--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Exhibit 10.2
 
 
 
NOTE AGREEMENT

Convertible Notes
Due August 15, 2014

To each of the Purchasers
of the above Notes:

Gentlemen:

Texas South Energy, Inc., a Nevada corporation (the “Company”), is offering for
sale up to $10,000,000 of convertible notes due August 15, 2014 (the
“Notes”).  The terms and conditions governing the Notes are contained in this
Agreement.  As purchasers of the Notes, you are acquiring one or more of the
Notes to be issued pursuant to this Agreement.  Accordingly, the Company hereby
agrees with you (each herein called a “Purchaser” and together, the “Purchasers”
or “Noteholders”) as follows:

1.           AUTHORIZATION OF NOTES.  The Company will authorize the issue and
sale of up to $10,000,000 in aggregate principal amount of its Notes.  Each Note
issued hereunder will be dated the date of its issuance, will mature on August
15, 2014, at which time principal and interest will be due.  Interest on the
unpaid principal balance will accrue from the date of issuance at the rate of 1%
per annum, computed on the basis of a 360-day year of twelve 30 day months,
until maturity, and will have the other terms and provisions provided herein and
in the form of Note attached hereto as Exhibit A.  The term “Note” or “Notes” as
used herein shall include each Note delivered pursuant to any provision of this
Agreement.  Certain capitalized terms used in this Agreement are defined in
Section 10.

2.           PURCHASE AND SALE OF NOTES.  The Company will issue and sell to you
and, subject to the terms and conditions of this Agreement, you will purchase
from the Company, at the closings set forth below, the principal amount of Notes
specified on the signature page hereof; it being understood that the aggregate
principal amount of the Notes as of the Second Closing will be at least US$6.5
million.  Funds will be wired to the Company from the Escrow Agent pursuant to
the escrow agreement attached hereto as Exhibit B (“Escrow Agreement”) with
respect to the Initial Closing (as defined below) and the Second Closing (as
defined below) and directly to the Company by the Investors for the Third
Closing (as defined below).  At the respective Closing, the Company will deliver
to you the Notes dated the date of the Closing and registered in your name,
against delivery of immediately available funds in the amount of the purchase
price therefor.

2.1         Initial Closing.  The initial closing (“Initial Closing”) shall
occur on the date of this Agreement, which shall be the date of the receipt by
the Company from the Escrow Agent of US$1.0 million (the “Initial Investment”),
in which event the Company shall issue Notes to the investors (the “Investors”)
as directed by the respective Purchaser, as scheduled on Exhibit C, and in
amounts limiting each such investor to a beneficial ownership of not more than
4.99% of the Company Common Stock.  Notwithstanding the forgoing, the Company’s
obligation to issue the Notes to any
 
 
1

--------------------------------------------------------------------------------

 
Investor is subject to receipt by the Company of such Investor’s executed
signature page to this Agreement.

2.2         Second Closing.  The second closing (“Second Closing”) shall occur
upon the receipt by the Company from the Escrow Agent of US$5.5 million, on or
about March 19, 2014, in which event the Company shall issue Notes to the
Investors as directed by the respective Purchaser, as scheduled on Exhibit C,
and in amounts limiting each such investor to a beneficial ownership of not more
than 4.99% of the Company Common Stock.  Notwithstanding the forgoing, the
Company’s obligation to issue the Notes to any Investor is subject to receipt by
the Company of such Investor’s executed signature page to this Agreement.

2.3         Third Closing.  The third closing (“Third Closing,” with First
Closing and Second Closing, the “Closings”) shall occur upon the receipt by the
Company from the Investors of US$3.5 million on or before April 11, 2014, unless
the Company advises the Investors that such funding will be on a later date, in
which event the Company shall issue Notes to the Investors as directed by the
respective Purchaser,  as scheduled on Exhibit C, and in amounts limiting each
such investor to a beneficial ownership of not more than 4.99% of the Company
Common Stock. Notwithstanding the forgoing, the Company’s obligation to issue
the Notes to any Investor is subject to receipt by the Company of such
Investor’s executed signature page to this Agreement.

3.           REPRESENTATIONS AND WARRANTIES.  The Company represents and
warrants to you that:
 
3.1        Organization, Qualification, Standing, Capital Stock, etc.  The
Company is a corporation duly organized, validly existing, and in good standing
under the laws of Nevada, has the corporate power to own its properties and to
carry on its businesses as the same are now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the properties owned by it or the nature of its businesses
makes such qualification necessary.  The authorized capital stock of the Company
consists of 750,000,000 shares of common stock, $.001 par value (“Common
Stock”), of which 326,138,004 shares of Common Stock are issued and outstanding,
and 50,000,000 shares of preferred stock, of which none are issued and
outstanding.

3.2        Financial Statements, Subsequent Changes, etc.  The financial
statements and other financial data and information contained in or referred to
in SEC Filings are complete and correct in all material respects.

3.3        Due Authorization and Compliance with Other Instruments.  This
Agreement and the Notes have been duly and validly authorized by all requisite
corporate proceeding and this Agreement constitutes, and the Notes when executed
and delivered will be, valid and legally binding obligations of the Company
enforceable against the Company in accordance with their terms except as
enforceability is limited by bankruptcy, insolvency, reorganization, moratorium,
or other laws relating to or affecting generally the enforcement of creditors'
rights.

3.4        Charter Provisions.  Neither the authorization, execution, and
delivery of this Agreement or the Notes, the consummation of the transactions
herein and therein contemplated, nor
 
 
2

--------------------------------------------------------------------------------

 
the fulfillment of or compliance with the terms hereof and thereof, will
conflict with or result in a breach of any of the terms of the charter or
by-laws.

The Noteholders represent and warrant to the Company that:

3.5        The Noteholder acknowledges that it has the authority to enter into
this Agreement.

3.6        The Noteholder recognizes that the purchase of the Notes involves a
high degree of risk including, but not limited to, the following: (a) the
Company has a limited operating history with a history of losses and requires
additional funds to conduct its business; (b) an investment in the Company is
highly speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Notes; (c) the
Noteholder may not be able to liquidate its investment; (d) transferability of
the Notes and underlying shares of Common Stock  is extremely limited; (e) in
the event of a disposition, the Noteholder could sustain the loss of its entire
investment; (f) the Company has not paid any dividends since its inception and
does not anticipate paying any dividends; and (g) the Company may issue
additional securities in the future which have rights and preferences that are
senior to those of the Notes and underlying shares of Common Stock. Without
limiting the generality of the representations set forth in Section 1.5 below,
the Noteholder represents that the Noteholder has carefully reviewed all of the
Company’s filings made with the Securities and Exchange Commission (“SEC
Filings”).

3.7        The Noteholder represents that the Noteholder is an “accredited
investor” as such term is defined in Rule 501 of Regulation D (“Regulation D”)
promulgated under the Securities Act, and that the Noteholder is able to bear
the economic risk of an investment in the Securities. In addition, if the
Noteholder is a resident of Canada, it will complete, sign and deliver to the
Company the Accredited Investor Questionnaire (Canada) attached hereto as
Exhibit E.

3.8        The Noteholder hereby acknowledges and represents that (a) the
Noteholder has knowledge and experience in business and financial matters, prior
investment experience, or the Noteholder has employed the services of a
“purchaser representative” (as defined in Rule 501 of Regulation D), attorney
and/or accountant to read all of the documents furnished or made available by
the Company both to the Noteholder and to all other prospective investors in the
Securities to evaluate the merits and risks of such an investment on the
Noteholder’s behalf; (b) the Noteholder recognizes the highly speculative nature
of this investment; and (c) the Noteholder is able to bear the economic risk
that the Noteholder hereby assumes.

3.9        The Noteholder hereby acknowledges receipt and careful review of this
Agreement, and any documents which may have been made available upon request as
reflected therein, and hereby represents that the Noteholder (a) has carefully
reviewed the SEC Filings, and (b) has been furnished by the Company with all
information regarding the Company, and any additional information that the
Noteholder has requested or desired to know, and has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the Company and the
terms and conditions of the sale of the Notes.

3.10      In making the decision to invest in the Notes (and underlying shares
of Common Stock), the Noteholder has relied solely upon the information provided
by the Company as well as the
 
 
3

--------------------------------------------------------------------------------

 
SEC Filings.  To the extent necessary, the Noteholder has retained, at its own
expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and the
purchase of the Notes (and underlying shares of Common Stock) hereunder.

3.11      The Noteholder represents that (i) the Noteholder was contacted
regarding the sale of the Notes by the Company or its agents, (ii) no Notes were
offered or sold to it by means of any form of general solicitation or general
advertising, and in connection therewith, the Noteholder did not (A) receive or
review any advertisement, article, notice or other communication published in a
newspaper or magazine or similar media or broadcast over television or radio,
whether closed circuit, or generally available; or (B) attend any seminar
meeting or industry investor conference whose attendees were invited by any
general solicitation or general advertising, and (iii) the Noteholder’s
substantive relationship with the Company’s agent predates the agent’s contact
with the Noteholder regarding an investment in the Notes.

3.12      The Noteholder hereby represents that the Noteholder, either by reason
of the Noteholder’s business or financial experience or the business or
financial experience of the Noteholder’s professional advisors (who are
unaffiliated with and not compensated by the Company or any affiliate or selling
agent of the Company, directly or indirectly), has the capacity to protect the
Noteholder’s own interests in connection with the transaction contemplated
hereby.

3.13      The Noteholder hereby acknowledges that the offering of the Notes has
not been reviewed by the SEC nor any state regulatory authority since the
offering is intended to be exempt from the registration requirements of Section
5 of the Securities Act pursuant to Regulation D and/or Regulation S promulgated
thereunder.  The Noteholder understands that the Notes as well as the underlying
shares of Common Stock have not been registered under the Securities Act or
under any state securities or “blue sky” laws and agrees not to sell, pledge,
assign or otherwise transfer or dispose of the Notes and underlying shares of
Common Stock unless they are registered under the Securities Act and under any
applicable state securities or “blue sky” laws or unless an exemption from such
registration is available.

3.14      The Noteholder understands that the Notes and underlying shares of
Common Stock have not been registered under the Securities Act by reason of a
claimed exemption under the provisions of the Securities Act that depends, in
part, upon the Noteholder’s investment intention.  In this connection, the
Noteholder hereby represents that the Noteholder is purchasing the Notes and
underlying shares of Common Stock for the Noteholder’s own account for
investment and not with a view toward the resale or distribution to others.

3.15      The Noteholder understands that the Company is a “shell company” as
defined in Rule 405 of the Securities Act, and that there is a no market for the
Notes and a limited trading market for the shares of Common Stock and that an
active market may not develop for the shares of Common Stock.  The Noteholder
understands that even if an active market develops for the Common Stock, Rule
144 promulgated under the Securities Act requires for non-affiliates (“Rule
144”), among other conditions, a one-year holding period ending February 15,
2015, the date that the Company ceases to be a shell company.  The Noteholder
understands and hereby acknowledges that the Company is under no obligation to
register the issuance or resale of any of the Notes and underlying shares of
Common Stock under the Securities Act or any state securities or “blue sky”
laws.

 
4

--------------------------------------------------------------------------------

 
3.16      The Noteholder understands that the Notes are being offered and sold
in reliance on specific exemptions from the registration requirements of federal
and state securities laws and that the Company and the principals and
controlling persons thereof are relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments, and understandings set
forth herein in order to determine the applicability of such exemptions and the
undersigned’s suitability to acquire Securities.

3.17      The Noteholder consents to the placement of a legend on any
certificate or other document evidencing the Notes and underlying shares of
Common Stock that such securities have not been registered under the Securities
Act or any state securities or “blue sky” laws and setting forth or referring to
the restrictions on transferability and sale thereof contained in this
Agreement.  The Noteholder is aware that the Company will make a notation in its
appropriate records with respect to the restrictions on the transferability of
such securities. The legend to be placed on each certificate shall be in form
substantially similar to the following:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES OR
“BLUE SKY LAWS,” AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”
 
3.18      Compliance with Regulation S.  Each Noteholder that is not a U.S.
Person, severally and not jointly, further represents and warrants to the
Company as follows:  (i) at the time of (A) the offer by the Company and (B) the
acceptance of the offer by such Person, of the Notes, such Person was outside
the U.S.; (ii) no offer to acquire the Notes or otherwise to participate in the
transactions contemplated by this Agreement was made to such Person or its
representatives inside the U.S.; (iii) such Person is not purchasing the Notes
for the account or benefit of any U.S. Person, or with a view towards
distribution to any U.S. Person, in violation of the registration requirements
of the securities Act; (iv) such Person will make all subsequent offers and
sales of the securities either (A) outside of the U.S. in compliance with
Regulation S; (B) pursuant to a registration under the Securities Act; or (C)
pursuant to an available exemption from registration under the Securities Act;
(v) such Person is acquiring the securities for such Person’s own account, for
investment and not for distribution or resale to others; (vi) such Person has no
present plan or intention to sell the securities in the U.S. or to a U.S. Person
at any predetermined time, has made no predetermined arrangements to sell the
securities and is not acting as an underwriter or dealer with respect to such
securities or otherwise participating in the distribution of such securities;
(vii) neither such Person, its affiliates nor any Person acting on behalf of
such Person, has entered into, has the intention of entering into, or will enter
into any put option, short position or other similar instrument or position in
the U.S. with respect to the securities at any time after the Closing through
the one year anniversary of the Closing except in compliance with the Securities
Act; (viii) such Person consents to the placement of a legend on any certificate
or other document evidencing the securities substantially in the form set forth
in Section 3.17 such Person is not acquiring the securities in a transaction (or
an element of a series of transactions) that is part of any plan or scheme to
evade the registration provisions of the Securities Act.  For purposes of this
Section,
 
 
5

--------------------------------------------------------------------------------

 
“Person” means all natural persons, corporations, business trusts, associations,
companies, partnerships, limited liability companies, joint ventures and other
entities, governments, agencies and political subdivisions.

3.19      The Noteholder should check the Office of Foreign Assets Control
(“OFAC”) website at <http://www.treas.gov/ofac> before making the following
representations. The Noteholder represents that the amounts invested by it in
the Company in the offering were not and are not directly or indirectly derived
from activities that contravene federal, state or international laws and
regulations, including anti-money laundering laws and regulations. Federal
regulations and Executive Orders administered by OFAC prohibit, among other
things, the engagement in transactions with, and the provision of services to,
certain foreign countries, territories, entities and individuals.  The lists of
OFAC prohibited countries, territories, persons and entities can be found on the
OFAC website at <http://www.treas.gov/ofac>.  In addition, the programs
administered by OFAC (the “OFAC Programs”) prohibit dealing with individuals[1]
or entities in certain countries regardless of whether such individuals or
entities appear on the OFAC lists.

3.20      To the best of the Noteholder’s knowledge, none of: (1) the
Noteholder; (2) any person controlling or controlled by the Noteholder; (3) if
the Noteholder is a privately-held entity, any person having a beneficial
interest in the Noteholder; or (4) any person for whom the Noteholder is acting
as agent or nominee in connection with this investment is a country, territory,
individual or entity named on an OFAC list, or a person or entity prohibited
under the OFAC Programs.  Please be advised that the Company may not accept any
amounts from a prospective investor if such prospective investor cannot make the
representation set forth in the preceding paragraph.  The Noteholder agrees to
promptly notify the Company should the Noteholder become aware of any change in
the information set forth in these representations.  The Noteholder understands
and acknowledges that, by law, the Company may be obligated to “freeze the
account” of the Noteholder, either by prohibiting additional subscriptions from
the Noteholder, declining any redemption requests and/or segregating the assets
in the account in compliance with governmental regulations.  The Noteholder
further acknowledges that the Company may, by written notice to the Noteholder,
suspend the redemption rights, if any, of the Noteholder if the Company
reasonably deems it necessary to do so to comply with anti-money laundering
regulations applicable to the Company or any of the Company’s other service
providers.  These individuals include specially designated nationals, specially
designated narcotics traffickers and other parties subject to OFAC sanctions and
embargo programs.

3.21      To the best of the Noteholder’s knowledge, none of: (1) the
Noteholder; (2) any person controlling or controlled by the Noteholder; (3) if
the Noteholder is a privately-held entity, any person having a beneficial
interest in the Noteholder; or (4) any person for whom the Noteholder is acting
as agent or nominee in connection with this investment is a senior foreign
political figure,[2] or
 
___________________
[1] These individuals include specially designated nationals, specially
designated narcotics traffickers and other parties subject to OFAC sanctions and
embargo programs.

[2] A “senior foreign political figure” is defined as a senior official in the
executive, legislative, administrative, military or judicial branches of a
foreign government (whether elected or not), a senior official of a major
foreign political party, or a senior executive of a foreign government-owned
corporation. In addition, a “senior foreign political figure” includes any
corporation, business or other entity that has been formed by, or for the
benefit of, a senior foreign political figure.
 
 
6

--------------------------------------------------------------------------------

 
any immediate family[3] member or close associate[4] of a senior foreign
political figure, as such terms are defined in the footnotes below; and

3.22      If the Noteholder is affiliated with a non-U.S. banking institution (a
“Foreign Bank”), or if the Noteholder receives deposits from, makes payments on
behalf of, or handles other financial transactions related to a Foreign Bank,
the Noteholder represents and warrants to the Company that: (1) the Foreign Bank
has a fixed address, other than solely an electronic address, in a country in
which the Foreign Bank is authorized to conduct banking activities; (2) the
Foreign Bank maintains operating records related to its banking activities; (3)
the Foreign Bank is subject to inspection by the banking authority that licensed
the Foreign Bank to conduct banking activities; and (4) the Foreign Bank does
not provide banking services to any other Foreign Bank that does not have a
physical presence in any country and that is not a regulated affiliate.

4.           COVENANTS OF THE COMPANY.  The Company covenants and agrees that,
so long as any of the Notes are outstanding, it will comply with the following
provisions.

4.1        Use of Proceeds.  The Company will apply all proceeds derived from
the sale of the Notes as set forth in section 3 of the farm-out agreement
attached hereto as Exhibit D (“Farm-Out Agreement”).
 
4.2        Repayment to Noteholders.  GulfSlope Energy, Inc. (“GulfSlope”) is
required pursuant to the Farm-Out Agreement to deliver to the Company on or
before August 1, 2014 five prospects identified therein (or such other prospects
as mutually agreed upon).  If GulfSlope fails to deliver a 20% working interest
to the Company in these prospects by August 1, 2014, GulfSlope shall provide to
the Company (at the Company’s option) a refund of all payments paid by the
Company to GulfSlope pursuant to the Farm-Out Agreement thereto, or a refund on
a pro rata basis, based on prospectivity of actual prospects delivered by
GulfSlope.  If the Company elects a repayment from GulfSlope as a result hereof,
the Company shall repay the Investors their portion of the pro rata repayment
made by GulfSlope upon the maturity of the Note (the balance of the principal
amount of the Note will mandatorily convert pursuant to section 8 hereof).
Notwithstanding any of the foregoing, in the unlikely event that GulfSlope is
not the high bid on any prospects on or about March 19, 2014, the Company will
obtain a covenant from GulfSlope to refund the Initial Investment to the Company
at the earliest possible date, and on receipt of the refunded Initial Investment
the Company will forthwith refund the Initial Investment to the respective
Investors.

4.3        Filings Under the Exchange Act.  So long as the Noteholders
beneficially own the Notes, the Company shall use its best efforts to (i) file
all reports required to be filed with the Commission pursuant to Section 13 and
15(d) of the Exchange Act and (ii) not terminate its status as an issuer
required to file reports under the Exchange Act where the rules and regulations
thereunder would permit such termination.  The Company will take all reasonable
action under its control to maintain the continued listing and quotation and
trading of the its Common Stock on the OTC
 
___________________
[3] “Immediate family” of a senior foreign political figure typically includes
the figure’s parents, siblings, spouse, children and in-laws.

[4] A “close associate” of a senior foreign political figure is a person who is
widely and publicly known to maintain an unusually close relationship with the
senior foreign political figure, and includes a person who is in a position to
conduct substantial domestic and international financial transactions on behalf
of the senior foreign political figure.
 
 
7

--------------------------------------------------------------------------------

 
Bulletin Board and will comply with the Company’s reporting, filing and other
obligations under the by-laws or rules of the National Association of Securities
Dealers, Inc. applicable to it at least so long as the Noteholder beneficially
owns the Notes.

4.4        Shares Reserved for Issuance.  The Company shall reserve, free from
preemptive rights, out of its authorized but unissued shares of its Common
Stock, sufficient shares to provide for the conversion of the Notes.

4.5        Shares Issued Upon Conversion.  The Company covenants that all shares
of Common Stock which may be issued upon conversion of Notes will upon issuance
be fully paid and nonassessable by the Company or parent of the Company and free
of preemptive rights.

5.           PAYMENT.  The Company will promptly and punctually pay all amounts
payable to Noteholder in respect of principal of and interest on the Notes at
maturity, unless converted pursuant to section 8.

6.           SUBORDINATION OF NOTES.  The Noteholder acknowledges and agrees
that the payment of the principal of and interest on each and all of the Notes
is hereby expressly made subordinate to all senior indebtedness and is
unsecured.

7.           FINAL AGREEMENT.  This Agreement, together with those documents
expressly referred to herein, constitutes the final agreement of the parties
concerning the matters referred to herein, and supersedes all prior agreements
and understandings.

   MANDATORY CONVERSION OF NOTES.

8.1.       Conversion Privilege and Conversion Price.  Upon the Mandatory
Conversion Event (or at the election of the Noteholder), the principal and
accrued interest on the Notes (unless a pro rata conversion is required as
described in the Mandatory Conversion Event), on the terms and conditions set
forth in this Section 8, shall be automatically converted (or voluntarily
converted if elected by Noteholder) into fully paid and non-assessable shares of
Common Stock.  Upon conversion, the Company shall issue the Investor
certificates representing the shares of Common Stock upon receipt by the Company
of the original issued Note to the Company.  The number of shares of Common
Stock which shall be issued upon conversion of a Note shall be determined by
dividing the outstanding indebtedness on such Note (plus accrued interest
thereon) by the Conversion Price (as defined herein) in effect at the time of
conversion.  The “Conversion Price” per share at which shares of Common stock
shall initially be issuable shall be $0.20; provided however, that the
Conversion Price shall be subject to adjustment pursuant to Section 8.2.

8.2.       Adjustment of Conversion Price.
 
(a)         The Conversion Price shall be subject to adjustment if the Company,
at any time while any Notes are outstanding, (a) shall pay a cash dividend or
otherwise make a distribution or distributions on shares of its Common Stock
payable in shares of Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by reclassification of
shares of Common Stock any shares of capital stock of the Company, the
Conversion Price shall be multiplied
 
 
8

--------------------------------------------------------------------------------

 
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
after such event. Any adjustment made pursuant to this Section 8.2 shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
 
9.           EVENTS OF DEFAULT.

9.1        Definition; Remedies.  If any one or more of the following events
(herein called “Events of Default”) shall occur and be continuing:

(a)           default shall be made in the payment of principal of, or interest
on, any of the Notes when and as the same shall become due and payable, either
at maturity or by acceleration or otherwise; or

(b)           default shall occur upon the Company’s insolvency, the appointment
of a receiver of all or any part of Company’s property, an assignment for the
benefit of creditors of Company, or the commencement of any proceeding under any
bankruptcy, insolvency or debtor relief laws by or against the Company.

then and in each and every such case the holders of Notes aggregating not less
than 51% of the aggregate principal amount of the Notes then outstanding may by
notice in writing to the Company declare the unpaid principal of all the Notes
together with accrued interest thereon to be forthwith due and payable and
thereupon such principal and interest shall be due and payable without
presentment, protest, or further demand or notice of any kind, all of which are
hereby expressly waived.

This Section 9, however, is subject to the condition that, if at any time after
the occurrence of an Event of Default hereunder, and before the entry of any
judgment or decree against the Company for the payment of all or any portion of
the Notes then outstanding, the Noteholders aggregating not less than 51% of the
aggregate principal amount of the Notes then outstanding may, by written notice
to the Company, either temporarily suspend or permanently rescind and annul such
declaration of an Event of Default and its consequences (including, without
limitation, the acceleration of the Notes as a result of such Event of Default);
but no such suspension or rescission and annulment shall extend to or affect any
prior, concurrent, or subsequent default or Event of Default (other than the
ones identified by the Noteholders declaring them due as the ones upon which
such declaration was based) or impair any right consequent thereon.

10.        DEFINITIONS.

“Agreement” shall mean this Note Agreement governing the Notes due August 15,
2014, as amended and modified pursuant to Section 10 hereof.

“Closing” shall have the meaning given such term in Section 3 hereof.

“Event of Default” shall have the meaning given such term in Section 9 hereof.

 
9

--------------------------------------------------------------------------------

 
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

“Mandatory Conversion Event” shall mean the date, on or before August 1, 2014 on
which GulfSlope  shall deliver to the Company a 20% working interest in the five
prospects (as amended or substituted, as set forth in the Farm-Out Agreement),
all of the principal amount and accrued interest shall be converted into shares
of Common Stock; in the event that pursuant to the Farm-Out Agreement, GulfSlope
fails to deliver the 20% working interest ownership in five prospects, the
principal amount and accrued interest on the Notes to be mandatorily converted
shall be reduced by a pro rata amount.

“Maximum Rate” shall mean the maximum non-usurious rate of interest which, under
all applicable statutes, rules and regulations, the Purchasers are permitted to
contract for, charge, take, reserve, or receive on the Notes.

“Noteholder” or “Noteholders” shall mean any Person in whose name at the time a
particular Note shall be registered on the registry books of the Company
maintained for that purpose in accordance with the terms of this Agreement.

“Notes” shall have the meaning given such term in Section 1 hereof.

“Securities Act” shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

11.        WAIVERS; MODIFICATIONS OF AGREEMENT.  Any provision in this Agreement
to the contrary notwithstanding, changes in or additions to this Agreement may
be made, and compliance with any covenant or condition herein set forth may be
omitted, if the Company (a) shall obtain from the holders of record of Notes
aggregating not less than 51% of the aggregate principal amount of the Notes at
the time outstanding, their consent thereto in writing and (b) shall deliver
copies of such consent in writing to any such holders of record who did not
execute the same; provided, however, that without the consent in writing of the
holder of each Note (or, in the case of any change, addition, or omission
adversely affecting the rights pursuant to Section 8 hereof of any holder of
record of Notes, as aforesaid) affected thereby, no such consent shall be
effective to reduce the principal of or rate of interest payable on, or to
postpone any date fixed for the payment of principal of or any installment of
interest on, any Note.

12.        GOVERNING LAW; VENUE.  THIS AGREEMENT AND THE NOTES ARE BEING
DELIVERED IN TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS
OF THE STATE OF TEXAS WITHOUT CONSIDERATION OF ITS CONFLICT OF LAW
PROVISIONS.  This Agreement shall be governed by the internal law of the State
of Texas, without regard to the principles of comity and/or the applicable
conflicts of laws of any state that would result in the application of any laws
other than the State of Texas.  The parties (a) hereby irrevocably and
unconditionally submit to the jurisdiction of the state courts of
 
 
10

--------------------------------------------------------------------------------

 
Texas and to the jurisdiction of the United States District Court for the
Southern District of Texas for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement, (b) agree not to
commence any suit, action or other proceeding arising out of or based upon this
Agreement except in the state courts of Texas or the United States District
Court for the Southern District of Texas, and (c) hereby waive, and agree not to
assert, by way of motion, as a defense, or otherwise, in any such suit, action
or proceeding, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from attachment
or execution, that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.

13.        NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if sent by hand-delivery, by facsimile (followed
by first-class mail), by nationally recognized overnight courier service or by
prepaid registered or certified mail, return receipt requested, to the addresses
set forth below:

If to the Company:
 
  Texas South Energy, Inc.
  3 Riverway, Suite 1800
  Houston, Texas  77056
  Attention: James M. Askew

If to Investors:
 
  To the addresses set forth on the signature pages hereto

17.        COUNTERPARTS.  This Agreement may be signed by each party hereto upon
a separate copy, in which event all of said copies shall constitute a single
counterpart of this Agreement.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.

18.        SEVERABILITY.  Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.

19.        FINAL AGREEMENT.  This Agreement, together with those documents
expressly referred to herein, constitutes the final agreement of the parties
concerning the matters referred to herein, and supersedes all prior agreements
and understandings.

20.        SAVINGS CLAUSE.  Regardless of any provision contained in the Notes
or Note Agreement, Purchaser shall never be entitled to receive collect or apply
as interest (whether the termed interest herein or deemed to be interest by
operation of law or judicial determination) on the
 
 
11

--------------------------------------------------------------------------------

 
Note any amount in excess of interest calculated at the Maximum Rate, and, in
the event that any Purchaser ever receives, collects or applies as interest any
such excess then the amount which would be excessive interest shall be deemed to
be a partial prepayment of principal and treated hereunder as such; and, if the
principal amount of the Note is paid in full, then any remaining excess shall
forthwith be paid to the Company.  In determining whether or not the interest
paid or payable under any specific contingency exceeds interest calculated at
the Maximum Rate, the Company and Purchasers shall, to the maximum extent
permitted under applicable law: (a) characterize any non-principal payment as an
expense, fee or premium rather than as interest; and (b) amortize, prorate,
allocate, and spread, in equal parts, the total amount of interest throughout
the entire contemplated term of the Note; provided that, if the Note is paid and
performed in full prior to the end of the full contemplated term thereof, and if
the interest received for the actual period of existence thereof exceeds
interest calculated at the Maximum Rate, then Purchaser shall refund to the
Company the amount of such excess or credit the amount of such excess against
the principal amount of the Note and, in such event, Purchasers shall not be
subject to any penalties provided by any laws for contracting for, charging,
taking, reserving, or receiving interest in excess of interest calculated at the
Maximum Rate.

 
 
12

--------------------------------------------------------------------------------

 
 If the foregoing is in accordance with your understanding, please sign the form
of confirmation and acceptance on the enclosed counterpart of this Agreement and
return the same to the Company, whereupon this Agreement shall be a binding
agreement between you and the Company.
 

 
Very truly yours,
     
Texas South Energy, Inc.
             
By: /s/ James Askew                                             
 
James Askew, Chief Executive Officer
     
Dated as of March 10, 2014

 
I HEREBY ACCEPT AND AGREE TO THE
TERMS AND CONDITIONS CONTAINED IN
THIS NOTE AGREEMENT:

By:  /s/ James Liang                                

Name:     James Liang                              

Title:                                                           

Principal Amount of
 Notes Purchased:                                           

 

 
13

--------------------------------------------------------------------------------

 

AMENDMENT NO. 1 TO NOTE AGREEMENT

This Amendment #1 (“Amendment”) to that certain Note Agreement dated March 10,
2014 (“Agreement”) is made by and between Texas South Energy, Inc., a Nevada
corporation (“Company”), and James Liang (“Holder”) as of this 14th day of
March, 2014.

For good and valuable consideration, the receipt and sufficiency of which is
hereby accepted and acknowledged, the parties hereto agree to amend and restate
section 4.1 of the Agreement to accurately reflect the understanding of the
parties as follows.

1.         Amendment of Section 4.1.  Section 4.1 of the Agreement is hereby
amended and restated in its entirety as follows:

4.1           Use of Proceeds.  The Company will apply all proceeds derived from
the sale of the Notes as set forth in section 3 of the farm-out agreement
attached hereto as Exhibit D (“Farm-Out Agreement”); provided that the Company
shall have the right to utilize up to $1.5 million funded in the Second Closing
for Company working capital purposes, which may or may not be utilized to fund
the Company’s obligations pursuant to the Farm-Out Agreement.

2.         No Other Amendments.  Except as set forth in Section 1, the Agreement
shall remain in full force and effect as currently in effect.

3.         Severability.  Should any one or more of the provisions of this
Amendment be determined to be illegal or unenforceable, all other provisions of
this Amendment shall be given effect separately from the provision or provisions
determined to be illegal or unenforceable and shall not be effected thereby.

4.         Counterparts.  This Amendment may be executed in multiple
counterparts with the same effect as if all parties had signed the same
document.  All such counterparts shall be deemed an original, shall be construed
together and shall constitute one and the same instrument.

5.         Entire Agreement.  This Amendment and the Agreement constitute the
full and entire understanding and agreement between the parties with respect to
the subject matter hereof.

6.         Defined Terms.  Defined terms used in this Amendment shall have the
meaning ascribed to them herein or in the Agreement.

 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Amendment or
has caused this Amendment to be executed on its behalf by a representative duly
authorized, all as of the date first above set forth.

Texas South Energy, Inc.

By:      s/ James Askew                                            
James Askew, Chief Executive Officer

 
      /s/ James Liang                                                
James Liang

Other Noteholders:

Name:                                                      

Title:                                                      

--------------------------------------------------------------------------------