government
      or any department or agency thereof or any other legal entity.

     

    (bb)        “Principal”
      means the outstanding principal amount of this Note as of any date.

     

    (cc)         “Principal
      Market” means, with respect to the Common Stock or any other security,
      the principal securities exchange or trading market for the Common Stock or
      such
      other security.

     

    (dd)         “Registration
      Rights Agreement” means the Registration Rights Agreement among the
      parties to the Securities Purchase Agreement, entered into in connection
      therewith.

     

    (ee)         “SEC”
      means the U.S. Securities and Exchange Commission, or any successor
      thereto.

     

    (ff)           “Security
      Documents” means the Security Agreement and any other agreements,
      documents and instruments executed concurrently herewith or at any time
      hereafter pursuant to which the Company, its Subsidiaries or any other Person
      either (i) guarantees payment or performance of all or any portion of the
      obligations hereunder or under any other instruments delivered in connection
      with the transactions contemplated hereby and by the Securities Purchase
      Agreement, and/or (ii) provides, as security for all or any portion of such
      obligations, a Lien on any of its assets in favor of the Holder, as any or
      all
      of the same may be amended, supplemented, restated or otherwise modified from
      time to time.

     

    (gg)        
      “Shares” means shares of Common Stock.

     

    (hh)        
      “Subsidiary” means any entity in which the Company, directly or
      indirectly, owns capital stock or holds an equity or similar
      interest.

     

    (ii)           “Trading
      Day” means any day on which the Common Stock is traded on its Principal
      Market; provided that “Trading Day” shall not include any day on which the
      Principal Market is open for trading for less than 4.5 hours.

     

    (jj)           “Transaction
      Documents” means the Securities Purchase Agreement, the Registration
      Rights Agreement, the Irrevocable Transfer Agent Instructions, the Note, the
      Warrant, the Security Agreement, the Mortgages, the Guaranty, the Pledge
      Agreements and each of the other agreements or instruments to which the Company
      is a party or by which it is bound and which is entered into by the parties
      to
      the Securities Purchase Agreement in connection with the transactions
      contemplated hereby and thereby.

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (kk)         “U.S.”
      means the United States of America.

     

    (ll)           “Warrant”
      means the warrant issued by the Company pursuant to the Securities Purchase
      Agreement and all warrants issued in exchange or substitution therefor or
      replacement thereof.

     

    (mm)       “Weighted
      Average Price” means, for any security as of any date, the dollar
      volume-weighted average price for such security on its Principal Market during
      the period beginning at 8:30 a.m. Houston time (or such other time as its
      Principal Market publicly announces is the official open of trading) and ending
      at 3:00 p.m. Houston time (or such other time as its Principal Market publicly
      announces is the official close of trading) as reported by Bloomberg through
      its
“Volume at Price” functions, or if the foregoing does not apply, the dollar
      volume-weighted average price of such security in the over-the-counter market
      on
      the electronic bulletin board for such security during the period beginning
      at
      8:30 a.m. Houston time (or such other time as such over-the-counter market
      publicly announces is the official open of trading), and ending at 3:00 p.m.
      Houston time (or such other time as such over-the-counter market publicly
      announces is the official close of trading) as reported by Bloomberg, or, if
      no
      dollar volume-weighted average price is reported for such security by Bloomberg
      for such hours, the average of the highest closing bid price and the lowest
      closing ask price of any of the market makers for such security as reported
      in
      the “pink sheets” by the National Quotation Bureau, Inc.  If the
      Weighted Average Price cannot be calculated for such security on such date
      on
      any of the foregoing bases, the Weighted Average Price of such security on
      such
      date shall be the fair market value as mutually determined by the Company and
      the Holder.  All such determinations shall be appropriately adjusted
      for any stock dividend, stock split, stock combination or other similar
      transaction during any period during which the Weighted Average Price is being
      determined.

     

    (3)           Principal
      Payment.

     

    (a)           Redemption.
      Subject to the application of the amount of a Company Alternative Redemption
      pursuant to the Section 6(a) or a Mandatory Compliance Redemption pursuant
      to
      Section 7, the Company shall repay the Principal in a single installment on
      the
      Maturity Date. Notwithstanding anything to the contrary in this Section 3,
      but
      subject to Section 4(f), the Principal (together with any interest thereon)
      may
      be converted, in whole or in part, by the Holder into Common Stock pursuant
      to
      Section 4.  In the event the Holder delivers a Conversion Notice to
      the Company, the Conversion Amount specified in such Conversion Notice shall
      be
      deducted (1) first, from any Mandatory Compliance Redemption Amount which is
      the
      subject of a Mandatory Compliance Notice but which has not yet been redeemed,
      then (2) second, from any Redemption Amount which is the subject of a Company
      Alternative Redemption Notice but which has not yet been redeemed, and then
      (3)
      third, from the Principal.  If any Principal remains outstanding on
      the Maturity Date, then the Holder shall surrender this Note, duly endorsed
      for
      cancellation to the Company, and such Principal shall be redeemed by the Company
      as of the Maturity Date by payment on the Maturity Date to the Holder, by wire
      transfer of immediately available funds, of an amount equal to 100% of such
      Principal.

     

    (b)           Surrender
      of Note.  Notwithstanding anything to the contrary set forth in
      this Note, upon any prepayment of this Note in accordance with its terms, the
      Holder shall not be required to physically surrender this Note to the Company
      unless all of the Principal is being repaid and the related Interest Amount
      and
      all other obligations payable under this Note have been paid in
      full.  The Holder and the Company shall maintain records showing the
      Principal repaid and the date(s) of such repayments or shall use such other
      method, reasonably satisfactory to the Holder and the Company, so as not to
      require physical surrender of this Note upon each such repayment.  In
      the event of any dispute or discrepancy, such records of the Holder establishing
      the Principal to which the Holder is entitled shall be controlling and
      determinative in the absence of manifest error.  The Holder and any
      assignee, by acceptance of this Note, acknowledge and agree that, by reason
      of
      the provisions of this paragraph, following partial repayment of any portion
      of
      this Note, the Principal of this Note may be less than the principal amount
      stated on the face hereof.

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (4)           Conversion
      of this Note.  This Note shall be converted into Shares on the
      terms and conditions set forth in this Section 4.

     

    (a)           Conversion
      at Option of the Holder.  Subject to the provisions of Section
      4(f), at any time or times on or after the Issuance Date, the Holder shall
      be
      entitled to convert all or any part of the Principal (and the Interest Amount
      relating thereto) into fully paid and nonassessable Shares in accordance with
      this Section 4, at the Conversion Rate (as defined in Section
      4(b)).  The Company shall not issue any fraction of a Share upon any
      conversion.  If the issuance would result in the issuance of a
      fraction of a Share, then the Company shall round such fraction of a Share
      up to
      the nearest whole number.  If any Principal remains outstanding on the
      Maturity Date, then all such Principal (and the Interest Amount relating
      thereto) shall be redeemed as of such date in accordance with Section
      4(c)(vii).

     

    (b)           Conversion
      Rate.  The number of Shares issuable upon a conversion of any
      portion of this Note pursuant to Section 4 shall be determined according to
      the
      following formula (the “Conversion Rate”):

     

    Conversion
      Amount

    Conversion
      Price

     

    (c)           Mechanics
      of Conversion.  The conversion of this Note shall be conducted in
      the following manner:

     

    (i)           Holder’s
      Delivery Requirements.  To convert a Conversion Amount into Shares
      on any date (the “Conversion Date”), the Holder shall
      (A) transmit by facsimile (or otherwise deliver), for receipt on or prior
      to 11:59 p.m. Houston time on such date, a copy of an executed conversion notice
      in the form attached hereto as Exhibit A (the “Conversion
      Notice”) to the Company (attention:  Chief Financial
      Officer), and (B) if required by Section 4(c)(vii), surrender to a common
      carrier for delivery to the Company, no later than three Business Days after
      the
      Conversion Date, the original Note being converted (or an indemnification
      undertaking reasonably acceptable to the Company with respect to this Note
      in
      the case of its loss, theft or destruction).

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (ii)           Company’s
      Response.  Upon receipt or deemed receipt by the Company of a copy
      of a Conversion Notice, the Company (I) shall immediately send, via facsimile,
      a
      confirmation of receipt of such Conversion Notice to the Holder and the
      Company’s designated transfer agent (the “Transfer Agent”),
      which confirmation shall constitute an instruction to the Transfer Agent to
      process such Conversion Notice in accordance with the terms herein and (II)
      on
      or before the fifth Business Day following the date of receipt or deemed receipt
      by the Company of such Conversion Notice (the “Share Delivery
      Date”) (A) provided that the Transfer Agent is participating in The
      Depository Trust Company (“DTC”) Fast Automated Securities
      Transfer Program and provided that the Holder (or its designee or custodian)
      is
      eligible to receive Shares through DTC, credit such aggregate number of Shares
      to which the Holder shall be entitled to the Holder’s or its designee’s or
      custodian’s balance account with DTC through its Deposit Withdrawal Agent
      Commission system, or (B) if the foregoing shall not apply, issue and deliver
      to
      the address as specified in the Conversion Notice, a certificate, registered
      in
      the name of the Holder or its designee, for the number of Shares to which the
      Holder shall be entitled.  If this Note is submitted for conversion,
      as may be required by Section 4(c)(vii), and the Principal represented by this
      Note is greater than the Principal being converted, then the Company shall,
      as
      soon as practicable and in no event later than three Business Days after receipt
      of this Note (the “Note Delivery Date”) and at its own expense,
      issue and deliver to the Holder a new Note representing the Principal not
      converted and cancel this Note.

     

    (iii)           Dispute
      Resolution.  In the case of a dispute as to the arithmetic
      calculation of the Conversion Rate, the Company shall instruct the Transfer
      Agent to issue to the Holder the Shares representing the number of Shares that
      is not disputed and shall transmit an explanation of the disputed arithmetic
      calculations to the Holder via facsimile within five Business Days of receipt
      or
      deemed receipt of the Holder’s Conversion Notice or other date of
      determination.  If the Holder and the Company are unable to agree upon
      the arithmetic calculation of the Conversion Rate within three Business Days
      of
      such disputed determination or arithmetic calculation being transmitted to
      the
      Holder, then either the Company or the Holder shall promptly (and in any event
      within three Business Days) submit via facsimile the disputed arithmetic
      calculation of the Conversion Rate to an independent, reputable investment
      banking firm acceptable to the Company and the Holder.  The Company
      shall direct such firm to perform the determinations or calculations and notify
      the Company and the Holder of the results no later than five Business Days
      from
      the time it receives the disputed calculations.  Such firm’s
      determination or calculation, as the case may be, shall be binding upon all
      parties absent demonstrable error.

     

    (iv)           Record
      Holder.  The person or persons entitled to receive the Shares
      issuable upon a conversion of this Note shall be treated for all purposes as
      the
      legal and record holder or holders of such Shares on the Conversion
      Date.

     

    (v)           Company’s
      Failure to Timely Convert.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (A)           Cash
      Damages.  If within five Business Days after the Company’s receipt
      of the facsimile copy of a Conversion Notice or deemed receipt of a Conversion
      Notice the Company shall fail to issue and deliver a certificate to the Holder
      for, or credit the Holder’s or its designee’s balance account with DTC with, the
      number of Shares to which the Holder is entitled upon the Holder’s conversion of
      any Conversion Amount, or if the Company fails to issue and deliver a new Note
      representing the Principal to which such Holder is entitled on or before the
      Note Delivery Date pursuant to Section 4(c)(ii), then in addition to all other
      available remedies that the Holder may pursue hereunder and under the Securities
      Purchase Agreement (including indemnification pursuant to Section 8 thereof
      or
      at law or in equity), the Company shall pay additional damages to the Holder
      for
      each day after the Share Delivery Date such conversion is not timely effected
      and/or each day after the Note Delivery Date such Note is not delivered in
      an
      amount equal to 0.5% of the sum of (a) the product of (I) the number of Shares
      not issued to the Holder or its designee on or prior to the Share Delivery
      Date
      and to which the Holder is entitled and (II) the Weighted Average Price of
      the
      Common Stock on the Share Delivery Date (such product is referred to herein
      as
      the “Share Product Amount”), and (b) in the event the Company
      has failed to deliver a Note to the Holder on or prior to the Note Delivery
      Date, the product of (y) the number of Shares issuable upon conversion of the
      Principal represented by the Note as of the Note Delivery Date and (z) the
      Weighted Average Price of the Common Stock on the Note Delivery Date; provided
      that in no event shall cash damages accrue pursuant to this Section 4(c)(v)(A)
      with respect to the Share Product Amount during the period, if any, in which
      the
      arithmetic calculation of the Conversion Rate is subject to a bona fide dispute
      that is subject to and being resolved pursuant to, and in compliance with the
      time periods and other provisions of, the dispute resolution provisions of
      Section 4(c)(iii), provided that the Shares are delivered to the Holder within
      one Business Day of the resolution of such bona fide
      dispute.  Alternatively, subject to Section 4(c)(iii), at the election
      of the Holder made in the Holder’s sole discretion, the Company shall pay to the
      Holder, in lieu of the additional damages referred to in the preceding sentence
      (but in addition to all other available remedies that the Holder may pursue
      hereunder and under the Securities Purchase Agreement (including indemnification
      pursuant to Section 8 thereof or at law or in equity)), 110% of the amount
      by
      which (A) the Holder’s total purchase price for the Shares purchased to make
      delivery in satisfaction of a sale by the Holder of the Shares to which the
      Holder is entitled but has not received upon a conversion exceeds (B) the net
      proceeds received by the Holder from the sale of the Shares to which the Holder
      is entitled but has not received upon such conversion.  If the Company
      fails to pay the additional damages set forth in this Section 4(c)(v)(A) within
      five Business Days of the date incurred, then the Holder entitled to such
      payments shall have the right at any time, so long as the Company continues
      to
      fail to make such payments, to require the Company, upon written notice, to
      immediately issue, in lieu of such cash damages, the number of Shares equal
      to
      the quotient of (X) the aggregate amount of the damages payments described
      herein divided by (Y) the Conversion Price.

     

    (B)           Void
      Conversion Notice.  If for any reason the Holder (or its designee
      or custodian) has not received all of the Shares prior to the tenth Business
      Day
      after the Share Delivery Date with respect to a conversion of this Note, other
      than due to the pendency of a dispute being resolved in accordance with Section
      4(c)(iii) (a “Conversion Failure”), then the Holder, upon
      written notice to the Company (a “Void Conversion Notice”), may
      void its Conversion Notice with respect to, and retain or have returned, as
      the
      case may be, any portion of this Note that has not been converted pursuant
      to
      the Holder’s Conversion Notice.

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (vi)           Book-Entry.  Notwithstanding
      anything to the contrary set forth herein, upon conversion of this Note in
      accordance with the terms hereof, the Holder shall not be required to physically
      surrender this Note to the Company unless all of the Principal is being
      converted.  The Holder and the Company shall maintain records showing
      the Principal converted or redeemed and the dates of such conversions or
      redemptions or shall use such other method, reasonably satisfactory to the
      Holder and the Company, so as not to require physical surrender of this Note
      upon each such conversion or redemption.  In the event of any dispute
      or discrepancy, such records of the Company establishing the Principal to which
      the Holder is entitled shall be controlling and determinative in the absence
      of
      demonstrable error.  Notwithstanding the foregoing, if this Note is
      converted or redeemed as aforesaid, the Holder may not transfer this Note unless
      the Holder first physically surrenders this Note to the Company, whereupon
      the
      Company will forthwith issue and deliver upon the order of the Holder a new
      Note
      of like tenor, registered as the Holder may request, representing in the
      aggregate the remaining Principal represented by this Note.  The
      Holder and any assignee, by acceptance of this Note, acknowledge and agree
      that,
      by reason of the provisions of this paragraph, following conversion or
      redemption of any portion of this Note, the Principal of this Note may be less
      than the principal amount stated on the face hereof.

     

    (d)           [Intentionally
      Omitted.]

     

    (e)           Adjustments
      to Conversion Price.  The Conversion Price shall be subject to
      adjustment (“Antidilution Adjustment”) as follows:

     

    (i)           Declaration
      of Dividend in Common Stock or Free Distribution or Bonus Issue of Common
      Stock.

     

    (A)           If
      the Company shall declare a dividend in Common Stock or make a free distribution
      or bonus issue of Common Stock which is treated as a capitalization issue for
      accounting purposes (including but not limited to capitalization of capital
      reserves) then the Conversion Price in effect on the date when such dividend
      and/or distribution is declared (or, if the Company has fixed a prior record
      date for the determination of shareholders entitled to receive such dividend
      and/or distribution, on such record date) shall be adjusted in accordance with
      the following formula:

     

    NCP
      = OCP
      x  [N/(N + n)]

     

    where:

     

    NCP
      = the
      Conversion Price after such adjustment.

     

    OCP
      = the
      Conversion Price before such adjustment.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    N
      = the
      number of Common Stock outstanding (having regard in this case and in each
      subsection mentioned below to subsection (xiv) below) at the time of declaration
      of such dividend and/or distribution (or at the close of business in New York
      City on such record date as the case may be).

     

    n
      = the
      number of Common Stock to be distributed to the shareholders as a dividend
      and/or free distribution.

     

    (B)           An
      adjustment made pursuant to this subsection (i) shall become effective on the
      record date for determination of shareholders entitled to receive such dividend
      and/or distribution; provided that in the case of a dividend in Common Stock
      or
      capitalization of reserves which must, under applicable law of the United
      States, be submitted for approval to a meeting of shareholders of the Company
      or
      to competent regulatory authority before being legally paid or made, and which
      is so approved after the record date fixed for the determination of shareholders
      entitled to receive such dividend and/or distribution, such adjustment shall,
      immediately upon such approval being given by such meeting or such authority,
      become effective retroactively to immediately after such record
      date.

     

    (C)           If
      the Company shall declare a dividend in, or make a free distribution or bonus
      issue of, Common Stock which dividend, issue or distribution is to be paid
      or
      made to shareholders as of a record date that is also:

     

    (1)           the
      record date for the issue of any rights or warrants which requires an adjustment
      of the Conversion Price pursuant to subsection (iii), (iv) or (v) below;

     

    (2)           the
      day immediately before the date of issue of any securities convertible into
      or
      exchangeable for Common Stock that requires an adjustment of the Conversion
      Price pursuant to subsection (vii) below;

     

    (3)           the
      day immediately before the date of issue of any Common Stock that requires
      an
      adjustment of the Conversion Price pursuant to subsection (viii)
      below;

     

    (4)           the
      day immediately before the date of issue of any rights, options or warrants
      that
      requires an adjustment of the Conversion Price pursuant to subsection (ix)
      below; or

     

    (5)           determined
      by the Company to be the relevant date for an event or circumstance that
      requires an adjustment to the Conversion Price pursuant to subsection (x)
      below,

     

    then
      no
      adjustment of the Conversion Price in respect of such dividend, bonus issue
      or
      free distribution shall be made under this subsection (i), but in lieu thereof
      an adjustment shall be made under subsection (iii), (iv), (v), (vi), (vii),
      (viii) or (ix) below (as the case may require) by including in the denominator
      of the fraction described therein the aggregate number of Common Stock to be
      issued pursuant to such dividend, bonus issue or free distribution and, in
      the
      case of such dividend, including in the numerator of the fraction described
      therein the number of Common Stock which the aggregate par value of Common
      Stock
      to be so distributed would purchase at the Current Market Price per Common
      Stock.

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (ii)           Sub-division,
      Consolidation and Reclassification of Common Stock.

     

    (A)           If
      the Company shall (1) sub-divide its outstanding Common Stock, (2) consolidate
      its outstanding Common Stock into a smaller number of Common Stock, or (3)
      re-classify any of its Common Stock into other securities of the Company, then
      the Conversion Price shall be appropriately adjusted so that the Holder on
      the
      Conversion Date which occurs after the coming into effect of the adjustment
      described in this clause (A) shall be entitled to receive the number of Common
      Stock and/or other securities of the Company which it would have held or have
      been entitled to receive after the happening of any of the events described
      above had the Note been converted immediately prior to the happening of such
      event (or, if the Company has fixed a prior record date for the determination
      of
      shareholders entitled to receive any such securities issued upon any such
      sub-division, consolidation or re-classification, immediately prior to such
      record date), but without prejudice to the effect of any other adjustment to
      the
      Conversion Price made with effect from the date of the happening of such event
      (or such record date) or any time thereafter.

     

    (B)           An
      adjustment made pursuant to clause (A) above shall become effective immediately
      on the relevant event referred to above becoming effective or, if a record
      date
      is fixed therefor, immediately after such record date.

     

    (iii)           Issue
      of Securities Convertible into or Exchangeable for Common
      Stock.

     

    (A)           If
      the Company shall issue securities convertible into or exchangeable for Common
      Stock at a consideration per Common Stock receivable by the Company (determined
      as provided in subsection (xii) below) which is fixed:

     

    (1)           on
      or prior to the record date mentioned below and is less than the Current Market
      Price per Common Stock on such record date; or

     

    (2)           after
      the record date mentioned below and is less than the Current Market Price per
      share on the date the Company fixes the said consideration,

     

    then
      the
      Conversion Price in effect (in a case within (1) above) on the record date
      for
      the determination of shareholders entitled to receive such rights or (in a
      case
      within (2) above) on the date the Company fixes the said consideration shall
      be
      adjusted in accordance with the following formula:

     

    NCP
      = OCP
      x [(N+v)/(N+n)]

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    where:

     

    NCP
      and
      OCP have the meanings ascribed thereto in subsection (i) above (which may be
      further adjusted pursuant to the provisions of subsection (ii)
      above).

     

    N
      = the
      number of Common Stock outstanding (having regard to subsection (xiii) below)
      at
      the close of business in New York, New York (in a case within (1) above) on
      such
      record date or (in a case within (2) above) on the date the Company fixes the
      said consideration.

     

    n
      = the
      number of Common Stock to be initially issued upon conversion or exchange of
      such convertible or exchangeable securities at the said
      consideration.

     

    v
      = the
      number of Common Stock which the aggregate consideration receivable by the
      Company determined as provided in subsection (xii) below would purchase at
      such
      Current Market Price per Common Stock specified in (1) or, as the case may
      be,
      (2) above.

     

    (B)           Subject
      as provided below, such adjustment shall become effective immediately after
      the
      date the consideration for such Common Stock is received in full or (if later)
      immediately after the Company fixes the said consideration but retroactively
      to
      immediately after the record date mentioned above.

     

    (iv)           Issue
      of Options, Rights or Warrants.

     

    (A)           If
      the Company shall issue options, rights or warrants entitling holders of Common
      Stock to subscribe for or purchase Common Stock at a consideration per Common
      Stock receivable by the Company (determined as provided in subsection (xii)
      below) which is fixed:

     

    (1)           on
      or prior to the record date for the determination of shareholders entitled
      to
      receive such warrants or options and is less than the Current Market Price
      per
      Common Stock at such record date; or

     

    (2)           after
      the record date mentioned above and is less than the Current Market Price per
      Common Stock on the date the Company fixes the said consideration,

     

    then
      the
      Conversion Price in effect (in a case within (1) above) on the record date
      for
      the determination of shareholders entitled to receive such warrants or options
      or (in a case within (2) above) on the date the Company fixes the said
      consideration shall be adjusted in accordance with the following
      formula:

     

    NCP
      = OCP
      x [(N+v)/(N+n)]

     

    where:

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    NCP
      and
      OCP have the meanings ascribed thereto in subsection (i) above (which may be
      further adjusted pursuant to the provisions of subsection (ii)
      above).

     

    N
      = the
      number of Common Stock outstanding (having regard to subsection (xiii) below)
      at
      the close of business in New York, New York (in a case within (1) above) on
      such
      record date or (in a case within (2) above) on the date the Company fixes the
      said consideration.

     

    n
      = the
      number of Common Stock initially to be issued upon exercise of such warrants
      or
      options at the said consideration where no applications by shareholders entitled
      to such warrants or options are required.  Where applications by
      shareholders entitled to such warrants or options are required, n = the number
      of such Common Stock that equals (A) the number of warrants or options which
      underwriters have agreed to underwrite as referred to below or, as the case
      may
      be, (B) the number of warrants or options for which applications are received
      from shareholders as referred to below save to the extent already adjusted
      for
      under (A).

     

    v
      = the
      number of Common Stock which the aggregate consideration receivable by the
      Company (determined as provided in subsection (xii) below) would purchase at
      such Current Market Price per Common Stock specified in (1) or, as the case
      may
      be, (2) above.

     

    (B)           Subject
      as provided below, such adjustment shall become effective (A) where no
      applications for such warrants or options are required from shareholders
      entitled to the same, upon their issue and (B) where applications by
      shareholders entitled to the same are required as aforesaid, immediately after
      the latest date for the submission of such applications or (if later)
      immediately after the Company fixes the said consideration, but in all cases
      retroactively to immediately after the record date mentioned above.

     

    (C)           If,
      in connection with a grant, issue or offer to the holders of Common Stock of
      warrants or options entitling them to subscribe for or purchase Common Stock
      where applications by shareholders entitled to the same are required, any
      warrants or options which are not subscribed for or purchased by the
      shareholders entitled thereto are agreed to be underwritten by others prior
      to
      the latest date for the submission of applications for such warrants or options,
      an adjustment shall be made to the Conversion Price in accordance with the
      above
      provisions which shall become effective immediately after the date the
      underwriters agree to underwrite the same or (if later) immediately after the
      Company fixes the said consideration but retroactively to immediately after
      the
      record date mentioned above. If, in connection with a grant, issue or offer
      to
      the holders of Common Stock of warrants or options entitling them to subscribe
      for or purchase Common Stock where applications by shareholders entitled to
      the
      same are required, any warrants or options which are not subscribed for or
      purchased by the underwriters who have agreed to underwrite as referred to
      above
      or by the shareholders entitled thereto (or persons to whom shareholders have
      transferred the right to purchase such warrants) who have submitted applications
      for such warrants as referred to above are offered to and/or subscribed by
      others, no further adjustment shall be made to the Conversion Price by reason
      of
      such offer and/or subscription.

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    (v)           Issues
      of Options, Rights or Warrants for Equity-Related Securities.

     

    (A)           If
      the Company shall grant, issue or offer rights, options or warrants entitling
      holders of Common Stock to subscribe for or purchase any securities convertible
      into or exchangeable for Common Stock at a consideration per Common Stock
      receivable by the Company (determined as provided in subsection xii) below)
      which is fixed:

     

    (1)           on
      or prior to the record date mentioned below and is less than the Current Market
      Price per Common Stock at such record date; or

     

    (2)           after
      the record date mentioned below and is less than the Current Market Price per
      Common Stock on the date the Company fixes the said consideration,

     

    then
      the
      Conversion Price in effect (in a case within (1) above) on the record date
      for
      the determination of shareholders entitled to receive such rights or warrants
      or
      (in a case within (2) above) on the date the Company fixes the said
      consideration shall be adjusted in accordance with the following
      formula:

     

    NCP
      = OCP
      x [(N+v)/(N+n)]

     

    where:

     

    NCP
      and
      OCP have the meanings ascribed thereto in subsection (i) above (which may be
      further adjusted pursuant to the provisions of subsection (ii)
      above).

     

    N
      = the
      number of Common Stock outstanding (having regard to subsection (xiii) below)
      at
      the close of business in New York, New York (in a case within (1) above) on
      such
      record date or (in a case within (2) above) on the date the Company fixes the
      said consideration.

     

    n
      = the
      number of Common Stock initially to be issued upon exercise of such rights
      or
      warrants and conversion or exchange of such convertible or exchangeable
      securities at the said consideration which, in the case of rights, equals (A)
      the number of Common Stock initially to be issued upon conversion or exchange
      of
      the number of such convertible or exchangeable securities which the underwriters
      have agreed to underwrite as referred to below or, as the case may be, (B)
      the
      number of Common Stock initially to be issued upon conversion or exchange of
      the
      number of such convertible or exchangeable securities for which applications
      are
      received from shareholders as referred to below save to the extent already
      adjusted for under (A), and which, in the case of warrants where no applications
      by shareholders entitled to such warrants are required, equals such number
      of
      Common Stock initially to be issued upon such exercise and conversion or
      exchange.  Where applications by shareholders entitled to such
      warrants are required, n = the number of such Common Stock that equals (x)
      the
      number of warrants which underwriters have agreed to underwrite as referred
      to
      below or, as the case may be, (y) the number of warrants for which applications
      are received from shareholders as referred to below save to the extent already
      adjusted for under (x).

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    v
      = the
      number of Common Stock which the aggregate consideration receivable by the
      Company (determined as provided in subsection (xii) below) would purchase at
      such Current Market Price per Common Stock specified in (1) or, as the case
      may
      be, (2) above.

     

    (B)           Subject
      as provided below, such adjustment shall become effective (A) where no
      applications for such warrants are required from shareholders entitled to the
      same, upon their issue and (B) in the case of rights and where applications
      by
      shareholders entitled to the warrants are required as aforesaid, immediately
      after the latest date for the submission of applications or (if later)
      immediately after the Company fixes the said consideration, but in all cases
      retroactively to immediately after the record date mentioned above.

     

    (C)           If,
      in connection with a grant, issue or offer to the holders of Common Stock of
      rights or of warrants entitling them to subscribe for or purchase securities
      convertible into or exchangeable for Common Stock where applications by
      shareholders entitled to the same are required, any convertible or exchangeable
      securities or warrants which are not subscribed for or purchased by the
      shareholders entitled thereto are agreed to be underwritten by others prior
      to
      the latest date for the submission of applications for such convertible or
      exchangeable securities or warrants, an adjustment shall be made to the
      Conversion Price in accordance with the above provisions which shall become
      effective immediately after the date the underwriters agree to underwrite the
      same or (if later) immediately after the Company fixes the said consideration
      but retroactively to immediately after the record date mentioned above. If,
      in
      connection with a grant, issue or offer to the holders of Common Stock of rights
      or of warrants entitling them to subscribe for or purchase securities
      convertible into or exchangeable for Common Stock where applications by
      shareholders entitled to the same are required, any convertible or exchangeable
      securities or warrants which are not subscribed for or purchased by the
      underwriters who have agreed to underwrite as referred to above or by the
      shareholders entitled thereto (or persons to whom shareholders have transferred
      such rights or the right to purchase such warrants) who have submitted
      applications for such convertible or exchangeable securities or warrants as
      referred to above are offered to and/or subscribed by others, no further
      adjustment shall be made to the Conversion Price by reason of such offer and/or
      subscription.

     

    (vi)           Capital
      Distribution, Other Distributions to Common Stockholders.

     

    (A)           If
      the Company shall make any capital distribution or the distribution to the
      holders of Common Stock of evidences of indebtedness of the Company or of shares
      of capital stock of the Company (other than Common Stock) or of assets (other
      than regular annual and interim dividends in cash not constituting a capital
      distribution) or of options, rights or warrants to subscribe for or purchase
      shares (other than Common Stock) or securities (other than those mentioned
      in (iii), (iv) or (v) above):

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    NCP
      = OCP
      x [(CMP-fmv)/CMP]

     

    where:

     

    NCP
      and
      OCP have the meanings ascribed thereto in subsection (i) above (which may be
      further adjusted pursuant to the provisions of subsection (ii)
      above).

     

    CMP
      = the
      Current Market Price per Common Stock on the record date for the determination
      of shareholders entitled to receive such distribution.

     

    fmv
      = the
      amount of such distribution or the fair market value (as determined by the
      Company and notified to the Holder or, if pursuant to applicable law of the
      United States such determination is to be made by application to a court of
      competent jurisdiction, as determined by such court or by an appraiser appointed
      by such court) of the portion of the evidences of indebtedness, shares of
      capital stock, assets, rights or warrants so distributed applicable to one
      Common Stock, less any consideration payable for the same by the relevant
      stockholder.  In making a determination of the fair market value of
      any such evidences of indebtedness, shares of capital stock, assets, rights
      or
      warrants, the Company shall consult a leading independent securities company
      or
      bank or accounting firm selected by the Company and approved by the Holder
      (which approval shall not be unreasonably withheld, conditioned or delayed)
      and
      shall take fully into account the advice received from such company or bank
      or
      accounting firm.

     

    (B)           Such
      adjustment shall become effective immediately after the record date for the
      determination of shareholders entitled to receive such capital distribution
      or
      distribution, provided that (A) in the case of such a capital distribution
      or
      distribution which must, under applicable law of the United States, be submitted
      for approval to a meeting of shareholders of the Company or to competent
      regulatory authority before such capital distribution or distribution may
      legally be made and is so approved after the record date fixed for the
      determination of shareholders entitled to receive such capital distribution
      or
      distribution, such adjustment shall, immediately upon such approval being given
      by such meeting or such authority, become effective retroactively to immediately
      after such record date and (B) if the fair market value of the evidences of
      indebtedness, shares of capital stock, assets, rights or warrants so distributed
      cannot be determined until after the record date fixed for the determination
      of
      shareholders entitled to receive such distribution, such adjustment shall,
      immediately upon such fair market value being determined, become effective
      retroactively to immediately after such record date.

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (vii)          Issue
      of Convertible or Exchangeable Securities Generally.

     

    (A)           If
      the Company shall issue any securities convertible into or exchangeable for
      Common Stock (other than the Note, or in any of the circumstances described
      in
      subsection (v) above and subsection (ix) below) and the consideration per Common
      Stock receivable by the Company (determined as provided in subsection (xii)
      below) shall be less than the Current Market Price per Common Stock on the
      date
      in the United States on which the Company fixes the said consideration (or,
      if
      the issue of such securities is subject to approval by a meeting of
      shareholders, on the date on which the board of directors of the Company fixes
      the consideration to be recommended at such meeting), then the Conversion Price
      in effect immediately prior to the date of issue of such convertible or
      exchangeable securities shall be adjusted in accordance with the following
      formula:

     

    NCP
      = OCP
      x [(N+v)/(N+n)]

     

    where:

     

    NCP
      and
      OCP have the meanings ascribed thereto in subsection (i) above (which may be
      further adjusted pursuant to the provisions of subsection (ii)
      above).

     

    N
      = the
      number of Common Stock outstanding (having regard to subsection (xiii) below)
      at
      the close of business in New York, New York on the day immediately prior to
      the
      date of such issue.

     

    n
      = the
      number of Common Stock initially to be issued upon conversion or exchange of
      such convertible or exchangeable securities at the initial conversion or
      exchange price or rate.

     

    v
      = the
      number of Common Stock which the aggregate consideration receivable by the
      Company (determined as provided in subsection (xii) below) would purchase at
      such Current Market Price per Common Stock.

     

    (B)           Such
      adjustment shall become effective as of the calendar day in the United States
      corresponding to the calendar day at the place of issue on which such
      convertible or exchangeable securities are issued.

     

    (viii) 
        Other Issues of
      Common Stock.

     

    (A)           If
      the Company shall issue any Common Stock (other than Common Stock issued upon
      conversion or exchange of any convertible or exchangeable securities (including
      the Note) issued by the Company or upon exercise of any rights or warrants
      granted, offered or issued by the Company or in any of the circumstances
      described in subsection (i), (ii) or (iii) above or issued to shareholders
      of
      any company which merges with the Company in proportion to their shareholdings
      in such company immediately prior to such merger, upon such merger) for a
      consideration per Common Stock receivable by the Company (determined as provided
      in subsection (xii) below) less than the Current Market Price per Common Stock
      on the date in the United States on which the Company fixes the said
      consideration (or, if the issue of such Common Stock is subject to approval
      by a
      meeting of shareholders, on the date on which the Board of Directors of the
      Company fixes the consideration to be recommended at such meeting), then the
      Conversion Price in effect immediately prior to the issue of such additional
      Common Stock shall be adjusted in accordance with the following
      formula:

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    NCP
      =OCP
      x [(N+v)/(N+n)]

     

    where:

     

    NCP
      and
      OCP have the meanings ascribed thereto in subsection (i) above (which may be
      further adjusted pursuant to the provisions of subsection (ii)
      above).

     

    N
      = the
      number of Common Stock outstanding (having regard to subsection (xiii) below)
      at
      the close of business in New York, New York on the day immediately prior to
      the
      date of such issue.

     

    n
      = the
      number of additional Common Stock issued as aforesaid.

     

    v
      = the
      number of Common Stock which the aggregate consideration receivable by the
      Company (determined as provided in subsection (xii) below) would purchase at
      such Current Market Price per Common Stock.

     

    (B)           Such
      adjustment shall become effective as of the calendar day in the United States
      corresponding to the calendar day at the place of issue on which such additional
      Common Stock are issued.

     

    (ix)           Issue
      of Equity Related Securities.

     

    (A)           If
      the Company shall grant, issue or offer options, rights or warrants to subscribe
      for or purchase Common Stock or securities convertible into or exchangeable
      for
      Common Stock and the consideration per Common Stock receivable by the Company
      (determined as provided in subsection (xii) below) shall be less than the
      Current Market Price per Common Stock on the date in the United States on which
      the Company fixes the said consideration (or, if the offer, grant or issue
      of
      such rights, options or warrants is subject to approval by a meeting of
      shareholders, on the date on which the board of directors of the Company fixes
      the consideration to be recommended at such meeting), then the Conversion Price
      in effect immediately prior to the date of the offer, grant or issue of such
      options, rights or warrants shall be adjusted in accordance with the following
      formula:

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    NCP
      = OCP
      x [(N+v)/(N+n)]

     

    where:

     

    NCP
      and
      OCP have the meanings ascribed thereto in subsection (i) above (which may be
      further adjusted pursuant to the provisions of subsection (ii)
      above).

     

    N
      = the
      number of Common Stock outstanding (having regard to subsection (xiii) below)
      at
      the close of business in New York, New York on the day immediately prior to
      the
      date of such issue.

     

    n
      = the
      number of Common Stock initially to be issued on exercise of such options,
      rights or warrants and (if applicable) conversion or exchange of such
      convertible or exchangeable securities.

     

    v
      = the
      number of Common Stock which the aggregate consideration receivable by the
      Company (determined as provided in subsection (xii) below) would purchase at
      such Current Market Price per Common Stock.

     

    (B)           Such
      adjustment shall become effective as of the calendar day in the United States
      corresponding to the calendar day at the place of issue on which such rights
      or
      warrants are issued.

     

    (x)           Analogous
      Events.

     

    If
      the
      Company determines that any other event or circumstance has occurred which
      has
      or would have an effect on the position of the Holder compared with the position
      of the holders of all the securities (and options and rights relating thereto)
      of the Company, taken as a class which is analogous to any of the events
      referred to in subsections (i) through (ix), then, in any such case, the Company
      will notify the Holder in writing thereof as soon as practicable and the Company
      will consult with a leading independent securities company or commercial bank
      or
      accounting firm selected by the Company as to what adjustment, if any, should
      be
      made to the Conversion Price to preserve the value of the Conversion Right
      of
      the Holder and will make any such adjustment.

     

    (xi)           Simultaneous
      Issues of Different Classes of Common Stock.

     

    In
      the
      event of simultaneous issues of two or more classes of share capital comprising
      Common Stock or rights or warrants in respect of, or securities convertible
      into
      or exchangeable for, two or more classes of share capital comprising Common
      Stock, then, for the purposes of this Section 4(e), the
      formula:

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    NCP
      = OCP
      x [(N+v)/(N+n)] shall be restated as NCP = OCP x
      [(N+v1+v2+v3)/(N+n1+n2+n3)]

     

    Where:

     

    v1
      and n1
      shall have the same meanings as “v” and “n” but by reference to one class of
      Common Stock.

     

    v2
      and n2
      shall have the same meanings as “v” and “n” but by reference to a second class
      of Common Stock.

     

    v3
      and n3
      shall have the same meanings as “v” and “n” but by reference to a third class of
      Common Stock and so on.

     

    (xii)          Consideration
      Receivable by the Company.

     

    For
      the
      purposes of any calculation of the consideration receivable by the Company
      pursuant to this Section 4(e), the following provisions shall be
      applicable:

     

    (A)           in
      the case of an issue of Common Stock for cash, the consideration shall be the
      amount of such cash, provided that in no such case shall any deduction be made
      for any commissions or any expenses paid or incurred by the Company for any
      underwriting of the issue or otherwise in connection therewith;

     

    (B)           in
      the case of an issue of Common Stock for a consideration in whole or in part
      other than cash, the consideration other than cash shall be deemed to be the
      fair value thereof as determined by the Company (and in making such
      determination the Company will consult a leading independent securities company
      or bank or accounting firm selected by the Company and approved by (which
      approval shall not be unreasonably withheld, conditioned or delayed) the Holder
      and will take fully into account the advice received from such company or bank
      or accounting firm) or, if pursuant to applicable law of the United States
      or
      any state thereof, such determination is to be made by application to a court
      of
      competent jurisdiction, as determined by such court or an appraiser appointed
      by
      such court, irrespective of the accounting treatment thereof;

     

    (C)           in
      the case of an issue (whether initially or upon the exercise of rights or
      warrants) of securities convertible into or exchangeable for Common Stock,
      the
      aggregate consideration receivable by the Company shall be deemed to be the
      consideration received by the Company for such securities and (if applicable)
      rights or warrants plus the additional consideration, if any, to be received
      by
      the Company upon (and assuming) the conversion or exchange of such securities
      at
      the initial conversion or exchange price or rate and (if applicable) the
      exercise of such rights or warrants at the initial subscription or purchase
      price (the consideration in each case to be determined in the same manner as
      provided in paragraphs (A) and (B) above) and the consideration per Common
      Stock
      receivable by the Company shall be such aggregate consideration divided by
      the
      number of Common Stock to be issued upon (and assuming) such conversion or
      exchange at the initial conversion or exchange price or rate and (if applicable)
      the exercise of such rights or warrants at the initial subscription or purchase
      price;

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    (D)           in
      the case of an issue of rights or warrants to subscribe for or purchase Common
      Stock, the aggregate consideration receivable by the Company shall be deemed
      to
      be the consideration received by the Company for any such rights or warrants
      plus the additional consideration to be received by the Company upon (and
      assuming) the exercise of such rights or warrants at the initial subscription
      or
      purchase price (the consideration in each case to be determined in the same
      manner as provided in paragraphs (A) and (B) above) and the consideration per
      Common Stock receivable by the Company shall be such aggregate consideration
      divided by the number of Common Stock to be issued upon (and assuming) the
      exercise of such rights or warrants at the initial subscription or purchase
      price;

     

    (E)           if
      any of the consideration referred to in any of the preceding paragraphs of
      this
      subsection (xii) is receivable in a currency other than US Dollars, such
      consideration shall, in any case where there is a fixed rate of exchange between
      the US Dollar and the relevant currency for the purposes of the issue of the
      Common Stock, the conversion or exchange of such securities or the exercise
      of
      such rights or warrants, be translated into US Dollars for the purposes of
      this
      subsection (xii) at such fixed rate of exchange and shall, in all other cases,
      be translated into US Dollars at the mean of the exchange rate quotations by
      a
      leading bank in the United States for buying and selling spot units of the
      relevant currency by telegraphic transfer against US Dollars on the date as
      of
      which the said consideration is required to be calculated as
      aforesaid;

     

    (F)           in
      the case of the issue of Common Stock to employees under any employee bonus
      or
      profit sharing arrangements where the Common Stock are credited as fully paid
      out of retained earnings at their par value and the Company would otherwise
      have
      been required to pay to those employees the cash equivalent of the aggregate
      par
      value of the number of Common Stock so issued had such Common Stock not been
      so
      issued, the aggregate consideration receivable per Common Stock by the Company
      shall be deemed to be the par value of such issued Common Stock;
      and

     

    (G)           in
      the case of the issue of Common Stock credited as fully paid out of retained
      earnings or capitalization or reserves at their par value, the aggregate
      consideration receivable by the Company shall be deemed to be zero (and
      accordingly the number of Common Stock which such aggregate consideration
      receivable by the Company could purchase at the relevant Current Market Price
      per Common Stock shall also be deemed to be zero).

     

    (xiii) 
        Cumulative
      Adjustments.

     

    If,
      at
      the time of computing an adjustment (the “later adjustment”) of
      the Conversion Price pursuant to any of subsections (iii), (iv) and (v) above,
      the Conversion Price already incorporates an adjustment (the “earlier
      adjustment”) made (or taken or to be taken into account pursuant to the
      proviso to subsection (xiv) below) to reflect an issue of Common Stock or of
      securities convertible into or exchangeable for Common Stock or of rights or
      warrants to subscribe for or purchase Common Stock or securities, to the extent
      that the number of such Common Stock or securities taken into account for the
      purposes of calculating the earlier adjustment exceeds the number of such Common
      Stock in issue at the time relevant for ascertaining the number of outstanding
      Common Stock for the purposes of computing the later adjustment, such excess
      Common Stock shall be deemed to be outstanding for the purposes of making such
      computation.

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    (xiv)   Reference
      to
“fix”.

     

    Any
      reference herein to the date on which a consideration is
“fixed” shall, where the consideration is originally expressed
      by reference to a formula which cannot be expressed as an actual cash amount
      until a later date, be construed as a reference to the first day on which such
      actual cash amount can be ascertained.

     

    (xv)           Fractions.

     

    All
      fractions used in relation to the calculation of any adjustment of the
      Conversion Price set forth in this Section 4(e) shall be calculated to six
      decimal places; provided that, where there are two such nearest decimal points
      the fraction shall be rounded upwards to the higher decimal point.

     

    (f)           Exempted
      Issuances.  Notwithstanding any other provision of Section 4(e),
      no adjustment shall be made pursuant to Section 4(e) for Exempted
      Issuances.  “Exempted Issuances” means (I) shares of
      Common Stock issued or deemed to be issued by the Company upon the conversion,
      exchange or exercise of any option, obligation or security outstanding on the
      date prior to the Warrant Date and set forth in Schedule 3.3 to the Securities
      Purchase Agreement, provided that the terms of such option, obligation or
      security are not amended or otherwise modified on or after the date of the
      Securities Purchase Agreement, and provided that the conversion price, exchange
      price, exercise price or other purchase price is not reduced, adjusted or
      otherwise modified and the number of shares of Common Stock issued or issuable
      is not increased (whether by operation of, or in accordance with, the relevant
      governing documents or otherwise) on or after the date of the Securities
      Purchase Agreement; and (II) shares of Common Stock issued or deemed to be
      issued by the Company upon exercise of the Warrants or upon conversion of the
      Notes.

     

    (g)           Notices.  Promptly
      upon, but in no event later than two Business Days after, any adjustment of
      the
      Conversion Price, the Company will give written notice thereof to the Holder,
      setting forth in reasonable detail, and certifying, the calculation of such
      adjustment; provided, however, that neither the timing of giving any such
      notice, nor any failure by the Company to give such notice, shall effect any
      such adjustment on the effective date thereof.  The Company will give
      written notice to the Holder at least 10 Business Days prior to the date on
      which the Company closes its books or takes a record (I) with respect to any
      dividend or distribution upon the Common Stock, (II) with respect to any pro
      rata subscription offer to holders of Common Stock or (III) for determining
      rights to vote with respect to any Organic Change (as defined in Section 2),
      dissolution or liquidation, provided that such information shall be made known
      to the public prior to or in conjunction with such notice being provided to
      the
      Holder.  The Company will also give written notice to the Holder at
      least 10 Business Days prior to the date on which any Organic Change,
      dissolution or liquidation will take place, provided that such information
      shall
      be made known to the public prior to or in conjunction with such notice being
      provided to the Holder.

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    (h)           Timing
      of Adjustments.  The adjustments required pursuant to Section 4(e)
      shall be made (i) no less than once per year (on the date of, or immediately
      after, the filing of the Company’s audited financial statements) and (ii) on
      each date on which the Note is converted.

     

    (5)           Reorganization,
      Reclassification, Consolidation, Merger or Sale.  Any
      recapitalization, reorganization, reclassification, consolidation, merger,
      sale
      of all or substantially all of the Company’s assets to another Person or other
      transaction that is effected in such a way that holders of Common Stock are
      entitled to receive (either directly or upon subsequent liquidation) stock,
      securities or assets with respect to or in exchange for Common Stock is referred
      to herein as “Organic Change.”  Prior to the
      consummation of any Organic Change, the Company shall make appropriate provision
      (in form and substance satisfactory to the holder of this Note), to ensure
      that
      each holder of this Note will thereafter have the right to acquire and receive,
      in lieu of or in addition to (as the case may be) the shares of Common Stock
      otherwise issuable upon such holder’s exercise of its conversion rights under
      this Note (without regard to any limitations on exercise), the kind and amount
      of shares of stock, securities or assets that would have been issued or payable
      in such Organic Change with respect to or in exchange for the number of shares
      of Common Stock such holder would have received or become entitled to receive
      (upon its exercise of the conversion rights under this Note) as of the date
      of
      such Organic Change (without taking into account any limitations or restrictions
      on the exerciseability of any such Note).

     

    (6)           Company
      Alternative Redemption.

     

    (a)           General.  At
      any time after the six-month anniversary of the Issuance Date, the Company
      shall
      have the right to redeem some or all of the Principal (a “Company Alternative
      Redemption”) by payment to the Holder of an amount in cash equal to the sum of
      (i) the outstanding Principal being redeemed pursuant to this Section 6, (ii)
      the Interest Amount with respect to such Principal as of the Company Alternative
      Redemption Date (as defined below) and (iii) 2.50% of such Principal (the
“Company Alternative Redemption Price”); provided that the
      conditions of this Section 6(a) and Section 6(b) are satisfied (or waived in
      writing by the Holder).  The Company may exercise its right to Company
      Alternative Redemption by delivering to the Holder written notice (the
“Company Alternative Redemption Notice”) at least 10 Trading
      Days prior to the date of consummation of such redemption (“Company
      Alternative Redemption Date”).  The date on which the Holder
      receives the Company Alternative Redemption Notice is referred to as the
“Company Alternative Redemption Notice Date.”  The
      Company Alternative Redemption Notice shall state (i) the date selected by
      the
      Company for the Company Alternative Redemption Date in accordance with this
      Section 6(a) and (ii) the aggregate Principal that the Company has elected
      to
      redeem pursuant to this Section 6.  Any Company Alternative Redemption
      shall be applied to Principal.

     

    (b)           Mechanics
      of Company Alternative Redemption.  If the Company has exercised
      its right to Company Alternative Redemption in accordance with Section 6(a)
      and
      the conditions of this Section 6 are satisfied on the Company Alternative
      Redemption Date (or waived in writing by the Holder), then the Redemption
      Amount, if any, that remains outstanding on the Company Alternative Redemption
      Date shall be redeemed by the Company on such Company Alternative Redemption
      Date by the payment by the Company to the Holder on such Company Alternative
      Redemption Date, by wire transfer of immediately available funds, of an amount
      equal to the Company Alternative Redemption Price for the Redemption
      Amount.  Notwithstanding anything contained herein to the contrary, if
      the Holder delivers a Conversion Notice after a Company Alternative Redemption
      Notice Date, but prior to the Company Alternative Redemption Date, then the
      Conversion Amount specified in such Conversion Notice shall be deducted (1)
      first, from the Redemption Amount, and then (2) second, from the Principal
      balance.  In the event that all of the Redemption Amount is converted
      prior to the Company Alternative Redemption Date, then the Company Alternative
      Redemption Notice shall be of no further effect.

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    (7)           Reservation
      of Shares.

     

    (a)           Reservation.  The
      Company shall, so long as this Note is outstanding, take all action necessary
      to
      reserve and keep available out of its authorized and unissued Common Stock,
      solely for the purpose of effecting the conversion of this Note, such number
      of
      Shares as shall from time to time be sufficient to effect the conversion of
      all
      of the principal amount then outstanding under this Note (together with accrued
      and unpaid Interest thereon)(the “Required Reserve
      Amount”).

     

    (b)           Insufficient
      Authorized Shares.  If at any time while this Note remains
      outstanding the Company does not have a sufficient number of authorized and
      unreserved Shares to satisfy its obligation to reserve for issuance upon
      conversion of the Note at least a number of Shares equal to the Required Reserve
      Amount, then the Company shall within a reasonable time take all action
      necessary to increase the Company’s authorized Shares to an amount sufficient to
      allow the Company to reserve the Required Reserve Amount for the Note then
      outstanding.

     

    (8)           Voting
      Rights.  The Holder shall have no voting rights with respect to
      the Shares underlying the Note, except as required by law.

     

    (9)           Defaults
      and Remedies.

     

    (a)           Events
      of Default.  An “Event of Default” shall mean any
      of:

     

    (i)           default
      in payment of any Principal under this Note or any other Note when and as
      due;

     

    (ii)           default
      in payment of any Interest or other amount due on this Note or any other Note
      that is not included in an amount described in the immediately preceding clause
      (i) that is not cured within five (5) Business Days from the date such Interest
      or other amount was due;

     

    (iii)           failure
      by the Company for thirty (30) days to comply with any other provision of this
      Note in all material respects;

     

    (iv)           any
      default in payment under any Indebtedness (other than as specified in clause
      (ii) of this Section 9) with a principal balance of at least $250,000,
      individually or in the aggregate, or acceleration prior to maturity of, or
      any
      event or circumstances arising such that, any Person is entitled, or could,
      with
      the giving of notice and/or lapse of time and/or the fulfillment of any
      condition and/or the making of any determination, become entitled, to require
      repayment before its stated maturity of, or to take any step to enforce any
      security for, any mortgage, indenture or instrument under which there may be
      issued or by which there may be secured or evidenced any Indebtedness with
      a
      principal balance of at least $250,000 by the Company or any of its
      Subsidiaries, or for Indebtedness with a principal balance of at least $250,000
      which is guaranteed by the Company or any of its Subsidiaries, whether such
      Indebtedness or guarantee now exists or shall be created
      hereafter;

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    (v)           the
      Company or any of its Subsidiaries pursuant to or within the meaning of any
      Bankruptcy Law (as defined below) (A) commences a voluntary case or applies
      for
      a receiving order; (B) consents to the entry of an order for relief against
      it
      in an involuntary case or consents to any involuntary application for a
      receiving order; (C) consents to the appointment of a Custodian of it or any
      of
      its Subsidiaries for all or substantially all of its property; (D) makes a
      general assignment for the benefit of its creditors; or (E) admits in writing
      that it is generally unable to pay its debts as the same become
      due;

     

    (vi)           an
      involuntary case or other proceeding is commenced against the Company or any
      of
      its Subsidiaries seeking liquidation, reorganization or other relief with
      respect to it or its Indebtedness under any Bankruptcy Law now or hereafter
      in
      effect or seeking the appointment of a trustee, receiver, liquidator, custodian
      or other similar official of it or any substantial part of its property, and
      such involuntary case or other Bankruptcy Law proceeding remains undismissed
      and
      unstayed for a period of sixty (60) days, or an order of relief is entered
      against the Company or any of its Subsidiaries as debtor under the Bankruptcy
      Laws as are now or hereafter in effect;

     

    (vii)          the
      Company or any of its Subsidiaries breaches any covenant or other term or
      condition of the Securities Purchase Agreement, the Registration Rights
      Agreement, the Warrant, this Note, the Security Documents, or any of the other
      Transaction Documents and such breach continues beyond any applicable grace
      period;

     

    (viii)         one
      or more judgments, non-interlocutory orders or decrees shall be entered by
      a
      U.S. state or federal or a foreign court or administrative agency of competent
      jurisdiction against the Company or any of its Subsidiaries involving, in the
      aggregate, liability (to the extent not covered by independent third-party
      insurance for which the insurance carrier has acknowledged liability) as to
      any
      single or related series of transactions, incidents or conditions, of $250,000
      or more, and the same shall remain unsatisfied, unvacated, unbonded or unstayed
      pending appeal for a period of sixty (60) days after the entry
      thereof;

     

    (ix)           there
      shall occur a Change of Control;

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    (x)           
      any representation, warranty, certification or statement made by the Company
      or
      any of its Subsidiaries in the Securities Purchase Agreement, the Registration
      Rights Agreement, the Warrant, this Note, the Security Documents or any other
      Transaction Documents or in any certificate, financial statement or other
      document delivered pursuant to any such Transaction Document is incorrect in
      any
      material respect when made (or deemed made);

     

    (xi)           any
      Lien created by any of the Security Documents shall at any time fail to
      constitute a valid and perfected Lien on any material portion of the collateral
      purported to be secured thereby, subject to no prior or equal Lien except
      Permitted Liens, or the Company or any of its Subsidiaries shall so
      assert,

     

    (xii)          the
      Company fails to file, or is determined to have failed to file any Periodic
      Report or Current Report  when required to be filed with the
      SEC;

     

    (xiii)         the
      Common Stock is not traded on the OTC Bulletin Board or listed on a national
      securities exchange, or if the Common Stock has been listed on a national
      securities exchange, the trading of the Common Stock on such exchange or market
      is terminated or suspended for a period of five consecutive Trading Days or
      for
      more than an aggregate of 20 Trading Days in any 365-day period;

     

    (xiv)         the
      Company’s or the Transfer Agent’s notice to any holder of this Note, including
      by way of public announcement, at any time, of its intention not to comply
      with
      a request for conversion of this Note into Shares that is tendered in accordance
      with the provisions of the Note (excluding, however, a notice that relates
      solely to a bona fide dispute that is subject to and being resolved pursuant
      to,
      and in compliance with the time periods and other provisions of the dispute
      resolution provisions of Section 4(c)(iii), provided neither such dispute nor
      such notice is publicly disclosed);

     

    (xv)         
      there shall occur a Conversion Failure;

     

    (xvi)        
      upon the Company’s receipt or deemed receipt of a Conversion Notice, the Company
      not being obligated to issue Shares upon such conversion due to the provisions
      of Section 4;

     

    (xvii)       the
      Company or any of its Subsidiaries breaches any representation, warranty,
      covenant or other term or condition of the Securities Purchase Agreement, the
      Registration Rights Agreement, the Warrant, this Note, the Security Documents
      or
      any other agreement, document, certificate or other instrument delivered in
      connection with the transactions contemplated thereby and hereby, and except,
      in
      the case of a breach of a covenant or other term that is curable, only if such
      breach continues for a period of at least 20 days or such other cure period
      as
      may be provided therein; or

     

    The
      term
“Bankruptcy Law” means Title 11, U.S. Code, or any similar U.S.
      federal or state law or law of any applicable foreign government or political
      subdivision thereof for the relief of debtors.  The term
“Custodian” means any receiver, trustee, assignee, liquidator
      or similar official under any Bankruptcy Law.

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    (b)           Remedies.  Within
      three (3) Business Days after the occurrence of an Event of Default, the Company
      shall deliver written notice thereof via facsimile and overnight courier
      (“Notice of Event of Default”) to the Holder.  During
      the continuation of an Event of Default, at the Holder’s option, interest shall
      accrue at the lesser of (i) the maximum rate of interest allowed by applicable
      law and (ii) the rate 18% per annum (prorated for partial months), based on
      actual days elapsed and a 365 day year, until such Event of Default shall have
      been cured or waived in writing.  If an Event of Default occurs and is
      continuing, the Holder shall have the right, at the Holder’s option by delivery
      of written notice (“Notice of Redemption on Event of Default”)
      to the Company, to require the Company to redeem all or a portion of the
      Principal at a price (“Redemption Price”) equal to the greater
      of (i) the sum of (x) 125% of such Principal plus (y) all accrued and unpaid
      Interest with respect to such Principal and (ii) the product of (A) the
      Conversion Rate in effect at such time as the Holder delivers a Notice of
      Redemption at Option of Holder (as defined below), multiplied by (B) the
      Weighted Average Price of the Common Stock on the Trading Day immediately
      preceding such Event of Default; provided, however, that in the case of an
      Event
      of Default arising from events described in clauses (v) and (vi) of Section
      9(a)
      above, all amounts due hereunder shall immediately become due and payable
      without further action or notice.  Nothing in this Section 9 shall
      limit any other rights the Holder may have under this Note, the Security
      Documents or the other Transaction Documents.

     

    (c)           Void
      Optional Redemption.  In the event that the Company does not pay
      the Redemption Price within five Business Days of receipt of a Notice of
      Redemption on Event of Default, at any time thereafter and until the Company
      pays such unpaid Redemption Price in full, the Holder shall have the option
      to,
      in lieu of redemption, require the Company to promptly return this Note (to
      the
      extent this Note has been previously delivered to the Company), in whole or
      any
      portion thereof, to the Holder, by sending written notice thereof to the Company
      via facsimile (the “Void Optional Redemption
      Notice”).  Upon the Company’s receipt of such Void Optional
      Redemption Notice, (i) the acceleration pursuant to Section 9(b) shall be
      null and void with respect to the portion of this Note subject to such Void
      Optional Redemption Notice, (ii) the Company shall promptly return the portion
      of this Note (to the extent this Note has been previously delivered to the
      Company) subject to such Void Optional Redemption Notice, and (iii) the
      Conversion Price with respect to all of the Principal shall be adjusted to
      the
      lesser of (A) the Conversion Price as in effect on the date on which the Void
      Optional Redemption Notice is delivered to the Company and (B) the lowest
      Weighted Average Price of the Common Stock during the period beginning on and
      including the date on which this Note became due under Section 9(b) and ending
      on and including the date on which the Void Optional Redemption Notice is
      delivered to the Company.

     

    (10)           Change
      in the Terms of the Note.  The written consent of the Company and
      the Holder shall be required in order to effect any amendment, waiver or other
      modification of this Note.

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    (11)           Lost
      or Stolen Note.  Upon receipt by the Company of evidence
      reasonably satisfactory to the Company of the loss, theft, destruction or
      mutilation of this Note, and, in the case of loss, theft or destruction, of
      an
      indemnification undertaking by the Holder to the Company in customary form
      and
      reasonably satisfactory to the Company and, in the case of mutilation, upon
      surrender and cancellation of this Note, the Company shall execute and deliver
      a
      new Note of like tenor and date; provided, however, the Company shall not be
      obligated to re-issue a Note if the Holder contemporaneously requests the
      Company to convert this Note in its entirety into Shares as permitted
      hereunder.

     

    (12)           Remedies,
      Characterizations, Other Obligations, Breaches and Injunctive
      Relief.  The remedies provided in this Note shall be cumulative
      and in addition to all other remedies available under the Securities Purchase
      Agreement and the other Security Documents, and Transaction Documents, at law
      or
      in equity (including a decree of specific performance and/or other injunctive
      relief), and no remedy contained herein shall be deemed a waiver of compliance
      with the provisions giving rise to such remedy, and nothing herein shall limit
      the Holder’s right to pursue actual damages for any failure by the Company to
      comply with the terms of this Note.  The Company covenants to the
      Holder that there shall be no characterization concerning this instrument other
      than as expressly provided herein.  Amounts set forth or provided for
      herein with respect to payments, conversion and the like (and the computation
      thereof) shall be the amounts to be received by the Holder and shall not, except
      as expressly provided herein, be subject to any other obligation of the Company
      (or the performance thereof).  The Company acknowledges that a breach
      by it of its obligations hereunder will cause irreparable harm to the Holder
      and
      that the remedy at law for any such breach may be inadequate.  The
      Company therefore agrees that, in the event of any such breach or threatened
      breach, the Holder shall be entitled, in addition to all other available
      remedies, to an injunction restraining any breach, without the necessity of
      showing economic loss and without any bond or other security being
      required.

     

    (13)           Specific
      Shall Not Limit General; Construction.  No specific provision
      contained in this Note shall limit or modify any more general provision
      contained herein.  This Note shall be deemed to be jointly drafted by
      the parties to the Securities Purchase Agreement and shall not be construed
      against any Person as the drafter hereof.

     

    (14)           Failure
      or Indulgence Not Waiver.  No failure or delay on the part of the
      Holder in the exercise of any power, right or privilege hereunder shall operate
      as a waiver thereof, nor shall any single or partial exercise of any such power,
      right or privilege preclude other or further exercise thereof or of any other
      right, power or privilege.

     

    (15)           Notice.  Whenever
      notice is required to be given under this Note, unless otherwise provided
      herein, such notice shall be given in accordance with Section
      9(f) of the Securities Purchase Agreement.

     

    (16)           Transfer
      of this Note.  The Holder may assign or transfer some or all of
      its rights hereunder, subject to compliance with applicable Securities Laws
      (if
      applicable) and the provisions of the Securities Purchase Agreement without
      the
      consent of the Company.  Notwithstanding anything to the contrary
      contained in this Section 16, each such assignee or transferee, upon becoming
      a
      Holder hereunder, acknowledges that it is bound by the terms and conditions
      of
      Section 5.12 of the Security Agreement and agrees to, promptly upon the request
      of the Collateral Agent, deliver to Collateral Agent a written Joinder to the
      Security Agreement and other Security Documents.

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    (17)           Payment
      of Collection, Enforcement and Other Costs.  Without limiting the
      provisions of the Securities Purchase Agreement and the other Transaction
      Documents, if (a) this Note is placed in the hands of an attorney for collection
      or enforcement or is collected or enforced through any legal proceeding; or
      (b)
      an attorney is retained to represent the Holder in any bankruptcy,
      reorganization, receivership of the Company or other proceedings affecting
      Company creditors’ rights and involving a claim under this Note, then the
      Company shall pay the costs incurred by the Holder for such collection,
      enforcement or action, including reasonable attorneys’ fees and disbursements of
      outside counsel based on actual time billed at customary rates.

     

    (18)           Cancellation.  After
      all principal and other amounts at any time owed under this Note have been
      paid
      in full or converted into Shares in accordance with the terms hereof, this
      Note
      shall automatically be deemed canceled, shall be surrendered to the Company
      for
      cancellation and shall not be reissued.

     

    (19)           Note
      Exchangeable for Different Denominations.  Subject to
      Section 3(b), in the event of a conversion, a Company Alternative
      Redemption or a mandatory or scheduled payment of less than all of the Principal
      pursuant to the terms hereof, the Company shall, upon the request of Holder
      and
      tender of this Note promptly cause to be issued and delivered to the Holder,
      a
      new Note of like tenor representing the remaining Principal that has not been
      so
      converted or repaid.  This Note is exchangeable, upon the surrender
      hereof by the Holder at the principal office of the Company, for a new Note
      or
      Notes containing the same terms and conditions and representing in the aggregate
      the Principal, and each such new Note will represent such portion of such
      Principal as is designated by the Holder at the time of such
      surrender.  The date the Company initially issued this Note shall be
      the “Issuance Date” hereof regardless of the number of times a new Note shall be
      issued.

     

    (20)           
      [Intentionally Omitted]

     

    (21)           Waiver
      of Notice.  To the extent permitted by law, the Company hereby
      waives demand, notice, protest and all other demands and notices in connection
      with the delivery, acceptance, performance, default or enforcement of this
      Note,
      the Security Documents, the Securities Purchase Agreement and the other
      Transaction Documents.

     

    (22)           Governing
      Law.  This Note shall be construed and enforced in accordance
      with, and all questions concerning the construction, validity, interpretation
      and performance of this Note shall be governed by, the internal laws of the
      State of New York, without giving effect to any choice of law or conflict of
      law
      provision or rule (whether of the State of New York or any other country or
      jurisdiction) that would cause the application of the laws of any jurisdiction
      or country other than the State 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), New York, for
      the
      adjudication of any dispute hereunder or in connection herewith or with any
      transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any suit, action or proceeding, any claim
      that it is not personally subject to the jurisdiction of any such court, that
      such suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of such suit, action or proceeding is improper.  Each party
      hereby irrevocably waives personal service of process and consents to process
      being served in any such suit, action or proceeding by mailing a copy thereof
      to
      such party at the address for such notices to it under this Note and agrees
      that
      such service shall constitute good and sufficient service of process and notice
      thereof.  Nothing contained herein shall be deemed to limit in any way
      any right to serve process in any manner permitted by law.  EACH PARTY
      HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,
      A
      JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
      HEREWITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
      HEREBY.

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    (23)           Effect
      of Redemption or Conversion.  Upon payment of the Company
      Alternative Redemption Price in accordance with the terms hereof with respect
      to
      any portion of the Principal of this Note, or delivery of Shares upon conversion
      of any portion of the Principal in accordance with the terms hereof, such
      portion of the Principal of this Note shall be deemed paid in full and shall
      no
      longer be deemed outstanding for any purpose.

     

    (24)           Further
      Assurances.  The Company shall do and perform, or cause to be done
      and performed, all such further acts and things, and shall execute and deliver
      all such other agreements, certificates, instruments and documents, as the
      Holder may reasonably request in order to carry out the intent and accomplish
      the purposes of this Note and the consummation of the transactions contemplated
      hereby.

     

    (25)           Payment
      Set Aside.  To the extent that the Company makes a payment or
      payments to the Holder hereunder or the Holder enforces or exercises its rights
      hereunder, 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, by a
      trustee, receiver or any other person under any law (including any Bankruptcy
      Law, U.S. state or federal law, the laws of any foreign government or any
      political subdivision thereof, 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.

     

    (26)           Interpretative
      Matters.  Unless the context otherwise requires, (a) all
      references to Sections, Schedules or Exhibits are to Sections, Schedules or
      Exhibits contained in or attached to this Note, (b) words in the singular or
      plural include the singular and plural and pronouns stated in either the
      masculine, the feminine or neuter gender shall include the masculine, feminine
      and neuter and (d) the use of the word “including” in this Note shall be by way
      of example rather than limitation.

     

    (27)           Signatures.  In
      the event that any signature to this Note or any amendment hereto is delivered
      by facsimile transmission or by e-mail delivery of a “.pdf” format data file,
      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 or “.pdf” signature page were an original
      thereof.  Notwithstanding the foregoing, the Company shall be required
      to deliver an originally executed Note to the Holder.  At the request
      of any party each other party shall promptly re-execute an original form of
      this
      Note or any amendment hereto and deliver the same to the other
      party.  No party hereto shall raise the use of a facsimile machine or
      e-mail delivery of a “.pdf” format data file to deliver a signature to this Note
      or any amendment hereto or the fact that such signature was transmitted or
      communicated through the use of a facsimile machine or e-mail delivery of a
      “.pdf” format data file as a defense to the formation or enforceability of a
      contract and each party hereto forever waives any such defense.

     

     [
      Remainder of Page Intentionally Left Blank; Signature Page Follows
      ]

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Note to be executed on its
      behalf by the undersigned as of the year and date first above
      written.

    

     

    
      	 	
              GULF
                WESTERN PETROLEUM CORPORATION

            
	 	 	 	 
	 	
              By:

            	
              /s/  Wm
                M. Cox

            	 
	 	
              Name: 
                

            	
              William
                M. Cox

            	 
	 	
              Title:

            	
              Chairman
                - CEO

            	 

    

     

     

    Signature
      Page to Metage Promissory Note

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    GULF
      WESTERN PETROLEUM CORPORATION

    CONVERSION
      NOTICE

    

    Reference
      is made to the Senior Secured Convertible Note (the “Note”) of
GULF WESTERN PETROLEUM CORPORATION, a Nevada corporation (the
“Company”), in the original principal
      amount of
      $3,200,000.  In accordance with and pursuant to the Note, the
      undersigned hereby elects to convert the Conversion Amount (as defined in the
      Note) of the Note indicated below into Shares of Common Stock, par value $0.001
      per share (the “Common Stock”), of the Company, as of the date
      specified below.

     

    Date
      of
      Conversion:_________

     

    Aggregate
      Conversion Amount to be converted
      :__________________________

     

    Principal,
      applicable thereto, to be converted:
      _____________________________

     

    Please
      confirm the number of shares of Common Stock to be issued:
      ___________________________

     

    Please
      issue the Common Stock into which the Note is being converted in the following
      name and to the following address:

     

    Issue
      to:___________________________________________________________

     

    Facsimile
      Number:___________________________________________________

     

    Authorization:_________________________

     

    By:___________________________

     

    Title:__________________________

     

    Dated:_______________________________

     

    DTC
      Participant Number and Name (if electronic book entry
      transfer):______________

     

    Account
      Number  (if electronic book entry
      transfer):____________________________

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ACKNOWLEDGMENT

     

    The
      Company hereby acknowledges this Conversion Notice and hereby directs Nevada
      Agency and Trust Company to issue the above indicated number of shares of Common
      Stock in accordance with the Transfer Agent Instructions dated _____________
      ___, 200__ from the Company and acknowledged and agreed to by Nevada Agency
      and
      Trust Company.

     

     

    
      	 	
              GULF
                WESTERN PETROLEUM CORPORATION

            
	 	 	 	 
	 	
              By:

            	
               

            	 
	 	
              Name:

            	
               

            	 
	 	
              Title:

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