Document:

ADVANCED TERMINATION AND MUTUAL SETTLEMENT AGREEMENT CELEBRATED BY, ON ONE HAND BY EMILIO ACUÑA PERALTA AND CARLOS ARNOLD ACUÑA ARANDA PER THEIR OWN RIGHT (THE

“SELLERS”) AND, ON THE OTHER HAND, BY CORPORACIÓN AMERMIN, S    ADVANCED TERMINATION AND MUTUAL SETTLEMENT AGREEMENT CELEBRATED BY, ON ONE HAND BY EMILIO ACUÑA PERALTA AND CARLOS ARNOLD ACUÑA ARANDA PER THEIR OWN RIGHT (THE “SELLERS”) AND, ON THE OTHER HAND, BY CORPORACIÓN AMERMIN, S. A. DE C. V., REPRESENTED IN THIS ACT BY MR. RAMIRO TREVIZO LEDEZMA IN HIS CHARACTER AS SOLE ADMINISTRATOR AND LEGAL REPRESENTATIVE AS WELL AS BY MR. RAMIRO TREVIZO LEDEZMA, PERSONALLY AND PER HIS OWN RIGHT (THE “PURCHASERS”) AS PER THE FOLLOWING PREVIOUS FACTS, DECLARATIONS AND CLAUSES:
 

 

 PREVIOUS FACTS
 

 

 I.
 On the 31st August 2006, PARTIES subscribed a Sales-Purchase Contract of Nominal Shares (the CONTRACT), by virtue of which, among other terms and conditions, the PÚRCHASERS acquired from the SELLERS the totality of the representative shares of the social capital of the corporation named Compañía Minera La Escuadra, S. A. de C. V. (CMLE), at that time being 2,000 (two thousand) ordinary nominal shares each with a value of $1,000.00 Mx. Cy., (One thousand Mexican Currency 00/100) (the SHARES, divided in the following manner: I. 1,700 (one thousand and seven hundred) shares property of Emilio Acuña Peralta and;  II., the remaining 300 (three hundred) shares property of Carlos Arnold Acuña Aranda;
 

 II.
 As a counterclaim concept for the acquisition of the SHARES, the PURCHASERS took unto themselves the obligation of paying the total amount of $500,000.00 Dollars (Five hundred thousand Dollars 00/100 in United States Currency), that is, the amount of $250.00 Dollars (Two hundred and fifty Dollars 00/100 in United States Currency) per each share in the proportion indicated following:
 

 I. For the purchase of 1,640 (One thousand six hundred and forty) shares property of Emilio Acuña Peralta, Corporación Amermin, S. A. de C. V., committed itself to pay the amount of $410,000.00 Dollars (Four hundred and ten thousand Dollars 00/100 in United States Currency);
 

 II. For the purchase of the remaining 60 (sixty) shares property of Emilio Acuña Peralta, Ramiro Trevizo Ledezma committed himself to pay the amount of $15,000.00 Dollars (Fifteen thousand Dollars 00/100 in United States Currency), and;
 

 III.For the purchase of the 300 (three hundred) shares property of Carlos Arnold Acuña Aranda, Corporación Amermin, S. A. de C. V., committed itself to pay in the former’s favor the amount of $75,000.00 Dollars (Seventy five thousand Dollars 00/100 in United States Currency.
 

 III. 
 The subscription of the CONTRACT was duly ratified on the 21st July 2006 before testimony of Mr. Eugenio Fernando García Russek, attorney and applicant to the exercise of Public Notary being ascribed to Notary Public number 28 of the Morelos Judicial District, and acting as Notary per license of 
 

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 Advanced termination and mutual settlement contract subscribed by Emilio Acuña Peralta and Carlos Arnold Acuña Aranda on one hand, and Corporación Amermin, S. A. de C. V., and Ramiro Trevizo Ledezma on the other on the 1st September 2008
 

 
 the Office’s Title Holder Mr. Felipe Colomo Castro, attorney, and reason of such an act taken notice of in the Book of Acts out of Protocol number XII, under act number 13,165 on same date. For purposes of clarity and certainty an ordinary copy of the CONTRACT is attached to the body of this present writing as Annex I;
 

 IV.
 Previous to the subscription of the CONTRACT and with the purpose of respecting the right of preference that might correspond to the SELLERS under the terms of the social statutes of CMLE, on the 10th July 2006 the shareholders of such a company celebrated an Ordinary General Assembly in which, among other resolutions, the sell of the SHARES was authorized in accord to the following proportions, same that were included in the terms and conditions of the CONTRACT: I Emilio Acuña Peralta would sell 1,640 (one thousand and six hundred and forty) shares in favor of Corporación Amermin, S. A. de C. V.; II Emilio Acuña Peralta would sell 60 (sixty) shares in favor of Ramiro Trevizo Ledezma, and; III. Carlos Arnold Acuña Aranda would sell 300 (three hundred) shares of his ownership in favor of Corporación Amermin, S. A. de C. V.
 

 V.
 The Shareholders’ Assembly Act described in the afore mentioned numeral was duly protocolized per virtue of Public Writ number 16,815 granted on the 31st October 2006 before testimony of Mr. Eugenio Fernando García Russek attorney and applicant to the exercise of Public Notary being ascribed to Notary Public number 28 of the Morelos Judicial District, and acting as Notary per license of the Office’s Title Holder Mr. Felipe Colomo Castro;
 

 VI.
 Months afterwards, on the 12th January 2007, Corporación Amermin, S. A. de C. V., and Ramiro Trevizo Ledezma in their character as new shareholders of CMLE. Celebrated an Ordinary General Assembly in which, among other matters of the Order of the Day adopted the following resolutions: I. Revoke the office of Sole Administrator from Emilio Acuña Peralta of CMLE; II. Revoke the totality of faculties, powers and mandates previously granted by CMLE in favor of Emilio Acuña Peralta; III. Name Mr. Ramiro Trevizo Ledezma as new Sole Administrator of CMLE, extending to him for such a purpose the totality of faculties, powers and mandates contemplated in the social statutes of the company for its administrators; IV. Revoke the charge of Proprietor Commissar of CMLE from David García Pérez; V. Revoke the totality of faculties, powers, and mandates previously granted by CMLE in favor of David García Pérez; VI. Name Mr. Ramón Alejandro Granillo Robles as the Society’s Proprietor Commissar, as well as; VII. Grant different powers in favor of Mr. Ramiro Trevizo González and Héctor Salvador Rentería Wong, because it is so convenient for the correct operation of the Society’s interests.
 

 VIII.
 Derived from the judicial acts described in the afore mentioned numerals, to date, the social capital of CMLE is structured as follows:
 

 

 

 

 

 

 

 

 2
 Advanced termination and mutual settlement contract subscribed by Emilio Acuña Peralta and Carlos Arnold Acuña Aranda on one hand, and Corporación Amermin, S. A. de C. V., and Ramiro Trevizo Ledezma on the other on the 1st September 2008
 

 
 

 

 

 	 	 	 	 	
	 Shareholders
	 Fixed Capital Shares
	 Varying Amount of Capital shares
	 Value in Mexican Currency
	 %

	 Corporación Amermin, S. A. de C. V.
 RFC. CAM-950810-K77
	 49
	 1,891
	 $1’940,000.00
	 97

	 Ramiro Trevizo Ledezma
 RFC. TELR-560904-R47
	 

 

 1
	 

 

 59
	 

 

 $60,000.00
	 

 

 3

	 Total
	 50
	 1,950
	 $2’000,000.00
	 100

  

 IX.
 In days past, PARTIES sustained different negotiations with the purpose of exploring the possibility of terminating the mercantile sale-purchase operation consigned and formalized by virtue of the CONTRACT and of the rest of the documentation described in the afore mentioned numerals, considering the feasibility of same as it was convenient to both parties’ interests and thus, proceeding in consequence to the preparation of this present instrument for all legal effects that may take place under the terms of the Tenth Clause of the CONTRACT.
 

 

 DECLARATIONS
 

 

 I.
 Mr. Emilio Acuña Peralta per his own right and under oath of stating the truth, declares, that:
 

 1. He is a Mexican citizen, of age, in complete use of his physical and mental faculties as well as enabled to engage in commerce and in all kinds of mercantile operations and thus, he enjoys the sufficient and necessary personality to intervene in this present judicial act;
 

 2. To be duly inscribed in the Federal Taxpayers Registry with fiscal identification certificate AUPE-501019-NQ0 and to be up to date in his income tax payments and other contributions that have corresponded in agreement with the applicable and current fiscal legislation.
 

 3. Under the terms of the CONTRACT he expressly acknowledges having received to date from the PURCHASERS the following payments per counterclaim concept for the sale of the SHARES, including those of his property as well as those of which Carlos Arnold Acuña Aranda was title holder:
 

 

 

 

 

 3
 Advanced termination and mutual settlement contract subscribed by Emilio Acuña Peralta and Carlos Arnold Acuña Aranda on one hand, and Corporación Amermin, S. A. de C. V., and Ramiro Trevizo Ledezma on the other on the 1st September 2008
 

 
 

 I. From Corporación Amermin, S. A. de C. V., the amount of $117,785.72 Dollars (one hundred and seventeen thousand and seven hundred and eighty five Dollars 72/100 in United States Currency), and still pending to date payment on the part of such company the total amount of $367,214.28 Dollars (three hundred and sixty seven thousand and two hundred and fourteen Dollars 28/100 in United States currency), and;
 

 II. From Ramiro Trevizo Ledezma, the amount of $3,642.85 Dollars (three thousand and six hundred forty two Dollars 85/100 in United States currency), and still pending to date payment on the part of such individual the amount of $11,357.15 Dollars (eleven thousand and three hundred and fifty seven 10/100 in United States Currency).
 

 4. He has had the opportunity of checking the corporative and accounting documentation of the company and recognizes that same is satisfactory as it has been submitted to his own advisors who have indicated to him no relevant contingency regarding same.  
 

 5. It is his free will to subscribe this present agreement with the purpose of terminating in advance the mercantile relationship now had with the PURCHASERS derived from the subscription of the CONTRACT, as well as to settling mutually the widest berth termination allowed by law in agreement with the terms and conditions included in this instrument.
 

 

 II.
 Mr. Carlos Arnold Acuña Aranda per his own right and under oath of stating the truth, declares, that:
 

 1. He is a Mexican citizen, of age, in complete use of his physical and mental faculties as well as enabled to engage in commerce and in all kinds of mercantile operations and thus, he enjoys the sufficient and necessary personality to intervene in this present judicial act;
 

 2. To be duly inscribed in the Federal Taxpayers Registry with fiscal identification certificate AUAC-77111104-9Q7 and to be up to date in his income tax payments and other contributions that have corresponded in agreement with the applicable and current fiscal legislation.
 

 3. With the purpose of facilitating the execution of payment obligations charged to the PURCHASERS, he expressly and in all opportunity authorized Mr. Emilio Acuña Peralta to receive on his behalf those payments that would correspond to him by the sale of the SHARES of his property, as per the schedule of payments of the price set in the CONTRACT.
 

 4. He has had the opportunity of checking the corporative and accounting documentation of the company and recognizes that same is satisfactory as it has been submitted to his own advisors who have indicated to him no relevant contingency regarding same.  
 

 

 

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 Advanced termination and mutual settlement contract subscribed by Emilio Acuña Peralta and Carlos Arnold Acuña Aranda on one hand, and Corporación Amermin, S. A. de C. V., and Ramiro Trevizo Ledezma on the other on the 1st September 2008
 

 
 5. It is his free will to subscribe this present agreement with the purpose of terminating in advance the mercantile relationship now had with the PURCHASERS derived from the subscription of the CONTRACT, as well as to settling mutually the widest berth termination allowed by law in agreement with the terms and conditions included in this instrument.
 

 III.
 Corporación Amermin, S. A. de C. V., declares through its legal representative and under oath of stating the truth, that:
 

 1. It is a Mexican mercantile society, specifically a Stock Company with Varying Amount of Capital, duly established and operating in agreement with the applicable and current legislation in the United States of Mexico as is evinced in Public Writ number 9,311, granted on the 9th August 1995 before testimony of Mr. José R. Miller Hermosillo, attorney and Notary Public number 2 of the Morelos Judicial District, State of Chihuahua, and instrument that was duly inscribed in the Public Registry of Commerce of said judicial district under electronic mercantile folio number 21,164*10 and thus enjoy the sufficient and necessary personality to intervene in this present judicial act;
 

 2. It enjoys the faculties, powers and sufficient and necessary mandates to subscribe this present agreement as is evinced in the instrument described in the afore indicated numeral, and same that have not been limited, restrained, suspended or revoked to date and reason by which he enjoys the capacity to subscribe this agreement;
 

 3. It is duly inscribed in the Federal Taxpayers Registry with Fiscal Identification Certificate CAM-950810-K77 and to be up to date in its income tax payments and other contributions that have corresponded according to the applicable and current fiscal legislation, and;
 

 4. It is the will of its Administration Board, as well as of its current shareholders, to subscribe this present agreement with the purpose of terminating in advance the mercantile relationship it holds with the SELLERS derived from the subscription of the CONTRACAT, as well to grant to each other the widest berth termination allowable by law in agreement with the terms and conditions included in this instrument.
 

 IV.
 Mr. Ramiro Trevizo Ledezma, per his own right and under oath of stating the truth, declares that:
 

 1. To be a Mexican citizen in complete use of his mental and physical abilities as well as enabled to engage in commerce and in all types of mercantile operations and thus enjoys the sufficient and necessary personality to intervene in this judicial act;
 

 2. To be duly inscribed in the Federal Taxpayers Registry with Fiscal Identification Certificate TELR-560904-R47 and to be up to date in its income tax payments and other contributions that have corresponded according to the applicable and current fiscal legislation, and;
 

 

 5
 Advanced termination and mutual settlement contract subscribed by Emilio Acuña Peralta and Carlos Arnold Acuña Aranda on one hand, and Corporación Amermin, S. A. de C. V., and Ramiro Trevizo Ledezma on the other on the 1st September 2008
 

 
 3. It is his free will to subscribe this present agreement with the purpose of terminating in advance the mercantile relationship it holds with the SELLERS derived from the subscription of the CONTRACT, as well to grant to each other the widest berth termination allowable by law in agreement with the terms and conditions included in this instrument.
 

 V.
 PARTIES declare per their right and through their legal representatives, as has been put down, under oath of stating the truth, that they acknowledge the personality they bear in addition of assisting to the subscription of this present document in good faith, free o deceit, error, violence or any other kind of vitiation with the purpose of committing themselves to the following:
 

 

 CLAUSES
 

 

 FIRST. ADVANCED TERMINATION: For all legal effects that may take place, because it is so convenient to their respective interests and under the terms of the Thirteenth Clause of the CONTRACT, by virtue of the subscription of this present instrument PARTIES expressly agree in terminating in advance as of this date with the totality of the terms and conditions of the CONTRACT,  as well as with any other written or verbal agreements related with the transfer of the ownership of the SHARES on the part of the SELLERS in favor of the PURCHASERS.
 

 SECOND, POURCHASERS’ OBLIGATIONS: Taking into consideration the advanced termination and mutual settlement agreed upon in the afore mentioned clauses, the PURCHASERS expressly commit themselves before the SELLERS, for all legal effects that may arise, to decline the totality of interests and rights they held on the SHARES by virtue of the CONTRACT or of any other written or verbal agreements related with such an object.
 

 Specifically, the PURCHASERS expressly commit themselves to:
 

 1. Celebrate on this same date an Ordinary General Assembly in they character as current shareholders of CMLE with the purpose of giving resolution to the following points, among other directly related with same: I. Expressly authorize the transfer of ownership of the SHARES in favor of the SELLERS, keeping for such an effect the original shareholding tenancy proportion; II. Revoke the previously granted powers in favor of Mr. Ramiro Trevizo González and Héctor Salvador Rentería Wong; III. Revoke the nomination of Ramón Alejandro Granillo Robles from the charge of Proprietor Commissar of the company, as well as; IV. Name Mrs. Isaura Irasema Valencia Aguilar as new Proprietor Commissar of CMLE;
 

 2. Keep in a confidential character the totality of documentation and information being held to date in relation with CMLE, excepting in those cases in which it be required by competent authorities and that must be disclosed for paper work and proceedings of any nature;
 

 

 

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 Advanced termination and mutual settlement contract subscribed by Emilio Acuña Peralta and Carlos Arnold Acuña Aranda on one hand, and Corporación Amermin, S. A. de C. V., and Ramiro Trevizo Ledezma on the other on the 1st September 2008
 

 
 3. In general, abstain from exhibiting in any manner the rights and interests it held to date regarding the SHARES, and;
 

 4. Regarding the administration of the Society, PARTIES expressly convene in that Mr. Ramiro Trevizo Ledezma, current Sole Administrator, continues in the exercise of his office for one more year. Consequently, at the latest on the 1st September 2009, the SELLERS must celebrate a Yearly Ordinary General Assembly in which, among other matters, the approval of the management of Mr. Ramiro Trevizo be discussed, his nomination be revoked and a new administrator be called in.
 

 THIRD. SELLERS’ OBLIGATION: Taking into consideration the advanced termination and mutual settlement agreed upon in the afore mentioned clauses, the SELLER expressly commit themselves before the PURCHASERS, for all legal effects that may arise, to decline the totality of interests and rights they held on the SHARES by virtue of the CONTRACT or of any other written or verbal agreements related with such an object.
 

 Specifically, the SELLERS expressly commit themselves to:
 

 1. Appear at the Shareholders Ordinary General Assembly of CMLE to be celebrated on this same date under the terms and before mentioned clauses as specially invited guests with the purpose of expressly accepting the resolutions adopted during the meeting.
 

 2. Receive the totality of the accounting and social documentation of CMLE when so required by the PURCHASERS, and;
 

 3. Regarding the administration of the Society PARTIES expressly convene that Ramiro Trevizo Ledezma, current Sole Administrator continues in the exercise of his office for one more year. Consequently, at the latest on the 1st September 2009, the SELLERS must celebrate a Yearly Ordinary General Assembly in which, among other matters, the approval of the management of Mr. Ramiro Trevizo be discussed, his nomination be revoked and a new administrator be called in.
 

 FOURTH. MUTUAL SETTLEMENT: Derived from the advanced termination agreed upon in the first afore mentioned clause, PARTIES expressly convene for all legal purposes that may take place, in granting to each other the widest berth termination allowable by law regarding the totality of the acts, omissions and conducts of any kind or nature that their representatives, administrators, shareholders, proxies, mandatories, employees, executives, agents, consultants and advisors, either past, present or future, have carried out to date in relation to the execution of the CONTRACT or of any other agreements written or verbal related with the SHARES, the PARTIES acknowledging that to date there does not exist a right or obligation derived from same left pending to be complied with, and consequently surrendering as of this moment the promotion of any action, through any possible competent jurisdiction against them or of the subjects described, in the understanding that if any part should not comply with such an obligation, this present instrument will constitute a total and absolute liberation regarding the non compliances and responsibilities that 
 

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 Advanced termination and mutual settlement contract subscribed by Emilio Acuña Peralta and Carlos Arnold Acuña Aranda on one hand, and Corporación Amermin, S. A. de C. V., and Ramiro Trevizo Ledezma on the other on the 1st September 2008
 

 
 might be argued against them, and so, both PARTIES stating their satisfaction due to the mercantile relationship they have terminated on this date.
 

 FIFTH. FOMALIZATION: For purposes of certainty and judicial security, PARTIES agree to ratify the subscription of this present document before Public Notary or Public Broker when so required by any of them in the understanding that expenses incurred in as derived from such an act will be covered by both parties equally.
 

 SIXTH. ADDRESSES AND CONTACT TELEPHONES: PARTIES convene in stating their addresses and contact telephone numbers for anything referring with the execution and compliance to the terms and conditions of this present instrument, as well as to carry out announcements, notifications and other communication in relation to same, the following:
 

 

 	 	
	 SELLERS
 

 Privada de Connecticut 1805
 Colonia Residencial Campestre
 Ciudad de Chihuahua
 Estado de Chihuahua, México
 

 Phone: 01-614-423-4098
	 PURCHASERS
 

 Calle California 5101, suite 206
 Colonia Haciendas de Santa Fe
 Ciudad de Chihuahua
 Estado de Chihuahua, México
 

 Phone: 01-614-200-8481

  

 

 SEVENTH. ANNOUNCEMENTS, NOTIFICATIONS AND COMMUNICATIONS: PARTIES agree that any announcement, notification or communication necessary to give to each other must be carried out in writing.
 

 Sending of mentioned documents can be carried out by three means: 1: By ordinary courier delivered on hand or by certificate mail, both with acknowledgment of receipt; 2. By Fax or; 3: Electronic mail. In this last instance, sending will only be considered valid and legally carried out when reception of the respective electronic mail if confirmed electronically within the 3 (three) following natural days after it being sent, through an answering and confirmation message by the receiving party.
 

 PARTIES likewise agree that announcements, notifications and communications carried out in relation with this present instrument will be in effect on the day of their reception. In case that such messages include some kind of a term, this latter will begin to be in effect on the following day of confirmation of receipt independently if it is an able day or holiday.
 

 EIGHTH. CONTACT PERSONS: PARTIES agree that the totality of announcements, notifications or communications necessary to have their counterparts know about as derived from the terms and conditions of this present instrument, must be indistinctly addressed to the following persons:
 

 

 

 

 

 8
 Advanced termination and mutual settlement contract subscribed by Emilio Acuña Peralta and Carlos Arnold Acuña Aranda on one hand, and Corporación Amermin, S. A. de C. V., and Ramiro Trevizo Ledezma on the other on the 1st September 2008
 

 
 

 	 	
	 SELLERS
 

 EMILIO ACUÑA PERALTA
 CARLOS ARNOLD ACUÑA ARANDA
 CONRADO ACUÑA ARANDA
	 PURCHASERS
 

 RAMIRO TREVIZO LEDEZMA
 RAMIRO TREVIZO GONZÁLEZ

  

 

 NINTH. TOTALITY OF THE AGREEMENT:  PARTIES accept that this present agreement contains the totality of the agreements between them regarding its object, leaving without effect and cancelling the whole of agreements, reports, negotiations, correspondence, commitments and communications carried out previously between them either in writing or verbally.
 

 APPLICABLE LAW: This present instrument will abide and will be interpreted accordingly to the Code of Commerce, the General Law of Mercantile Societies and the Federal Civil Code among other applicable and current legal dispositions in the United States of Mexico.
 

 ELEVENTH. JURISDICTION: In case there may arise controversies regarding the validity, intention, interpretation, execution or compliance to this agreement, PARTIES expressly agree to submit same before the competent courts of law of the Morelos Judicial District in the City of Chihuahua, State of Chihuahua, and giving up as of this moment any other jurisdiction or privilege that might correspond to them by reason of their addresses present or future or by whatever other circumstance.
 

 

 

 PARTIES IN THE KNOWLEDGE OF THE FORCE AND LEGAL REACH OF THIS PRESENT AGREEMENT, SUBSCRIBE IT BEING TOGETHER IN THE CITY OF CHIHUAHUA, STATE OF CHIHUAHUA ON THE FIRST DAY OF SEPTEMBER OF THE YEAR TWO THOUSAND AND EIGHT.
 

 

 SELLERS
 

 	 	
	 Signature
 

 EMILIO ACUÑA PERALTA
 PER HIS OWN RIGHT
	 Signature
 

 CARLOS ARNOLD ACUÑA ARANDA
 PER HIS OWN RIGHT

  

 PURCHASERS
 

 	 	
	 CORPORACIÓN AMERMIN,
 S.A. DE C.V.
 REPRESENTED IN THIS ACT BY:
 RAMIRO TREVIZO LEDEZMA
	 RAMIRO TREVIZO LEDEZMA
 PER HIS OWN RIGHT

  

 

 ###
 

 9
 Advanced termination and mutual settlement contract subscribed by Emilio Acuña Peralta and Carlos Arnold Acuña Aranda on one hand, and Corporación Amermin, S. A. de C. V., and Ramiro Trevizo Ledezma on the other on the 1st September 2008ex10988k120810.htm

  

  

  

 

1,500,000 Shares

 

FX ENERGY, INC.

Common Stock

PLACEMENT AGENCY AGREEMENT

December 8, 2010

Pritchard Capital Partners, LLC

600 Travis Street

Suite 5210

Houston, Texas 77002

Ladies and Gentlemen:

FX Energy, Inc., a Nevada corporation (the "Company"), proposes, subject to the terms and conditions stated in this Placement Agency Agreement (this "Agreement") and the Subscription Agreements in the form of Exhibit A attached hereto (the "Subscription Agreements") to be entered into with the investors that will be identified therein (each, an "Investor" and collectively, the "Investors"), to issue and sell an aggregate of up to 1,500,000 shares (the "Shares") of the Company's common stock, $0.001 par value (the "Common Stock").  The Company hereby confirms its agreement with Pritchard Capital Partners, LLC (the "Placement Agent"), as set forth below.

1.           Agreement to Act as Placement Agent; Delivery and Payment.  On the basis of the representations, warranties and agreements of the Company herein contained, and subject to the terms and conditions set forth in this Agreement:

(a)           The Company hereby engages the Placement Agent, as an agent of the Company, to, on a reasonable best efforts basis, solicit offers to purchase the Shares from the Company on the terms and subject to the conditions set forth in this Agreement, the Subscription Agreements and the Prospectus (as defined below).  The Placement Agent agrees to use its reasonable best efforts to assist the Company in obtaining performance by each Investor whose offer to purchase Shares was solicited by such Placement Agent and accepted by the Company, but the Placement Agent shall not, except as otherwise provided in this Agreement, have any liability to the Company in the event any such purchase is not consummated for any reason.  Under no circumstances will the Placement Agent or any of its affiliates be obligated to underwrite or purchase any of the Shares for its own account or otherwise provide any financing.  The Placement Agent shall act solely as the Company's agent and not as principal.  The Placement Agent shall not have any authority to bind the Company with respect to any prospective offer to purchase Shares, and the Company shall have the sole right to accept offers to purchase Shares and may reject any such offer, in whole or in part.  The Placement Agent has the right, after discussion with the Company, to reject any offer to purchase Shares received by it, in whole or in part, and any such rejection shall not be deemed a breach of this Agreement.

(b)           As compensation for services rendered by the Placement Agent hereunder, on the Closing Date (as defined below), the Company shall pay or cause to be paid to the Placement Agent by wire transfer of immediately available funds to an account designated by the Placement Agent, an aggregate amount equal to 5.0% of the gross proceeds received by the Company from the sale of the Shares if consummated prior to the expiration or termination of this Agreement (the "Agency Fee").  The Placement Agent agrees that the foregoing compensation, together with any expense reimbursement payable hereunder, constitutes all of the compensation that the Placement Agent shall be entitled to receive in connection with the Offering contemplated hereby.

  

  

  

(c)           The Shares are being sold to the Investors at the price per Share (the "Purchase Price") set forth on the cover page of the Prospectus (as defined below).  The obligation of each Investor to purchase Shares shall be evidenced by a Subscription Agreement to be entered into between the Company and such Investor.

(d)           Prior to the earlier of (i) the date on which this Agreement is terminated and (ii) the Closing Date, the Company shall not, without the prior written consent of the Placement Agent, solicit or accept offers to purchase shares of Common Stock (other than pursuant to the exercise of options or warrants to purchase shares of Common Stock that are outstanding at the date hereof) otherwise than through the Placement Agent in accordance herewith.

(e)           No Shares shall be deemed to have been purchased and paid for, or sold by the Company, until such Shares shall have been delivered to the Investor purchasing such Shares against payment therefor by such Investor.  If the Company shall default in its obligations to deliver Shares to a Investor whose offer it has accepted, the Company shall indemnify and hold the Placement Agent harmless against any loss, claim, damage or liability directly or indirectly arising from or as a result of the default by the Company in accordance with the procedures set forth in Section 6(c) hereof.

(f)           Payment of the purchase price for and delivery of the Shares shall be made at a closing (the "Closing") at the offices of Bracewell & Giuliani LLP, counsel for the Placement Agent, located at 711 Louisiana Street, Houston, Texas, at 10:00 a.m., New York City time, on December 13, 2010 or at such other time and date as the Placement Agent and the Company determine pursuant to Rule 15c6-1(a) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (such date of payment and delivery being herein referred to as the "Closing Date").  The sale of the Shares will be settled through the facilities of The Depository Trust Company's DWAC system or The Depository Trust Company's delivery versus payment (DVP) settlement service.  Payment of the purchase price for the Shares to be purchased by Investors shall be made pursuant to instructions contained in the Subscription Agreement.  Prior to the Closing, each Investor purchasing Shares shall deposit with (i) the Company or (ii) the Placement Agent, pursuant to the Subscription Agreement, an amount (the "Purchase Amount") equal to the product of (x) the number of Shares such Investor has agreed to purchase and (y) the Purchase Price.  The aggregate of all such Purchase Amounts is herein referred to as the "Purchase Funds.”  Subject to the terms and conditions hereof and of the Subscription Agreements, the Placement Agent shall, on the Closing Date, deliver to the Company, by Federal Funds wire transfer, the Purchase Funds so held by the Placement Agent, reduced by an amount equal to the sum of the aggregate Agency Fee payable to the Placement Agent and the Placement Agent's bona fide estimate of the amount of expenses for which the Placement Agent is entitled to reimbursement pursuant hereto.  At least one day prior to the Closing Date, the Placement Agent shall submit to the Company its bona fide estimate of the amount of expenses for which the Placement Agent is entitled to reimbursement pursuant hereto.  As soon as reasonably practicable after the Closing Date, the Placement Agent shall submit to the Company its expense reimbursement invoice, and the Company or the Placement Agent, as applicable, shall make any necessary reconciling payment(s) within thirty days after receipt of such invoice.  The Company shall remit to the Placement Agent any remaining Agency Fees or the Placement Agent's expenses for which the Placement Agent is entitled to reimbursement.

2.           Representations and Warranties of the Company.  The Company represents and warrants to the Placement Agent as of the date hereof, and as of the Closing Date and agrees with the Placement Agent, as follows:

(a)           Filing of Registration Statement.  The Company has prepared and filed, in conformity with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the published rules and regulations thereunder (the "Rules and Regulations") adopted by the Securities and Exchange Commission (the "Commission"), a registration statement, including a prospectus, on Form S-3 (File No. 333-155718), which became effective on June 29, 2009, relating to the Shares and the offering thereof (the "Offering") from time to time in accordance with Rule 415(a)(1)(x) of the Rules and Regulations, and such amendments thereof as may have been required to the date of this Agreement. The term "Registration Statement" as used in this Agreement means the aforementioned registration statement, as amended at the time of such registration statement's effectiveness for purposes of Section 11 of the Securities Act (the "Effective Time"), including (i) all documents filed as a part thereof or incorporated or deemed to be incorporated by reference therein and (ii) any information in the corresponding Base Prospectus (as defined below) or a prospectus supplement filed with the Commission

 

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pursuant to Rule 424(b) under the Securities Act, to the extent such information is deemed pursuant to Rule 430A ("Rule 430A"), 430B ("Rule 430B") or 430C ("Rule 430C") under the Securities Act to be a part thereof at the Effective Time. If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Rules and Regulations (the "Rule 462(b) Registration Statement"), then any reference herein to the term "Registration Statement" shall also be deemed to include such Rule 462(b) Registration Statement.  For purposes of this Agreement, all references to the Registration Statement, the Base Prospectus, any Preliminary Prospectus (as defined below), the Prospectus (as defined below) or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR").  All references in this Agreement to amendments or supplements to the Registration Statement, the Base Prospectus, any Preliminary Prospectus or the Prospectus shall be deemed to include the subsequent filing of any document under the Exchange Act that is deemed to be incorporated by reference therein or otherwise deemed to be a part thereof.

(b)           Effectiveness of Registration Statement; Certain Defined Terms.  The Company and the transactions contemplated by this Agreement meet the requirements and comply with the conditions for the use of Form S-3 under the Securities Act.  The Registration Statement meets, and the offering and sale of the Shares as contemplated hereby complies with, the requirements of Rule 415 of the Rules and Regulations.  The Company has complied, to the Commission's satisfaction, with all requests of the Commission for additional or supplemental information.  No stop order preventing or suspending use of the Registration Statement, any Preliminary Prospectus or the Prospectus or the effectiveness of the Registration Statement has been issued by the Commission, and no proceedings for such purpose pursuant to Section 8A of the Securities Act against the Company or related to the Offering have been instituted or are pending or, to the Company's knowledge, are contemplated or threatened by the Commission.  As used in this Agreement:

 

(1)           "Base Prospectus" means the prospectus included in the Registration Statement at the Effective Time, including the documents incorporated by reference therein.

 

(2)           "Disclosure Package" means (i) the Statutory Prospectus, (ii) each Issuer Free Writing Prospectus, if any, filed or used by the Company on or before the Time of Sale and listed on Schedule I hereto (other than a roadshow that is an Issuer Free Writing Prospectus but is not required to be filed under Rule 433 of the Rules and Regulations) and (iii) the pricing and other information set forth on Schedule III hereto, all considered together.

(3)           "Issuer Free Writing Prospectus" means any "issuer free writing prospectus," as defined in Rule 433 of the Rules and Regulations relating to the Shares in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company's records pursuant to Rule 433(g) of the Rules and Regulations.

(4)           "Preliminary Prospectus" means any preliminary prospectus supplement, subject to completion, relating to the Shares, filed by the Company with the Commission pursuant to Rule 424(b) under the Securities Act for use in connection with the offering and sale of the Shares, together with the Base Prospectus.

(5)           "Prospectus" means the final prospectus supplement, relating to the Shares, filed by the Company with the Commission pursuant to Rule 424(b) under the Securities Act on or before the second business day after the date hereof (or such earlier time as may be required under the Securities Act), in the form furnished by the Company to the Placement Agent, for use in connection with the offering and sale of the Shares that discloses the public offering price and other final terms of the Offering of the Shares, together with the Base Prospectus.

(6)           "Statutory Prospectus" means the Preliminary Prospectus, if any, as amended and supplemented immediately prior to the Time of Sale.

(7)           "Time of Sale" means 8:30 a.m., New York City time, on the date of this Agreement.

 

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(c)           Contents of Registration Statement.  The Registration Statement complied when it became effective, complies as of the date hereof and, as amended or supplemented, complied or will comply at the Time of Sale and will comply at all times during which a prospectus is required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) in connection with any sale of Shares (the "Prospectus Delivery Period"), in all material respects, with the requirements of the Securities Act and the Rules and Regulations; the Registration Statement did not, as of the Effective Time, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, provided, that the Company makes no representation or warranty in this subsection (c) with respect to statements in or omissions from the Registration Statement in reliance upon, and in conformity with, written information furnished to the Company by the Placement Agent specifically for inclusion therein, which information the parties hereto agree is limited to the Placement Agent's Information (as defined in Section 7 hereof).

(d)           Contents of Prospectus.  The Prospectus will comply, as of the date that it is filed with the Commission, the date of its delivery to Investors and the Closing Date and at all times during the Prospectus Delivery Period, in all material respects, with the requirements of the Securities Act; at no time during the period that begins on the date the Prospectus is filed with the Commission and ends at the end of the Prospectus Delivery Period or at the Closing Date will the Prospectus, as then amended or supplemented, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided, that the Company makes no representation or warranty with respect to statements in or omissions from the Prospectus in reliance upon, and in conformity with, written information furnished to the Company by the Placement Agent or its representatives or agents specifically for inclusion therein, which information the parties hereto agree is limited to the Placement Agent's Information.  The Prospectus contains or will contain all required information under the Securities Act with respect to the Shares and the distribution of the Shares.

(e)           Incorporated Documents.  Each of the documents incorporated or deemed to be incorporated by reference, as amended, in the Registration Statement, at the time such document was filed with the Commission or at the time such document became effective, as applicable, complied, in all material respects, with the requirements of the Exchange Act, was filed with the Commission on a timely basis (or within the time periods specified by Rule 12b-25 under the Exchange Act) and did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(f)           Disclosure Package.  The Disclosure Package, as of the Time of Sale, did not, and at the Closing Date will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that the Company makes no representations or warranties in this subsection (f) with respect to statements in or omissions from the Disclosure Package in reliance upon, and in conformity with, written information furnished to the Company by the Placement Agent or its representatives or agents specifically for inclusion therein, which information the parties hereto agree is limited to the Placement Agent's Information.

(g)           Distributed Materials; Conflict with Registration Statement.  Other than the Base Prospectus, any Preliminary Prospectus and the Prospectus, the Company has not made, used, prepared, authorized, approved or referred to and will not make, use, prepare, authorize, approve or refer to any "written communication" (as defined in Rule 405 of the Rules and Regulations("Rule 405")) that constitutes an offer to sell or a solicitation of an offer to buy the Shares other than (i) any document not constituting a prospectus pursuant to Section 2(a)(10)(a) of the Securities Act or Rule 134 of the Rules and Regulations or (ii) the documents listed on Schedule I hereto and other written communications approved in advance by the Placement Agent.

 

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(h)           Issuer Free Writing Prospectuses.  Each Issuer Free Writing Prospectus, if any, conformed or will conform in all material respects to the requirements of the Securities Act and the Rules and Regulations on the date of first use, and the Company has complied or will comply with any filing requirements applicable to such Issuer Free Writing Prospectus pursuant to the Rules and Regulations.  Each Issuer Free Writing Prospectus, if any, when considered together with the Disclosure Package, as of its issue date and at all subsequent times through the completion of the Prospectus Delivery Period and on the Closing Date did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, the Statutory Prospectus or the Prospectus, including any document incorporated by reference therein and any prospectus supplement deemed to be a part thereof that has not been superseded or modified, or include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that the Company makes no representation or warranty with respect to statements in or omissions from any Issuer Free Writing Prospectus in reliance upon, and in conformity with, written information furnished to the Company by the Placement Agent or its representatives or agents specifically for inclusion therein, which information the parties hereto agree is limited to the Placement Agent's Information.

(i)           Not an Ineligible Issuer.  (i) At the earliest time after the filing of the Registration Statement that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the Shares and (ii) at the date hereof, the Company was not and is not an "ineligible issuer," as defined in Rule 405.

(j)           Due Incorporation.

(1)           The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Nevada, with the requisite power and authority to own its properties and to conduct its business as it is currently being conducted and as described in the Registration Statement, the Prospectus and the Disclosure Package.  The Company is duly qualified to transact business and is in good standing as a foreign corporation in each other jurisdiction in which its ownership or leasing of property or the conduct of its business requires such qualification, except where the failure to be so qualified or in good standing would not (i) have, individually or in the aggregate, a material adverse effect upon the general affairs, business, operations, prospects, properties, financial condition, or results of operations of the Company and its subsidiaries, taken as a whole, or (ii) impair in any material respect the power or ability of the Company to perform its obligations under this Agreement and the Subscription Agreements or to consummate any transactions contemplated by this Agreement and the Subscription Agreements, including the issuance and sale of the Shares (any such effect as described in clauses (i) or (ii), a "Material Adverse Effect");

(2)           Each of the subsidiaries of the Company has been duly incorporated or formed, as the case may be, and is validly existing and in good standing under the laws of its respective jurisdiction of organization, each with full power and authority (corporate or otherwise) to own its properties and conduct its business as described in the Registration Statement, the Prospectus and the Disclosure Package, and each has been duly qualified as a foreign corporation or other legal entity for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where the failure to be so qualified or in good standing would not result in a Material Adverse Effect.

(k)           Subsidiaries.  Except as otherwise described in the Registration Statement, the Prospectus and the Disclosure Package, the Company has no material subsidiaries and does not own any beneficial interest, directly or indirectly, in any material corporation, partnership, joint venture or other business entity.

 

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(l)           Due Authorization, Etc.  The Company has the full right, power and authority to enter into this Agreement and the Subscription Agreements and to perform and discharge its obligations hereunder and thereunder.  This Agreement has been duly authorized, executed and delivered by the Company.  Each Subscription Agreement has been duly authorized by the Company and, prior to the Closing Time, will have been duly executed and delivered by the Company and, upon such execution and delivery, will constitute a valid, legal and binding obligation of the Company, enforceable against the Company in accordance with its terms.

(m)           The Shares.  The issuance of the Shares has been duly and validly authorized by the Company and, when issued, delivered and paid for by the Investors in accordance with the terms of this Agreement and the Subscription Agreement, the Shares will have been duly and validly issued and will be fully paid and nonassessable, will not be subject to any statutory or contractual preemptive rights or other rights to subscribe for or purchase or acquire any shares of Common Stock which have not been waived or complied with, and will conform in all material respects to the description thereof contained in the Disclosure Package and the Prospectus, and such description conforms in all material respects to the rights set forth in the instruments defining the same.

(n)           Capitalization.  The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Disclosure Package and the Prospectus under the caption "Description of Capital Stock.”  The issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable, and have been issued in compliance with all federal and state securities laws.  None of the outstanding shares of Common Stock was issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase or acquire any securities of the Company or any of its subsidiaries.  There are no authorized or outstanding shares of capital stock, options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable for, any capital stock of the Company or any of its subsidiaries, other than those described in the Prospectus and the Disclosure Package or waived in writing on or before the date hereof.  The description of the Company's stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, as described in the Prospectus and the Disclosure Package, accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights.  All the outstanding shares of capital stock of each "significant subsidiary" within the meaning of Rule 1-02(w) of Regulation S-X (such a significant subsidiary of the Company, a "Significant Subsidiary") have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and are owned directly by the Company or by another wholly-owned subsidiary of the Company free and clear of any lien, encumbrance, security interest, claim or charge, restriction upon voting or transfer or any other claim of any third party, other than those described in the Registration Statement, the Disclosure Package and the Prospectus.

(o)           No Conflict.  The execution, delivery and performance by the Company of this Agreement and the Subscription Agreements, and the consummation of the transactions contemplated hereby and thereby, including the issuance and sale of the Shares by the Company, will not (i) conflict with or result in a breach or violation of, or constitute a default under (nor constitute any event which with or without notice, lapse of time or both would result in any breach or violation of or constitute a default under), give rise to any right of termination or other right or the cancellation or acceleration of any right or obligation or loss of a benefit under, or give rise to the creation or imposition of any lien, encumbrance, security interest, claim or charge upon any property or assets of the Company or its subsidiaries pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or its subsidiaries or any of their properties may be bound or to which any of their property or assets is subject, (ii) result in any violation of the provisions of the charter or bylaws (or analogous governing instrument, as applicable) of the Company or any of its subsidiaries, or (iii) result in any violation of any law, statute, rule, regulation, judgment, order or decree of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Company or any of its properties or assets.

 

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(p)           No Consents Required.  No approval, authorization, consent or order of or filing, qualification or registration with, any court or governmental agency or body, foreign or domestic, which has not been made, obtained or taken and is not in full force and effect, is required in connection with the Company's execution, delivery and performance of this Agreement and the Subscription Agreements, the consummation by the Company of the transactions contemplated hereby and thereby or the issuance and sale of the Shares other than (i) as may be required under the Securities Act, (ii) any necessary qualification of the Shares under the securities or blue sky laws of the various jurisdictions in which the Shares are being offered by the Placement Agent, (iii) under the rules and regulations of the Financial Industry Regulatory Authority, Inc. ("FINRA") (other than any approval required with respect to the Base Prospectus), (iv) under the rules of the NASDAQ Global Market ("NASDAQ"), or (v) any required filing on Form 8-K under the Exchange Act.

(q)           Preemptive Rights.  There are no preemptive rights or other rights (other than rights which have been waived in writing in connection with the transactions contemplated by this Agreement or otherwise satisfied or as described in the Prospectus) to subscribe for or to purchase any shares of Common Stock or shares of any other capital stock or other equity interests of the Company or any of its subsidiaries, or any agreement or arrangement between the Company and any of the Company's stockholders or between any of the Company's subsidiaries and any of such subsidiary's stockholders, or to the Company's knowledge, between or among any of the Company's stockholders or any of its subsidiaries' stockholders, which grant special rights with respect to any shares of the Company's or any of its subsidiaries' capital stock or which in any way affect any stockholder's ability or right to alienate freely or vote such shares.

(r)           Registration Rights.  There are no contracts, agreements or understandings between the Company or any of its subsidiaries and any person granting such person the right (other than rights which have been waived in writing in connection with the transactions contemplated by this Agreement or otherwise satisfied) to require the Company or any of its subsidiaries to register any securities with the Commission in connection with this Offering.

(s)           Independent Accountants.  PricewaterhouseCoopers LLP, whose reports on the consolidated financial statements of the Company are incorporated by reference in the Registration Statement, the Prospectus and the Disclosure Package, is (A) an independent public accounting firm within the meaning of the Securities Act, (B) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act")), and (C) not in violation of the auditor independence requirements of the Sarbanes-Oxley Act.  Except as disclosed in the Registration Statement and as pre-approved in accordance with the requirements set forth in Section 10A of the Exchange Act, PricewaterhouseCoopers LLP has not been engaged by the Company to perform any "prohibited activities" (as set forth in Section 10A of the Exchange Act).

(t)           Financial Statements.  The consolidated financial statements of the Company, together with the related schedules and notes thereto, set forth or incorporated by reference in the Registration Statement, the Prospectus and the Disclosure Package comply in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as applicable, and present fairly in all material respects (i) the financial condition of the Company and its consolidated subsidiaries as of the dates indicated and (ii) the consolidated results of operations, stockholders' equity and changes in cash flows of the Company and its consolidated subsidiaries for the periods therein specified; and such financial statements and related schedules and notes thereto have been prepared in conformity with United States generally accepted accounting principles, consistently applied throughout the periods involved (except as otherwise stated therein and subject, in the case of unaudited financial statements, to normal year-end adjustments).  There are no other financial statements (historical or pro forma) that are required to be included or incorporated by reference in the Registration Statement, the Prospectus or the Disclosure Package; and the Company does not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not disclosed in the Registration Statement, the Disclosure Package and the Prospectus; and all disclosures contained in the Registration Statement, the Disclosure Package and the Prospectus regarding "non-GAAP financial measures" (as such term is defined by the rules and regulations of the Commission) comply with Regulation G under the Exchange Act and Item 10(e) of Regulation S-K under the Securities Act, to the extent applicable, and present fairly the information shown therein and the Company's basis for using such measures.

 

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(u)           Absence of Material Changes.  Subsequent to the respective dates as of which information is given in the Registration Statement, the Prospectus and the Disclosure Package, and except as may be otherwise stated or incorporated by reference in the Registration Statement, the Prospectus and the Disclosure Package, there has not been (i) any Material Adverse Effect, (ii) any transaction which is material to the Company or any of its subsidiaries taken as a whole, (iii) any obligation, direct or contingent (including any off-balance sheet obligations), incurred by the Company or any of its subsidiaries, which is material to the Company or any of its subsidiaries taken as a whole, (iv) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company, (v) any change in the capital stock (other than a change in the number of outstanding shares of Common Stock due to the issuance of shares upon the exercise of outstanding options or warrants or the conversion of convertible indebtedness), or material change in the short-term debt or long-term debt of the Company or any of its subsidiaries taken as a whole (other than upon conversion of convertible indebtedness) or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock (other than grants of stock options under the Company's stock option plans existing on the date hereof) of the Company or any of its subsidiaries.

(v)           Legal Proceedings.  Except as disclosed in the Company's filings with the Commission, there are no legal or governmental actions, suits, claims or proceedings pending or, to the Company's knowledge, threatened or contemplated to which the Company or any of its subsidiaries is or would be a party or of which any of their respective properties is or would be subject at law or in equity, before or by any federal, state, local or foreign court or governmental or regulatory commission, board, body, authority or agency, or before or by any self-regulatory organization or other non-governmental regulatory authority, which are required to be described in the Registration Statement, the Disclosure Package or the Prospectus or a document incorporated by reference therein and are not so described therein, or which, singularly or in the aggregate, if resolved adversely to the Company or such subsidiary, would reasonably be likely to result in a Material Adverse Effect. To the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by other third parties.

(w)           No Violation.  Neither the Company nor any of its subsidiaries is in breach or violation of or in default (nor has any event occurred which with notice, lapse of time or both would result in any breach or violation of, or constitute a default) under (i) the provisions of its charter or bylaws (or analogous governing instrument, as applicable) or (ii)  any term, covenant, obligation, agreement or condition contained in any indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which the Company or such subsidiary is a party or by which any of its properties may be bound or affected, or (iii) any statute, law, rule, regulation, ordinance, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any of its properties, as applicable, except, with respect to clauses (ii) and (iii) above, to the extent any such contravention has been waived or would not result in a Material Adverse Effect.

(x)           Permits.  The Company and each of its subsidiaries have made all filings, applications and submissions required by, and own or possess all approvals, licenses, certificates, certifications, clearances, consents, exemptions, marks, notifications, orders, permits and other authorizations issued by, the appropriate federal, state or foreign regulatory authorities necessary to conduct its business as described in the Disclosure Package and the Prospectus (collectively, "Permits"), and is in compliance in all material respects with the terms and conditions of all such Permits. All such Permits are valid and in full force and effect.  Neither the Company nor any of its subsidiaries has received any notice of any proceedings relating to revocation or modification of, any such Permit, which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect.  Except as may be required under the Securities Act and state and foreign blue sky laws and the rules and regulations of FINRA, no other Permits are required for the Company or any of its subsidiaries to enter into, deliver and perform this Agreement and the Subscription Agreements and to issue and sell the Shares to be issued and sold by the Company hereunder.

 

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(y)           Not an Investment Company.  The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Disclosure Package and the Prospectus, will not be (i) required to register as an "investment company" as defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules and regulations of the Commission thereunder or (ii) a "business development company" (as defined in Section 2(a)(48) of the Investment Company Act).

(z)           No Price Stabilization.  Neither the Company nor any of its subsidiaries, or any of their respective officers, directors, affiliates or controlling persons has taken or will take, directly or indirectly, any action designed to or that would be reasonably expected to cause or result in, or which has constituted or which would reasonably be expected to constitute the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares.

(aa)           Good Title to Property.  The Company and each of its subsidiaries has good and defensible title to all property (whether real or personal) described in the Registration Statement, the Disclosure Package and the Prospectus as being owned by it, in each case free and clear of all liens, claims, security interests, other encumbrances or defects (collectively, "Liens"), except (i) such as are described in the Registration Statement, the Disclosure Package and the Prospectus and (ii) those that would not, individually or in the aggregate materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries. All of the property described in the Registration Statement, Disclosure Package and the Prospectus as being held under lease by the Company or any of its subsidiaries is held thereby under valid, subsisting and enforceable leases, without any liens, restrictions, encumbrances or claims, except those that, individually or in the aggregate, are not material and do not materially interfere with the use made and proposed to be made of such property by the Company or such subsidiary.

(bb)           Intellectual Property Rights.  The Company and each of its subsidiaries owns or possesses the right to use all patents, trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, licenses, inventions, software, databases, know-how, Internet domain names, trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures, and other intellectual property (collectively, "Intellectual Property") necessary to carry on its businesses as currently conducted, and as proposed to be conducted as described in the Disclosure Package and the Prospectus, and the Company is not aware of any claim to the contrary or any challenge by any other person to the rights of the Company or any of its subsidiaries with respect to the foregoing except for those that would not reasonably be expected to have a Material Adverse Effect.  The Company's and each of its subsidiaries' business as now conducted and as proposed to be conducted, to the knowledge of the Company, does not and will not infringe or conflict with any patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses or other Intellectual Property or franchise right of any person.  Neither the Company nor any of its subsidiaries has received notice of any claim against the Company or any of its subsidiaries alleging the infringement by the Company or any of its subsidiaries of any patent, trademark, service mark, trade name, copyright, trade secret, license in or other intellectual property right or franchise right of any person.

(cc)           No Labor Disputes.  No labor problem or dispute with the employees of the Company or any of the Company's subsidiaries exists, or, to the Company's knowledge, is threatened or imminent, which would reasonably be expected to result in a Material Adverse Effect.  The Company is not aware that any key employee or significant group of employees of the Company or any of the Company's subsidiaries plans to terminate employment with the Company or any of the Company's subsidiaries.  Neither the Company nor any of its subsidiaries has engaged in any unfair labor practice; except for matters which would not, individually or in the aggregate, result in a Material Adverse Effect, (i) there is (A) no unfair labor practice complaint pending or, to the Company's knowledge, threatened against the Company or any of its subsidiaries before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending or to the Company's knowledge, threatened, (B) no strike, labor dispute, slowdown or stoppage pending or, to the Company's knowledge, threatened against the Company or any of its subsidiaries and (C) no union representation dispute currently existing concerning the employees of the Company or any of its subsidiaries and (ii) to the Company's

 

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 knowledge, (A) no union organizing activities are currently taking place concerning the employees of the Company or any of its subsidiaries and (B) there has been no violation of any federal, state, local or foreign law relating to discrimination in the hiring, promotion or pay of employees, any applicable wage or hour laws or any provision of the Employee Retirement Income Security Act of 1974 ("ERISA") or the rules and regulations promulgated thereunder concerning the employees of the Company or any of its subsidiaries.

(dd)           Taxes.  Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, the Company and each of its subsidiaries (i) has timely filed all necessary federal, state, local and foreign income and franchise tax returns (or timely filed applicable extensions therefor) that have been required to be filed and (ii) is not in default in the payment of any taxes which were payable pursuant to such returns or any assessments with respect thereto, other than any which the Company or any of its subsidiaries is contesting in good faith and for which adequate reserves have been provided and reflected in the Company's financial statements included in the Registration Statement, the Disclosure Package and the Prospectus. Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, neither the Company nor any of its subsidiaries has any tax deficiency that has been or, to the knowledge of the Company, is reasonably likely to be asserted or threatened against it that would result in a Material Adverse Effect.  Neither the Company nor any of its subsidiaries has engaged in any transaction which is a corporate tax shelter or which could be characterized as such by the Internal Revenue Service or any other taxing authority.

(ee)           ERISA.  The Company and each of its subsidiaries is in compliance in all material respects with all presently applicable provisions of ERISA; no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company or any of its subsidiaries would have any liability; neither the Company nor any of its subsidiaries has incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company or any of its subsidiaries would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

(ff)           Compliance with Environmental Laws.  The Company and each of its subsidiaries (i) is in compliance with any and all applicable foreign, federal, state and local laws, orders, rules, regulations, directives, decrees and judgments relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of human health and safety or the environment which are applicable to their businesses ("Environmental Laws"); (ii) has received and is in compliance with all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business; and (iii) is in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, individually or in the aggregate, result in a Material Adverse Effect. There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, individually or in the aggregate, result in a Material Adverse Effect.

(gg)           Insurance.  The Company and each of its subsidiaries maintains or is covered by insurance provided by recognized, financially sound and reputable institutions with insurance policies in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties and as is customary for companies engaged in similar businesses in similar industries.  All such insurance is fully in force on the date hereof and will be fully in force as of the Closing Date.  The Company has no reason to believe that it and its subsidiaries will not be able to renew their existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.  Neither the Company nor any of its subsidiaries has been denied any material insurance policy or coverage for which it has applied.  Neither the Company nor any of its subsidiaries insures risk of loss through any captive insurance, risk retention group, reciprocal group or by means of any fund or pool of assets specifically set aside for contingent liabilities other than as described in the Disclosure Package.

 

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(hh)           Accounting Controls.  Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, the Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(ii)           Disclosure Controls.  The Company has established, maintains and evaluates "disclosure controls and procedures" (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), which (i) are designed to ensure that material information relating to the Company and its subsidiaries is made known to the Company's principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared, (ii) have been evaluated for effectiveness as of the end of the last fiscal period covered by the Registration Statement; and (iii) except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, such disclosure controls and procedures are effective to perform the functions for which they were established. Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, there are no material weaknesses in the design or operation of internal control over financial reporting which could adversely affect the Company's ability to record, process, summarize, or report financial data to management and the Board of Directors of the Company.  The Company is not aware of any fraud, whether or not material, that involves management or other employees who have a role in the Company's internal controls; and since the date of the most recent evaluation of such disclosure controls and procedures, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, except any corrective actions with regard to significant deficiencies and material weaknesses.  A member of the Audit Committee of the Board of Directors of the Company (the "Audit Committee") has confirmed to the Chief Executive Officer, Chief Financial Officer or General Counsel of the Company that, except as set forth in the Disclosure Package and the Prospectus, the Audit Committee is not reviewing or investigating, and neither the Company's independent auditors nor its internal auditors have recommended that the Audit Committee review or investigate, (i) adding to, deleting, changing the application of or changing the Company's disclosure with respect to, any of the Company's material accounting policies, (ii) any matter which could result in a restatement of the Company's financial statements for any annual or interim period during the current or prior three fiscal years, or (iii) a significant deficiency, material weakness, change in internal control over financial reporting or fraud involving management or other employees who have a significant role in the internal control over financial reporting.

(jj)           Minute Books.  The minute books of the Company and each of its subsidiaries that would be a Significant Subsidiary have been made available upon request to the Placement Agent and counsel for the Placement Agent, and such books (i) contain a complete summary in all material respects of all meetings and actions of the board of directors (including each board committee) and shareholders of the Company (or analogous governing bodies and interest holders, as applicable), and each of its Significant Subsidiaries since the time of its incorporation or organization through the date of the latest meeting and action, and (ii) accurately in all material respects reflect all transactions referred to in such minutes.

(kk)           Contracts; Off-Balance Sheet Interests.  There is no document, contract, permit or instrument, or off-balance sheet transaction (including without limitation, any "variable interests" in "variable interest entities," as such terms are defined in Financial Accounting Standards Board Interpretation No. 46) of a character required by the Securities Act or the Rules and Regulations to be described in the Registration Statement or the Disclosure Package or to be filed as an exhibit to the Registration Statement or document incorporated by reference therein, which is not described or filed as required.  Each description of a document, contract, permit or instrument in the Registration Statement or the Disclosure Package accurately reflects in all material respects the terms of the underlying document, contract, permit or instrument.  The documents, contracts, permits and instruments described in the immediately preceding sentence to which the Company is a party have been duly authorized, executed and delivered by the Company,

 

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constitute valid and binding agreements of the Company, are enforceable against and by the Company in accordance with the terms thereof (except as rights to indemnity thereunder may be limited by federal or state securities laws and except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity) and are in full force and effect on the date hereof.  No default exists, and no event has occurred which with notice or lapse of time or both would constitute a default, in the due performance and observance of any term, covenant or condition, by the Company or a subsidiary, if a subsidiary is a party thereto, of any agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or its properties or business or a subsidiary or the subsidiary's properties or business may be bound or affected which default or event, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

(ll)           No Undisclosed Relationships.  No relationship, direct or indirect, exists between or among the Company on the one hand and the directors, officers, stockholders, customers or suppliers of the Company or any of their affiliates on the other hand, which is required to be described in the Registration Statement, the Disclosure Package or the Prospectus or a document incorporated by reference therein and which has not been so described.

(mm)           Brokers Fees.  Except as disclosed in the Disclosure Package, there are no contracts, agreements or understandings between the Company and any person (other than this Agreement) that would give rise to a claim against the Company or the Placement Agent for a brokerage commission, finder's fee or other like payment in connection with the offering and sale of the Shares.

(nn)           Forward-Looking Statements.  No forward-looking statements (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in either the Disclosure Package or the Prospectus have been made or reaffirmed without a reasonable basis therefor or have been disclosed other than in good faith.

(oo)           Sarbanes-Oxley Act.  The Company, and to its knowledge, each of the Company's directors or officers, in their capacities as such, is in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act and any related rules and regulations promulgated by the Commission.  Each of the principal executive officer and the principal financial officer of the Company (and each former principal executive officer of the Company and each former principal financial officer of the Company as applicable) has made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to all reports, schedules, forms, statements and other documents required to be filed by him or her with the Commission.  For purposes of the preceding sentence, "principal executive officer" and "principal financial officer" shall have the meanings given to such terms in the Sarbanes-Oxley Act.

(pp)           Foreign Corrupt Practices.  Neither the Company nor, to the Company's knowledge, any other person acting on behalf of the Company, including without limitation any director, officer, agent or employee of the Company or any of its subsidiaries has, directly or indirectly, while acting on behalf of the Company or any of its subsidiaries (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity or failed to disclose fully any contribution in violation of law, (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof, (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

(qq)           Affiliate Transactions.  There are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company's liquidity or the availability of or requirements for its capital resources required to be described in the Disclosure Package and the Prospectus or a document incorporated by reference therein which have not been described as required.  The Company does not, directly or indirectly, including through any subsidiary, have any outstanding personal loans or other credit extended to or for any of its directors or executive officers.

 

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(rr)           Statistical or Market-Related Data.  Any statistical, industry-related or market-related data included or incorporated by reference in the Registration Statement, the Prospectus or the Disclosure Package, are based on or derived from sources that the Company reasonably and in good faith believes to be reliable and accurate, and such data agree with the sources from which they are derived.

(ss)           Money Laundering Laws.  The operations of the Company and its subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the USA PATRIOT Act, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the "Money Laundering Laws") and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending, or to the knowledge of the Company, threatened against the Company or any of its subsidiaries.

(tt)           OFAC.  Neither the Company nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ("OFAC"); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any affiliate, joint venture partner or other person or entity, which, to the Company's knowledge, will use such proceeds for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

(uu)           Margin Securities.  The Company does not own any "margin securities" as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), and none of the proceeds of the sale of the Shares will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Shares to be considered a "purpose credit" within the meanings of Regulation T, U or X of the Federal Reserve Board.

(vv)           Rated Securities.  At the Time of Sale there were, and as of the Closing Date there will be, no securities of or guarantees by the Company that are rated by a "nationally recognized statistical rating organization," as that term is defined in Rule 436(g)(2) promulgated under the Act.

(ww)           FINRA Affiliations.  There are no affiliations or associations between (i) any member of FINRA and (ii) the Company or any of the Company's officers, directors or 5% or greater securityholders or any beneficial owner of the Company's unregistered equity securities that were acquired at any time on or after the one hundred eightieth (180th) day immediately preceding the date the Registration Statement was initially filed with the Commission, except as set forth in the Registration Statement, the Disclosure Package and the Prospectus.

(xx)           Exchange Act Requirements.  The Company has filed in a timely manner (or within the periods specified by Rule 12b-25 under the Exchange Act) all reports required to be filed pursuant to Sections 13(a), 13(e), 14 and 15(d) of the Exchange Act during the preceding 36 months (except to the extent that Section 15(d) requires reports to be filed pursuant to Sections 13(d) and 13(g) of the Exchange Act, which shall be governed by the next clause of this sentence); and the Company has filed in a timely manner all reports required to be filed pursuant to Sections 13(d) and 13(g) of the Exchange Act, except where the failure to timely file could not reasonably be expected individually or in the aggregate to have a Material Adverse Effect.

 

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(yy)           Trading Market.  No approval of the shareholders of the Company under the rules and regulations of any trading market is required for the Company to issue and deliver to the Investors the Shares.  The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and is listed on the NASDAQ, and the Company has taken no action designed to, or reasonably likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the NASDAQ, nor has the Company received any notification that the Commission or the NASDAQ is contemplating terminating such registration or listing.  The Company has complied in all material respects with the applicable requirements of the NASDAQ for maintenance of inclusion of the Common Stock thereon.  The Company has filed a notification of the listing of the Shares on the NASDAQ.

(zz)           Reserve Reports.  The information underlying the estimates of the reserves of the Company and its subsidiaries, which was supplied by the Company to RPS Energy ("RPS"), independent petroleum engineers, and Hohn Engineering, PLLC ("Hohn"), independent petroleum engineers, for purposes of preparing the reserve reports incorporated by reference into the Registration Statement (the "Reserve Reports"), including, without limitation, production volumes, sales prices for production, contractual pricing provisions under oil or gas sales or marketing contracts under hedging arrangements, costs of operations and development, and working interest and net revenue interest information relating to the Company's ownership interests in properties, was true and correct in all material respects on the dates of such Reserve Reports; the estimates of future capital expenditures and other future exploration and development costs supplied to RPS and Hohn were prepared in good faith and with a reasonable basis; the information provided to RPS and Hohn by the Company for purposes of preparing the Reserve Reports was prepared in accordance with customary industry practices; each of RPS and Hohn was, as of the dates of the Reserve Reports prepared by it, and is, as of the date hereof, independent petroleum engineers with respect to the Company; other than any decrease in reserves resulting from normal production of the reserves and intervening spot market product price fluctuations incorporated by reference into the Registration Statement, to the knowledge of the Company, there are not any facts or circumstances that would adversely effect the reserves in the aggregate, or the aggregate present value of future net cash flows therefrom, as incorporated by reference into the Registration Statement and reflected in the Reserve Reports such as to cause a material adverse change; estimates of such reserves and the present value of the future net cash flows therefrom as incorporated by reference into the Registration Statement and reflected in the Reserve Reports comply in all material respects to the applicable requirements of Regulations S-K and S-X under the Act.

(aaa)           Other Information.  The Company has not provided and has not authorized any other person to act on its behalf to provide any Investor or its respective agents or counsel with any information about the Company that constitutes or might constitute material, non-public information which is not otherwise disclosed in the Disclosure Package.

Any certificate signed by any officer of the Company and delivered to the Placement Agent or to counsel for the Placement Agent in connection with the offering of the Shares shall be deemed a representation and warranty by the Company to the Placement Agent as to the matters covered thereby.

3.           Covenants.  The Company covenants and agrees with the Placement Agent as follows:

(a)           Reporting Obligations; Exchange Act Compliance.  The Company will file: (i) any Preliminary Prospectus and the Prospectus with the Commission within the time periods specified by Rule 424(b) and Rules 430A, 430B or 430C under the Securities Act, as applicable, (ii) any Issuer Free Writing Prospectus to the extent required by Rule 433 under the Securities Act, if applicable, (iii) all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus during the Prospectus Delivery Period, and (iv) furnish copies of each Issuer Free Writing Prospectus, if any, (to the extent not previously delivered) to the Placement Agent prior to 11:00 a.m. New York City time, on the second business day next succeeding the date of this Agreement in such quantities as the Placement Agent shall reasonably request.

 

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(b)           Continued Compliance with Securities Law.  If, at any time prior to the filing of the Prospectus pursuant to Rule 424(b), any event occurs as a result of which the Disclosure Package as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Company will (i) promptly notify the Placement Agent so that any use of the Disclosure Package may cease until it is amended or supplemented and (ii) amend or supplement the Disclosure Package to correct such statements or omission. If, during the Prospectus Delivery Period, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Registration Statement or supplement the Prospectus to comply with the Securities Act, the Company will (A) promptly notify the Placement Agent of such event and (B) promptly prepare and file with the Commission and furnish, at its own expense, to the Placement Agent and, to the extent applicable, the dealers and any other dealers upon request of the Placement Agent, an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance.  Upon request, the Company will deliver promptly to the Placement Agent such number of the following documents as the Placement Agent shall reasonably request:  (i) conformed copies of the Registration Statement as originally filed with the Commission (in each case excluding exhibits), (ii) any Preliminary Prospectus, (iii) any Issuer Free Writing Prospectus, (iv) the Prospectus (the delivery of the documents referred to in clauses (i), (ii) (iii) and (iv) of this subsection (b) to be made not later than 10:00 a.m., New York time, on the business day following the date of request), (v) conformed copies of any amendment to the Registration Statement (excluding exhibits), (vi) any amendment or supplement to the Disclosure Package or the Prospectus (the delivery of the documents referred to in clauses (v) and (vi) of this subsection (b) to be made not later than 10:00 a.m., New York City time, on the business day following the date of request) and (vii) any document incorporated by reference in the Disclosure Package or the Prospectus (excluding exhibits thereto) (the delivery of the documents referred to in clause (vii) of this subsection (b) to be made not later than 10:00 a.m., New York City time, on the business day following the date of request).

(c)           Issuer Free Writing Prospectuses.  The Company will (i) not make any offer relating to the Shares that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a "free writing prospectus" (as defined in Rule 405 under the Securities Act) required to be filed by the Company with the Commission under Rule 433 under the Securities Act unless the Placement Agent approves its use in writing prior to first use (each, a "Permitted Free Writing Prospectus"); provided, that the prior written consent of the Placement shall be deemed to have been given in respect of any electronic road show; (ii) treat each Permitted Free Writing Prospectus prepared or approved by the Company as an Issuer Free Writing Prospectus; (iii) comply with the requirements of Rules 164 and 433 under the Securities Act applicable to any Issuer Free Writing Prospectus, including the requirements relating to filing timely with the Commission, legending and record keeping; and (iv) not take any action that would result in the Placement Agent or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Placement Agent that the Placement Agent otherwise would not have been required to file thereunder. The Company and the Placement Agent, as applicable, will satisfy the conditions in Rule 433 under the Securities Act to avoid a requirement to file with the Commission any electronic road show.

(d)           Conflicting Issuer Free Writing Prospectus.  If at any time following the issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement relating to the Shares or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company promptly will notify the Placement Agent and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission. The foregoing sentence does not apply to statements in or omissions from any Issuer Free Writing Prospectus in reliance upon, and in conformity with, written information furnished to the Company by the Placement Agent specifically for inclusion therein, which information the parties hereto agree is limited to the Placement Agent's Information.

 

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(e)           Blue Sky Laws.  The Company will promptly take or cause to be taken, from time to time, such actions as the Placement Agent may reasonably request to qualify the Shares for offering and sale under the state securities, or blue sky, laws of such states or other jurisdictions as the Placement Agent may reasonably request and to maintain such qualifications in effect so long as the Placement Agent may request for the distribution of the Shares, provided, that in no event shall the Company be obligated to qualify as a foreign corporation in any jurisdiction in which it is not so qualified or to file a general consent to service of process in any jurisdiction or subject itself to taxation as doing business in any jurisdiction. The Company will advise the Placement Agent promptly of the suspension of the qualification or registration of (or any exemption relating to) the Shares for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its best efforts to obtain the withdrawal thereof at the earliest possible moment.

(f)           Earnings Statement.  As soon as practicable, the Company will make generally available to holders of its securities, an earnings statement of the Company (which need not be audited) covering a period of at least 12 months beginning after the date of this Agreement that will satisfy the provisions of Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158).  For the purpose of the preceding sentence, "as soon as practicable" means the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes the date of this Agreement, except that if such fourth fiscal quarter is the last quarter of the Company's fiscal year, "as soon as practicable" means the 90th day after the end of such fourth fiscal quarter.

(g)           Use of Proceeds.  The Company will apply the net proceeds from the sale of the Shares in the manner set forth in the Prospectus under the heading "Use of Proceeds."

(h)           Public Communications.  Prior to 9:00 a.m. New York City time on the business day immediately subsequent to the date hereof, the Company shall issue a press release (the "Press Release") reasonably acceptable to the Placement Agent disclosing the execution of this Agreement and the transactions contemplated hereby and thereby.  Prior to the Closing Date, the Company covenants not to issue any press release (other than the Press Release) or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Placement Agent is notified), without the prior written consent of the Placement Agent, unless in the judgment of the Company and its counsel, and after notification to the Placement Agent, such press release or communication is required by law.

(i)           Stabilization.  The Company will not take directly or indirectly any action designed, or that might reasonably be expected to cause or result in, or that will constitute, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Shares.

(j)           Transfer Agent.  The Company shall engage and maintain, at its expense, a transfer agent for the Common Stock.

(k)           Listing.  The Company shall use its best efforts to ensure the Shares are listed for quotation on the NASDAQ at the Closing Date and to maintain such listing.

(l)           Investment Company Act.  The Company shall not invest, or otherwise use the proceeds received by the Company from its sale of the Shares in such a manner as would require the Company to register as an investment company under the Investment Company Act.

(m)           Sarbanes-Oxley Act.  The Company will comply with all effective applicable provisions of the Sarbanes Oxley Act.

(n)           Periodic Reports.  The Company will file with the Commission such periodic and special reports as required by the Exchange Act.

 

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(o)           Lock-Up Period.  The Company will not, for a period of sixty (60) days from the date of this Agreement, (the "Lock-Up Period") without the prior written consent of the Placement Agent, directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, grant any option to purchase, make any short sale or otherwise dispose of, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock, other than (i) the Company's sale of the Shares hereunder, (ii) the issuance of shares of Common Stock, options to acquire shares of Common Stock or restricted stock units that provide a contingent right to acquire shares of Common Stock pursuant to the Company's employee benefit plans, qualified stock option plans or other director or employee compensation plans as such plans are in existence on the date hereof and described in the Prospectus, and (iii) the issuance of shares of Common Stock pursuant to the valid vesting of restricted stock units, exercises of options, warrants or rights outstanding on the date hereof.  The Company will cause each executive officer and director listed on Schedule II to furnish to the Placement Agent, prior to the date of this Agreement, a letter, substantially in the form of Exhibit B hereto, pursuant to which each such person shall agree, among other things, not to directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of, or announce the intention to otherwise dispose of, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock, not to engage in any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, directly or indirectly, the economic risk of ownership of shares of Common Stock or any such securities and not to engage in any short selling of any shares of Common Stock or any such securities, during the Lock-Up Period, without the prior written consent of the Placement Agent (provided, however, that the Company's directors and executive officers may put in place a Rule 10b5-1 trading plan during the Lock-Up Period that becomes effective after the termination of the Lock-Up Period and may sell up to the number of shares of Common Stock set forth opposite their respective names on Schedule II, not to exceed an aggregate of 105,000 shares of Common Stock for all such directors and executive officers).  The Company also agrees that during the Lock-Up Period, other than for the sale of the Shares hereunder and under the circumstances set forth in clauses (ii) and (iii) above, without prior written consent of the Placement Agent, the Company will not file any registration statement, preliminary prospectus or prospectus, or any amendment or supplement thereto, under the Securities Act for any such transaction or which registers, or offers for sale, shares of Common Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock, except for a registration statement on Form S-8 relating to employee benefit plans or a registration statement for the resale of securities of the Company.

(p)           Registration of Preferred Stock Purchase Rights.  To the extent that registration under Section 12(b) or 12(g) of the Exchange Act of the preferred stock purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as of April 4, 2007 between the Company and Fidelity Transfer Company, as rights agent, is required by the Exchange Act or the rules and regulations of the Commission thereunder, the Company shall, as soon as practicable after the date hereof, file with the Commission a registration statement on an appropriate form to effect the registration of the Rights under Section 12(b) or 12(g), as applicable, of the Exchange Act and shall use its reasonable best efforts to cause such registration statement to become effective. 

4.           Costs and Expenses.  The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay or reimburse the Placement Agent for all actual and accountable direct and reasonable expenses incident to the performance of this Agreement and in connection with the transactions contemplated hereby, including the reasonable legal fees and expenses of counsel to the Placement Agent, up to an aggregate amount of $50,000.

5.           Conditions of Placement Agent's Obligations.  The obligations of the Placement Agent hereunder and Closing of the sale of the Shares are subject to the following conditions and no Closing shall occur unless such conditions are satisfied on the Closing Date:

(a)           Filings with the Commission.  Each Issuer Free Writing Prospectus, if any, and the Prospectus shall have been filed with the Commission within the applicable time period prescribed for such filing by, and in compliance with, the Rules and Regulations and in accordance with Section 3(a) hereof.

 

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(b)           No Stop Orders.  Prior to the Closing: (i) no stop order suspending the effectiveness of the Registration Statement or any part thereof, preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus or any part thereof shall have been issued under the Securities Act and no proceedings for that purpose or pursuant to Section 8A under the Securities Act shall have been initiated or threatened by the Commission, (ii) no order suspending the qualification or registration of the Shares under the securities or blue sky laws of any jurisdiction shall be in effect and (iii) all requests for additional information on the part of the Commission (to be included or incorporated by reference in the Registration Statement, the Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of the Placement Agent. On or prior to the Closing Date, the Registration Statement or any amendment thereof or supplement thereto shall not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and neither the Disclosure Package, nor any Issuer Free Writing Prospectus nor the Prospectus nor any amendment thereof or supplement thereto shall contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.

(c)           Action Preventing Issuance.  No action shall have been taken and no law, statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would prevent the issuance or sale of the Shares or materially and adversely affect or would reasonably be expected to materially and adversely affect the business or operations of the Company; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued which would prevent the issuance or sale of the Shares or materially and adversely affect or would reasonably be expected to materially and adversely affect the business or operations of the Company.

(d)           Material Adverse Change.  Subsequent to the date of the latest audited financial statements included or incorporated by reference in the Disclosure Package, (i) neither the Company nor any of its subsidiaries taken as a whole has sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth in the Disclosure Package, (ii) there has not been any change in the capital stock (other than a change in the number of outstanding shares of Common Stock due to the issuance of shares upon the exercise of outstanding options or warrants or the conversion of convertible indebtedness), or material change in the short–term debt or long–term debt of the Company (other than upon conversion of convertible indebtedness) or any material adverse change, in or affecting the business, assets, general affairs, management, financial position, prospects, stockholders' equity or results of operations of the Company, otherwise than as set forth in the Disclosure Package, the effect of which, in any such case described in clause (i) or (ii) of this subsection (d), is, in the reasonable judgment of the Placement Agent, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Shares on the terms and in the manner contemplated in the Disclosure Package.

(e)           Representations and Warranties.  Each of the representations and warranties of the Company contained herein shall be true and correct when made and on and as of the Closing Date, as if made on such date (except that those representations and warranties that address matters only as of a particular date shall remain true and correct as of such date), and all covenants and agreements herein contained to be performed on the part of the Company and all conditions herein contained to be fulfilled or complied with by the Company at or prior to the Closing Date shall have been duly performed, fulfilled or complied with.

(f)           Opinions of Counsel to the Company.  The Placement Agent shall have received from Kruse Landa Maycock & Ricks, LLC, counsel to the Company, such counsel's written opinion, addressed to the Placement Agent and dated the Closing Date, to the effect set forth on Exhibit C attached hereto.

(g)           Opinion of Counsel to the Placement Agent.  The Placement Agent shall have received from Bracewell & Giuliani LLP, counsel for the Placement Agent, such counsel's opinion or opinions, dated the Closing Date, with respect to such matters as the Placement Agent may reasonably require, and the Company shall have furnished to such counsel such documents as it requests to enable it to pass upon such matters.

 

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(h)           Accountant's Comfort Letter.  On the date hereof, the Placement Agent shall have received a letter dated the date hereof (the "Comfort Letter"), addressed to the Placement Agent and in form and substance reasonably satisfactory to the Placement Agent and counsel for the Placement Agent, from PricewaterhouseCoopers LLP, (i) confirming that they are independent public accountants with respect to the Company within the meaning of the Securities Act and the Rules and Regulations and (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Disclosure Package, as of a date not more than three days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants' "comfort letters" to underwriters, delivered according to Statement of Auditing Standards No. 72 and Statement of Auditing Standard No. 100 (or successor bulletins), in connection with registered public offerings.

(i)           Bring-Down Letter.  On the Closing Date, the Placement Agent shall have received from PricewaterhouseCoopers LLP a letter (the "Bring-Down Letter"), dated as of the Closing Date, addressed to the Placement Agent and in form and substance reasonably satisfactory to the Placement Agent and counsel for the Placement Agent, (i) confirming that they are independent public accountants with respect to the Company within the meaning of the Securities Act and the Rules and Regulations, (ii) stating, as of the date of the Bring-Down Letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Disclosure Package and the Prospectus, as of a date not more than three days prior to the date of the Bring-Down Letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by the Comfort Letter and (iii) confirming in all material respects the conclusions and findings set forth in the Comfort Letter.

(j)           Officer's Certificate.  The Placement Agent shall have received on the Closing Date a certificate, addressed to the Placement Agent and dated the Closing Date, of the chief executive officer and the chief financial officer of the Company to the effect that:

(i)           each of the representations, warranties and agreements of the Company contained in this Agreement were true and correct when originally made and as of the Time of Sale and the Closing Date as if made on each such date (except that those representations and warranties that address matters only as of a particular date remain true and correct as of each such date); and the Company has complied with all agreements and satisfied all the conditions on its part required under this Agreement to be performed or satisfied at or prior to the Closing Date;

(ii)           there has not been, subsequent to the date of the most recent audited financial statements included or incorporated by reference in the Disclosure Package, any material adverse change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a material adverse change or a prospective material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company except as set forth in or incorporated by reference into the Prospectus or the Disclosure Package;

(iii)           no stop order suspending the effectiveness of the Registration Statement or any part thereof or any amendment thereof or the qualification of the Shares for offering or sale, nor suspending or preventing the use of the Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus has been issued, and no proceedings for that purpose or pursuant to Section 8A under the Securities Act is pending or, to their knowledge, threatened by the Commission or any state or regulatory body;

 

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(iv)           the Registration Statement and each amendment thereto, at the Time of Sale and as of the date of this Agreement and as of the Closing Date did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Disclosure Package, as of the Time of Sale and as of the Closing Date, any Issuer Free Writing Prospectus as of its date and as of the Closing Date, the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading; and

(v)           no event has occurred as a result of which it is necessary to amend or supplement the Registration Statement, the Prospectus or the Disclosure Package in order to make the statements therein not untrue or misleading in any material respect.

(k)           Lock-Up Letters.  The Placement Agent shall have received the written agreements, substantially in the form of Exhibit B hereto, of the executive officers and directors of the Company listed in Schedule II to this Agreement.

(l)           Subscription Agreements.  The Company shall have entered into Subscription Agreements with each of the Investors, and such agreements shall be in full force and effect on the Closing Date.

(m)           NASDAQ. The Shares shall have been listed and authorized for trading on the NASDAQ, and satisfactory evidence of such actions shall have been provided to the Placement Agent.

(n)           Engineer Letters.  The Placement Agent shall have received on the Closing Date a letter from each of RPS and Hohn, addressed to the Placement Agent and dated the Closing Date, an independence letter, in form and substance reasonably satisfactory to the Placement Agent.

(o)           Additional Documents.  Prior to the Closing Date, the Company shall have furnished to the Placement Agent such further information, certificates or documents as the Placement Agent shall have reasonably requested.

All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Placement Agent.

If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Placement Agent by notice to the Company at any time prior to the Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 4, Section 6 and Section 12 hereof shall at all times be effective and shall survive such termination.

6.           Indemnification and Contribution.

(a)           Indemnification of the Placement Agent.  The Company agrees to indemnify, defend and hold harmless the Placement Agent, its affiliates, each of its directors, officers, members, employees, representatives and agents and any person who controls the Placement Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each a "Control Person"), and the successors and assigns of all of the foregoing persons, from and against any losses, claims, damages, expenses or liabilities, joint or several, to which such person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, the common law or otherwise (including in settlement of any litigation if such settlement is effected with the written consent of the Company), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Disclosure Package, the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus or in any materials or information provided to Investors by, or with the approval of, the Company in connection with the marketing of the offering of the

 

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Shares ("Marketing Materials"), including any roadshow or investor presentations made to Investors by the Company (whether in person or electronically) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such person for any legal or other expenses reasonably incurred by it in connection with investigating or defending against such loss, claim, damage, liability, expense or action; or (ii) in whole or in part upon any inaccuracy in the representations and warranties of the Company contained herein; or (iii) in whole or in part upon any failure of the Company to perform its obligations hereunder or under law; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, expense, liability or action arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Disclosure Package, the Prospectus, or any such amendment or supplement, any Issuer Free Writing Prospectus or in any Marketing Materials, in reliance upon and in conformity with written information furnished to the Company by the Placement Agent or its representatives or agents, specifically for use in the preparation thereof, which information the parties hereto agree is limited to the Placement Agent's Information.

(b)           Indemnification of the Company.  The Placement Agent agrees to indemnify, defend and hold harmless the Company, its affiliates, each of its directors, officers, members, employees, representatives and agents and any Company Control Person against any losses, claims, damages, expenses or liabilities to which the Company may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, the common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the applicable Placement Agent), insofar as such losses, claims, damages, expenses or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Disclosure Package, the Prospectus, or any amendment or supplement thereto or any Issuer Free Writing Prospectus or Marketing Materials, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Disclosure Package, the Prospectus, or any such amendment or supplement thereto, or any Issuer Free Writing Prospectus or Marketing Materials in reliance upon and in conformity with written information furnished to the Company by such Placement Agent or its representatives or agents, specifically for use in the preparation thereof, which information the parties hereto agree is limited to the Placement Agent's Information, and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending against any such loss, claim, damage, liability or action. Notwithstanding the provisions of this Section 6(b), in no event shall any indemnity by the Placement Agent under this Section 6(b) exceed the total compensation received by the Placement Agent in accordance with Section 1(b) hereof.

(c)           Notice and Procedures.  If any action, suit or proceeding (each, a "Proceeding") is brought against a person (an "Indemnified Party") in respect of which indemnity may be sought against the Company or the Placement Agent (as applicable, the "Indemnifying Party") pursuant to subsections (a) or (b) above, respectively, of this Section 6, such Indemnified Party shall promptly notify such Indemnifying Party in writing of the institution of such Proceeding and such Indemnifying Party shall assume the defense of such Proceeding, including the employment of counsel reasonably satisfactory to such Indemnified Party (who shall not, except with the consent of the Indemnified Party, be counsel to the Indemnifying Party) and payment of all fees and expenses; provided, however, that the omission to so notify such Indemnifying Party shall not relieve such Indemnifying Party from any liability which such Indemnifying Party may have to any Indemnified Party or otherwise, except to the extent the Indemnifying Party has been materially prejudiced by such failure; and provided, further, that the failure to notify the Indemnifying Party shall not relieve it from any liability that it may have to an Indemnified Party otherwise than under subsection (a) or (b) above. The Indemnified Party or Parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless (i) the employment of such counsel shall have been authorized in writing by the Indemnifying Party in connection with the defense of such Proceeding, (ii) after having received notice from the Indemnified Party the Indemnifying Party shall not have, within a reasonable period of time in light of the circumstances, employed counsel to defend such Proceeding or (iii) such Indemnified Party or Parties shall have reasonably concluded upon written advice of counsel that there may be one or more legal defenses available to it or them which are different from, additional to or in conflict with those available to such Indemnifying Party (in which case such Indemnifying Party shall not have the right to direct that portion of the defense of such Proceeding on behalf of the Indemnified Party or Parties, but such Indemnifying Party or Parties may employ counsel and participate in the defense thereof but the reasonable fees and expenses of such counsel shall be at the expense of the Indemnifying Party), in any of which events such reasonable fees and expenses shall be borne by such Indemnifying

 

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Party and paid as incurred (it being understood, however, that such Indemnifying Party shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel) in any one Proceeding or series of related Proceedings in the same jurisdiction representing the Indemnified Parties who are parties to such Proceeding). An Indemnifying Party shall not be liable for any settlement of any Proceeding effected without its written consent but, if settled with its written consent, such Indemnifying Party agrees to indemnify and hold harmless the Indemnified Party or parties from and against any loss or liability by reason of such settlement.  Notwithstanding the foregoing sentence, if at any time an Indemnified Party shall have requested an Indemnifying Party to reimburse the Indemnified Party for fees and expenses of counsel as contemplated by the second sentence of this Section 6(c), then the Indemnifying Party agrees that it shall be liable for any settlement of any Proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such Indemnifying Party of the aforesaid request, (ii) such Indemnifying Party shall not have fully reimbursed the Indemnified Party in accordance with such request prior to the date of such settlement, (iii) such Indemnified Party shall have given the Indemnifying Party at least 30 days' prior notice of its intention to settle and (iv) such settlement includes an unconditional release of the Indemnifying Party from all liability on claims that are the subject matter of such Proceeding and does not include an admission of fault or culpability or a failure to act by or on behalf of the Indemnifying Party; provided, however, that this sentence shall not apply if the fees and expenses are reasonably in dispute. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened Proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding and does not include an admission of fault or culpability or a failure to act by or on behalf of such Indemnified Party.

(d)           Contribution.  If the indemnification provided for in this Section 6 is unavailable to an Indemnified Party under subsections (a) or (b) of this Section 6 or insufficient to hold an Indemnified Party harmless in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of the losses, claims, damages, liabilities or expenses referred to in subsections (a) or (b) above, (i) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party or Parties on the one hand and the Indemnified Party or Parties on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Party or Parties on the one hand and the Indemnified Party or Parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Placement Agent on the other hand shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Shares (before deducting expenses) received by the Company bear to the discounts and commissions received by the Placement Agent.  The relative fault of the Company on the one hand and the Placement Agent on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by the Placement Agent, on the other hand, and the parties' relevant intent, knowledge, access to information and opportunity to correct or prevent such untrue statement, omission, act or failure to act; provided that the parties hereto agree that the written information furnished to the Company by the Placement Agent for use in the Registration Statement, Disclosure Package, Issuer Free Writing Prospectus, the Prospectus or Marketing Materials, or in any amendment or supplement thereto, consists solely of the Placement Agent's Information.

 

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(e)           Allocation.  The Company and the Placement Agent agree that it would not be just and equitable if contribution pursuant to subsection (d) above were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of subsection (d) above.  Notwithstanding the provisions of this Section 6(e), the Placement Agent shall not be required to contribute any amount in excess of the total commissions received by such Placement Agent in accordance with Section 1(b) less the amount of any damages which such Placement Agent has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement, omission or alleged omission, act or alleged act or failure to act or alleged failure to act.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Party at law or in equity.

(f)           Representations and Agreements to Survive Delivery.  The obligations of the Company under this Section 6 shall be in addition to any liability which the Company may otherwise have.  The indemnity and contribution agreements contained in this Section 6 and the covenants, agreements, warranties and representations of the Company and the Placement Agent contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Placement Agent, any person who controls the Placement Agent within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act or any affiliate of the Placement Agent, or by or on behalf of the Company, its directors or officers or any person who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and (iii) the issuance and delivery of the Shares. The Company and the Placement Agent agree promptly to notify each other of the commencement of any Proceeding against it and, in the case of the Company, against any of the Company's officers or directors in connection with the issuance and sale of the Shares, or in connection with the Registration Statement, the Disclosure Package or the Prospectus.

7.           Information Furnished by Placement Agent.

(a)           The Company acknowledges that the statements set forth in the first paragraph with respect to the Placement Agent's name under the heading "Plan of Distribution" in the Prospectus (the "Placement Agent's Information") constitute the only information relating to the Placement Agent furnished in writing to the Company by the Placement Agent as such information is referred to in Sections 2 and 6 hereof.

(b)           The Placement Agent agrees and confirms that it has not provided any Investor or its respective agents or counsel with any information about the Company that constitutes or might constitute material, non-public information which is not otherwise disclosed in the Disclosure Package.

8.           Termination.  The Placement Agent shall have the right to terminate this Agreement by giving notice as hereinafter specified at any time at or prior to the Closing Date, without liability on the part of the Placement Agent to the Company, if (i) prior to delivery and payment for the Shares (A) trading in securities generally shall have been suspended on or by the New York Stock Exchange, the New York Stock Exchange Amex Equities, the NASDAQ Global Market or in the over the counter market (each, a "Trading Market"), (B) trading in the Common Stock of the Company shall have been suspended on any exchange, in the over-the-counter market or by the Commission, (C) a general moratorium on commercial banking activities shall have been declared by federal or New York state authorities or a material disruption shall have occurred in commercial banking or securities settlement or clearance services in the United States, (D) there shall have occurred any outbreak or material escalation of hostilities or acts of terrorism involving the United States or there shall have been a declaration by the United States of a national emergency or war, (E) there shall have occurred any other calamity or crisis or any material change in general economic, political or financial conditions in the United States or elsewhere, if the effect of any such event specified in clause (D) or (E), in the judgment of the Placement Agent, is material and adverse and makes it impractical or inadvisable to proceed with the completion of the sale of and payment for the Shares on the Closing Date on the terms and in the manner contemplated by this Agreement, the Disclosure Package and the Prospectus, (ii) since the time of execution of this Agreement or the earlier respective dates as of which information is given in the Disclosure Package or incorporated by reference therein, there has been any Material Adverse Effect, (iii) the Company shall have failed, refused or been

 

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unable to comply with the terms of or perform any agreement or obligation under this Agreement or any Subscription Agreement, other than by reason of a default by the Placement Agent, or (iv) any condition of the Placement Agent's obligations hereunder is not fulfilled. Any such termination shall be without liability of any party to any other party except that the provisions of Section 4, Section 6, and Section 12 hereof shall at all times be effective notwithstanding such termination.  The Company may, at its option, terminate this Agreement at any time prior to the Time of Sale upon giving notice as hereinafter specified without liability on the part of the Company to the Placement Agent if the Placement Agent fails to comply in any material respect with any of its obligations hereunder.

9.           Notices.  All statements, requests, notices and agreements hereunder shall be in writing or by facsimile, and:

(a)           if to the Placement Agent, shall be delivered or sent by mail, telex or facsimile transmission as follows:

Pritchard Capital Partners, LLC

103 Northpark Blvd., Suite 101

Covington, LA 70433

Attention: Todd Giustiniano, Chief Operating Officer

Facsimile No.:  (985) 674-5775

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

Bracewell & Giuliani LLP

711 Louisiana St, Suite 2300

Houston, Texas  77002

Attention: Charles H. Still, Jr.

Facsimile No.: (713) 437-5318

(b)           if to the Company shall originate from the Placement Agent and shall be delivered or sent by mail, telex or facsimile transmission to:

FX Energy, Inc.

3006 Highland Drive, Suite 206

Salt Lake City, Utah 84106

Attention: David N. Pierce, President and Chief Executive Officer

Facsimile No.: (801) 486-5575

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

Kruse Landa Maycock & Ricks, LLC

136 East South Temple Street, Twenty-First Floor

Salt Lake City, Utah 84111

Attention: James R. Kruse

Facsimile No.: (801) 359-3954

Any such statements, requests, notices or agreements shall be effective only upon receipt.  Any party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose.

10.           Persons Entitled to Benefit of Agreement; Several Obligations of Placements Agents.  No party may assign this Agreement without the prior written consent of the others.  This Agreement shall inure to the benefit of and shall be binding upon the Placement Agent, the Company, and their respective successors and assigns.  Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person, except that the representations, warranties, covenants, agreements and indemnities of the Company

 

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contained in this Agreement shall also be for the benefit of the controlling persons, officers and directors referred to in Section 6(a) hereof and the representations, warranties, covenants, agreements and indemnities of the Placement Agent shall also be for the benefit of the controlling persons, officers and directors referred to in Section 6(b) hereof.  The term "successors and assigns" as herein used shall not include any purchaser of the Shares by reason merely of such purchase.

11.           Governing Law; Submission to Jurisdiction.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the conflicts of laws provisions thereof.  Except as set forth below, no Proceeding may be commenced, prosecuted or continued in any court other than the courts of State of New York located in the City and County of New York or the United States District Court for the Southern District of New York, which courts shall have jurisdiction over the adjudication of such matters, and the Company hereby consents to the jurisdiction of such courts and personal service with respect thereto.  The Company and the Placement Agent hereby consent to personal jurisdiction, service and venue in any court in which any Proceeding arising out of or in any way relating to this Agreement is brought by any third party against the Placement Agent.  The Company and the Placement Agent hereby waive all right to trial by jury in any Proceeding (whether based upon contract, tort or otherwise) in any way arising out of or relating to this Agreement.  The Company and the Placement Agent agree that a final judgment in any such Proceeding brought in any such court shall be conclusive and binding upon the Company and the Placement Agent, respectively, and may be enforced in any other courts in the jurisdiction of which the Company is or may be subject, by suit upon such judgment.

12.           No Fiduciary Relationship.  The Company hereby acknowledges and agrees that:

(a)           No Other Relationship.  The Placement Agent has been retained solely to act as Placement Agent on an exclusive basis in connection with the offering of the Company's securities.  The Company further acknowledges that the Placement Agent is acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm's length basis and in no event do the parties intend that the Placement Agent act or be responsible as a fiduciary to the Company, its management, stockholders, creditors or any other person in connection with any activity that such Placement Agent may undertake or has undertaken in furtherance of the offering of the Company's securities, either before or after the date hereof, irrespective of whether such Placement Agent has advised or is advising the Company on other matters. The Placement Agent hereby expressly disclaims any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company hereby confirms its understanding and agreement to that effect.

(b)           Arm's-Length Negotiations.  The price of the Shares determined hereunder were or will be established by the Company following discussions and arms-length negotiations with the Investors and the Placement Agent, and the Company is capable of evaluating and understanding, and understands and accepts, the terms, risks and conditions of the transactions contemplated by this Agreement.

(c)           Absence of Obligation to Disclose.  The Company has been advised that the Placement Agent and its affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Company and that the Placement Agent has no obligation to disclose such interests or transactions to the Company by virtue of any fiduciary, advisory or agency relationship.

(d)           Waiver.  The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Placement Agent with respect to any breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions and agrees that the Placement Agent shall not have any liability (whether direct or indirect) to the Company in respect of such a fiduciary duty claim to any person asserting a fiduciary duty claim on behalf of the Company, including stockholders, employees or creditors of the Company.

13.           Headings.  The Section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement.

 

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14.           Amendments and Waivers.  No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the party or parties to be bound thereby.  The failure of a party to exercise any right or remedy shall not be deemed or constitute a waiver of such right or remedy in the future.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided.

15.           Counterparts.  This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original and all such counterparts shall together constitute one and the same instrument.  Delivery of an executed counterpart by facsimile or portable document format (.pdf) or of a similar format shall be effective as delivery of a manually executed counterpart thereof.

16.           Research Analyst Independence.  The Company acknowledges that the Placement Agent's research analysts and research departments are required to be independent from their investment banking divisions and are subject to certain regulations and internal policies, and that the Placement Agent's research analysts may hold views and make statements or investment recommendations and/or publish research reports with respect to the Company and/or the offering that differ from the views of their investment banking divisions.  The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Placement Agent with respect to any conflict of interest that may arise from the fact that the views expressed by its independent research analysts and research departments may be different from or inconsistent with the views or advice communicated to the Company by such Placement Agent's investment banking division.  The Company acknowledges that the Placement Agent is a full service securities firm and as such from time to time, subject to applicable securities laws, rules and regulations, may effect transactions for its own account or the account of its customers and hold long or short positions in debt or equity securities of the Company; provided, however, that nothing in this Section 16 shall relieve the Placement Agent of any responsibility or liability it may otherwise bear in connection with activities in violation of applicable securities laws, rules or regulations.

17.           Entire Agreement.  This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof.

18.           Partial Unenforceability.  The invalidity or unenforceability of any section, paragraph, clause or provision of this Agreement shall not affect the validity or enforceability of any other section, paragraph, clause or provision hereof.  If any section, paragraph, clause or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

19.           Effectiveness.  This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.

 

[Signature Page Follows]

 

26

  

  

  

If the foregoing is in accordance with your understanding of the agreement between the Company and the Placement Agent, kindly indicate your acceptance in the space provided for that purpose below.

Very truly yours,

FX ENERGY, INC.

By:           /s/ David N. Pierce

Name: David N. Pierce

Title: President

Accepted as of the date first

above written:

PRITCHARD CAPITAL PARTNERS, LLC

By:           /s/ Todd Giustiniano

Name: Todd Giustiniano

Title: C.O.O.

27

  

  

  

Schedules and Exhibits

	  	  
	
Schedule I:

	
Issuer Free Writing Prospectuses

	  	  
	
Schedule II:

	
List of Directors and Officers for Lock-Up Letter

	  	  
	
Schedule III:

	
Pricing Information

	  	  
	
Exhibit A:

	
Form of Subscription Agreement

	  	  
	
Exhibit B:

	
Form of Lock-Up Letter

	  	  
	
Exhibit C:

	
Opinion of Counsel to the Company

  

  

  

SCHEDULE I

Issuer Free Writing Prospectuses

None

  

  

  

SCHEDULE II

List of Directors and Officers for Lock-Up Letter

	  	
Number of Shares Subject

	
Name

	
Lock-Up Exception

	  	  
	
David N. Pierce

	
25,000

	
Thomas B. Lovejoy

	  
	
Jerzy B. Maciolek

	
20,000

	
Arnold S. Grundvig, Jr.

	  
	
Richard Hardman

	  
	
Dennis B. Goldstein

	  
	
H. Allen Turner

	  
	
Andrew W. Pierce

	
25,000

	
Clay Newton

	
15,000

	
Scott J. Duncan

	
  20,000

	
Total

	
105,000

  

  

  

SCHEDULE III

Pricing Information

Total Number of Shares of Common Stock to Be Sold:  1,500,000

Purchase Price per Share:  $6.00

Total Placement Agent Fees:  $450,000.00

Total Net Proceeds to Company (before expenses):  $8,550,000.00

  

  

  

EXHIBIT A

Form of Subscription Agreement

See attached.

  

  

  

EXHIBIT B

Form of Lock-Up Letter

FX ENERGY, INC.

LOCK-UP AGREEMENT

Pritchard Capital Partners, LLC

600 Travis Street

Suite 5210

Houston, Texas 77002

Re: FX Energy, Inc. – Public Offering

Ladies and Gentlemen:

The undersigned understands that Pritchard Capital Partners, LLC (the "Placement Agent") proposes to enter into a Placement Agency Agreement (the "Agreement") with FX Energy, Inc., a Nevada corporation (the "Company"), providing for a public offering of shares (the "Shares") of common stock, par value $0.001 per share, of the Company (the "Common Stock"), pursuant to a Registration Statement on Form S-3 filed with the Securities and Exchange Commission (the "SEC").

In consideration of the agreement by the Placement Agent to continue its efforts in connection with the offering of the Shares, and of other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned agrees that, during the period beginning on the date hereof and continuing to and including the date sixty (60) days after the date of the final prospectus covering the offering of the Shares (the "Lock-Up Period"), the undersigned will not offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares of Common Stock, or any options or warrants to purchase any shares of Common Stock, or any securities convertible into, exchangeable for or that represent the right to receive shares of Common Stock, whether now owned or hereafter acquired, owned directly by the undersigned (including holding as a custodian) or with respect to which the undersigned has beneficial ownership within the rules and regulations of the SEC (collectively, the "Undersigned's Shares"); provided, however, that undersigned may put in place a Rule 10(b)5-1 trading plan during the Lock-Up Period that becomes effective after the termination of the Lock-Up Period.

The foregoing restriction is expressly agreed to preclude the undersigned from engaging in any hedging or other transaction which is designed to or reasonably expected to lead to, or result in, a sale or disposition of the Undersigned's Shares even if such shares would be disposed of by someone other than the undersigned.  Such prohibited hedging or other transactions would include without limitation any short sale (whether or not against the box) or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Undersigned's Shares or with respect to any security that includes, relates to, or derives any significant part of its value from such shares.  Notwithstanding the foregoing, nothing in this Lock-Up Agreement shall prohibit (i) any grant or exercise of options to purchase shares of Common Stock pursuant to the Company's option plans or (ii) the conversion of any equity security held by the undersigned into shares of Common Stock.

Notwithstanding the foregoing, the undersigned may transfer the Undersigned's Shares (i) as a bona fide gift or gifts, or by will or intestacy, provided that the transferee or transferees thereof agree to be bound by the restrictions set forth herein, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that the trustee of the trust agrees to be bound by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, or (iii) with the prior written consent of the Placement Agent.  For purposes of this Lock-Up Agreement, "immediate family" shall mean any relationship by blood, marriage or adoption, not more remote

 

 

  

  

  

 

than first cousin.  [ADD THE FOLLOWING IF APPLICABLE:  In addition, notwithstanding the foregoing, the undersigned may transfer up to [_______] of the Undersigned's Shares [NOT TO EXCEED 105,000 SHARES FOR ALL DIRECTORS AND EXECUTIVE OFFICERS] in one or more broker's transactions pursuant to Rule 144 of the SEC under the Securities Act of 1933, as amended.]

Except as set forth on the signature page hereto, the undersigned now has, and except as contemplated by clauses (i) through (iv) of the foregoing paragraph, for the duration of this Lock-Up Agreement will have, good and marketable title to the Undersigned's Shares, free and clear of all liens, encumbrances and claims whatsoever.  The undersigned also agrees and consents to the Company entering stop transfer instructions with its transfer agent and registrar against the transfer of the Undersigned's Shares except in compliance with the foregoing restrictions.

Notwithstanding anything contained herein to the contrary, if (1) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by this Lock-Up Agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

The undersigned further represents and agrees that the undersigned has not taken and will not take, directly or indirectly, any action which is designed to or which has constituted or which would reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares, or which has otherwise constituted or will constitute any prohibited bid for or purchase of the Shares or any related securities.

Notwithstanding anything contained herein to the contrary, this Lock-Up Agreement shall terminate and be of no further force or effect upon the earlier of (i) expiration of the Lock-Up Period and (ii) written notice either by the Company to the Placement Agent or by the Placement Agent to the Company that the offering of the Shares has been terminated or suspended in accordance with the terms of the Agreement.

The undersigned understands that the Company and the Placement Agent are relying upon this Lock-Up Agreement in proceeding toward consummation of the offering.  The undersigned further understands that this Lock-Up Agreement is irrevocable and shall be binding upon the undersigned's heirs, legal representatives, successors and assigns.

Very truly yours,

Date:                                           

________________________________________

Signature

________________________________________

Print Name

________________________________________

Title

The following liens, encumbrances and claims relate to the Undersigned's Shares:

____________________________________________________________________________

____________________________________________________________________________

  

  

  

EXHIBIT C

Opinion of Counsel to the Company

	
1.

	
The Company validly exists as a corporation in good standing under the laws of the State of Nevada.

	
2.

	
The Company has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Disclosure Package and the Prospectus and to enter into and perform its obligations under the Placement Agency Agreement and each Subscription Agreement.

	
3.

	
The authorized capital stock of the Company is as set forth in the Disclosure Package and the Prospectus under the heading "Description of Capital Stock."

	
4.

	
The Shares have been duly authorized for issuance and sale to the Investors and, when issued and delivered by the Company against payment by the Investors of the consideration therefor as set forth in the Prospectus and the Subscription Agreements, will be validly issued, fully paid and non-assessable.

	
5.

	
The issuance of the Shares is not subject to the preemptive or other similar rights of any securityholder of the Company under the laws of the State of Nevada or under any agreement or instrument that has been filed as an exhibit to a report filed by the Company with the Commission pursuant to Section 13(d) of the Exchange Act (each, a "Material Agreement").

	
6.

	
The Placement Agency Agreement and each Subscription Agreement have been duly authorized, executed and delivered by the Company.

	
7.

	
The Registration Statement and each post-effective amendment thereto have become effective under the Securities Act; any required filing of each prospectus relating to the Shares (including the Preliminary Prospectus and the Prospectus) pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b) (without reference to Rule 424(b)(8)); any required filing of each Issuer Free Writing Prospectus pursuant to Rule 433 has been made in the manner and within the time period required by Rule 433(d); and no stop order suspending the effectiveness of the Registration Statement has been issued under the Securities Act and, to the knowledge of such counsel, no proceedings for that purpose have been instituted or are pending or threatened by the Commission.

	
8.

	
The Registration Statement, including without limitation the information deemed to be a part thereof pursuant to Rule 430A, Rule 430B or Rule 430C, the Prospectus, excluding the documents incorporated by reference therein, and each amendment or supplement to the Registration Statement and the Prospectus, excluding the documents incorporated by reference therein, as of their respective effective or issue dates, other than the financial statements and supporting schedules and information pertaining to reserves of oil and natural gas included therein or omitted therefrom, as to which such counsel need express no opinion, complied as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations.

	
9.

	
The documents incorporated by reference in the Prospectus (other than the financial statements and supporting schedules and information pertaining to reserves of oil and natural gas included therein or omitted therefrom, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder.

	
10.

	
The information in the Disclosure Package and the Prospectus under the caption "Description of Capital Stock,” to the extent that it constitutes matters of law or summaries of legal matters, the Company’s articles and bylaws or legal proceedings, is correct in all material respects.

	
11.

	
No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign (other than under the Securities Act and the Rules and Regulations, which have been made or obtained, or as may be required under the securities laws of the various states, as to which such counsel need express no opinion) is necessary or required in connection with the due authorization, execution and delivery of the Placement Agency Agreement or the Subscription Agreements or for the offering, issuance, sale or delivery of the Shares.

 

 

  

  

  

 

 

	
12.

	
The execution, delivery and performance of the Placement Agency Agreement and the Subscription Agreements; the consummation of the transactions contemplated in the Placement Agency Agreement and the Subscription Agreements and in the Prospectus (including the issuance and sale of the Shares and the use of the proceeds from the sale of the shares as described in the Prospectus under the caption “Use of Proceeds”); and compliance by the Company with its obligations under the Placement Agency Agreement and the Subscription Agreements do not and will not, whether with or without the giving of notice or lapse of time or both, conflict with or constitute a breach of, or default or give rise to any right of termination or other right or the cancellation or acceleration of any right or obligation or loss of a benefit under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to any Material Agreement, nor will such action result in any violation of the provisions of the articles or by-laws of the Company or any subsidiary, or any applicable law, statute, rule, regulation or judgment, or any order, writ or decree known to us of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, assets or operations.

	
13.

	
The Company is not and, after giving effect to issuance and sale of the Shares, will not be required to register as an “investment company” under the Investment Company Act.

In addition, such counsel shall state that it has participated in conferences with officers and other representatives of the Company and the independent registered public accounting firm of the Company, counsel for the Placement Agent and representatives of the Placement Agent, at which the contents of the Registration Statement, the Disclosure Package and the Prospectus (including the documents incorporated by reference) and related matters were discussed, and, based on the foregoing, no facts have come to its attention that would lead it to believe that:

(A)           the Registration Statement, including the information deemed to be a part thereof pursuant to Rule 430A, Rule 430B or Rule 430C, and each post-effective amendment thereto, at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading;

(B)           the Prospectus, as of its date and as of the Closing Date, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; or

(C)           the Disclosure Package, as of the Time of Sale, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of circumstances under which they were made, not misleading;

it being understood that such counsel need not express any statement or belief with respect to the financial statements and other financial or accounting data and information pertaining to reserves of oil and natural gas, included or incorporated or deemed incorporated by reference in, or excluded from, the Registration Statement, the Prospectus or the Disclosure Package.

In rendering such opinion, such counsel may rely as to matters of fact (but not as to legal conclusions), on certificates of responsible officers of the Company and public officials.  Such opinion shall not state that it is to be governed or qualified by, or that it is otherwise subject to, any treatise, written policy or other document relating to legal opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).

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