Exhbit 10.3

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  IN ADDITION, THE TRANSFER HEREOF IS SUBJECT TO VARIOUS AGREEMENTS
CONTAINED IN A SECURITIES PURCHASE AGREEMENT DATED OCTOBER 19, 2006.  A COPY OF
SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER UPON REQUEST.  THIS SECURITY AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

PARTICLE DRILLING TECHNOLOGIES, INC.

COMMON STOCK PURCHASE WARRANT

Void after October 19, 2011, and subject to earlier termination upon the terms
and conditions set forth herein

This Warrant (the “Warrant”) entitles Milfam I, LP (including any successors or
assigns, the “Holder”), for value received, to purchase from PARTICLE DRILLING
TECHNOLOGIES, INC., a Nevada corporation (the “Company”), at any time and from
time to time, subject to the terms and conditions set forth herein, during the
period starting from 5:00 a.m. on the Initial Exercise Date (as defined in
Section 1 below) to 5:00 p.m., Eastern time, on the Expiration Date (as defined
in Section 1 below), immediately following which time this Warrant shall expire
and become void, all or any portion of the Warrant Shares (as defined in Section
1 below) at the Exercise Price (as defined in Section 1 below).  This Warrant is
issued subject to the following terms and conditions:

1.             Definitions  As used in this Warrant, the following terms shall
have the respective meanings set forth below or elsewhere in this Warrant as
referred to below:

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person.  For the purposes of this Warrant,
“control,” when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.

“business day” (whether such term is capitalized or not) means any day except
Saturday, Sunday

1

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

and any day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York or the State of Texas are authorized or
required by law or other governmental action to close.

“Closing Date” shall have the meaning given to it in the Securities Purchase
Agreement.

“Common Stock” means the common stock, $0.001 par value per share, of the
Company (including any securities into which or for which such shares may be
exchanged for, or converted into, pursuant to any stock dividend, stock split,
stock combination, recapitalization, reclassification, reorganization or other
similar event).

“Company” has the meaning set forth in the preamble hereof.

“Effective Date” shall have the meaning given to it in the Securities Purchase
Agreement.

“Exercise Price” means initially the Initial Exercise Price, as such amount may
be adjusted from time to time pursuant to Section 3 hereof.

“Expiration Date” means October 19, 2011.

“Fair Market Value” shall mean on any date (i) if the Common Stock is quoted on
Nasdaq or listed on a national securities exchange, then the last reported sale
price per share of Common Stock on Nasdaq or any national securities exchange in
which such Common Stock is quoted or listed, as the case may be, on such date
or, if no such sale price is reported on such date, such price on the next
preceding business day in which such price was reported, (ii) if the Common
Stock is actively traded over-the-counter, then the last sales price quoted, if
determinable, or, if not determinable, the average of the closing bid and asked
prices quoted on the OTCBB (or similar system) on such date or (iii) if such
Common Stock is not traded, quoted or listed on Nasdaq or any national
securities exchange or the over-the-counter market, then the fair market value
of a share of Common Stock, as determined in good faith by the Board of
Directors of the Company.

“Holder” has the meaning set forth in the preamble of hereof.

“Initial Exercise Date” means April 22, 2007.

“Initial Exercise Price” means $3.25 per share of Common Stock.

“OTCBB” means the OTC Bulletin Board.

“Person” (whether or not capitalized) means an individual, entity, partnership,
limited liability company, corporation, association, trust, joint venture,
unincorporated organization, and any government, governmental department or
agency or political subdivision thereof.

“Registration Rights Agreement” means that certain Registration Rights
Agreement, dated as of the date hereof, as it may be amended from time to time,
by and among the Company and the Investors (as such term is defined therein).

“SEC” means the United States Securities and Exchange Commission.

“Securities Purchase Agreement” means that certain Securities Purchase
Agreement, dated as of the date hereof, as it may be amended from time to time,
by and among the Company and the Purchasers (as such term is defined therein).

2

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

“Shares” means the aggregate of 5,000,000 shares of Common Stock issued pursuant
to the Securities Purchase Agreement.

“Warrants” means this Warrant and any other warrants to purchase Common Stock
issued by the Company to the Investors pursuant to the Securities Purchase
Agreement.

“Warrant Shares” means 30,000 shares of Common Stock, subject to adjustment in
accordance with Section 3 below.

2.             Exercise of Warrant. 

2.1           Method of Exercise; Payment.

(a)           Cash Exercise.  Subject to all of the terms and conditions hereof,
this Warrant may be exercised, in whole or in part, with respect to the Warrant
Shares, at any time and from time to time during the period commencing on the
Initial Exercise Date and ending at 5:00 p.m., Eastern Time, on the Expiration
Date, by surrender of this Warrant to the Company at its principal office,
accompanied by a subscription substantially in the form attached hereto,
executed by the Holder and accompanied by (a) wire transfer of immediately
available funds or (b) certified or official bank check payable to the order of
the Company, in each case in the amount obtained by multiplying (i) the number
of Warrant Shares for which the Warrant is being exercised, as designated in
such subscription, by (ii) the Exercise Price.  Thereupon, the Holder shall be
entitled to receive the number of duly authorized, validly issued, fully paid
and nonassessable Warrant Shares determined as provided for herein.

(b)           Cashless Exercise/Conversion.  Subject to all of the terms and
conditions hereof, if by October 19, 2007 the Effective Date shall not have
occurred, the Holder shall have the right to convert this Warrant, in whole or
in part, with respect to the Warrant Shares, at any time and from time to time
until 5:00 p.m., Eastern Time, on the earlier to occur of (x) the Effective Date
or (y) the Expiration Date, by surrender of this Warrant to the Company at its
principal office, accompanied by a conversion notice substantially in the form
attached hereto, executed by the Holder. Thereupon, the Holder shall be entitled
to receive a number of duly authorized, validly issued, fully paid and
nonassessable Warrant Shares equal to:

(i)            (A) (x) the number of Warrant Shares (subject to adjustment as
provided in Section 3 hereof) which such Holder would be entitled to receive
upon exercise of such Warrant for the number of Warrant Shares designated in
such conversion notice (without giving effect to any adjustment thereof pursuant
to this subsection), multiplied by (y) the Fair Market Value of each such
Warrant Share so receivable upon such exercise

minus

(B) (x) the number of Warrant Shares (subject to adjustment as provided in
Section 3 hereof) which such Holder would be entitled to receive upon exercise
of such Warrant for the number of Warrant Shares designated in such conversion
notice (without giving effect to any adjustment thereof pursuant to this
subsection), multiplied by (y) the Exercise Price

3

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

divided by

(ii)           the Fair Market Value per Warrant Share.

2.2           Delivery of Stock Certificates on Exercise.  As soon as
practicable after the exercise of this Warrant, and in any event within three
(3) business days thereafter, the Company, at its expense, and in accordance
with applicable securities laws, will cause to be issued in the name of and
delivered to the Holder, or as the Holder may direct (subject in all cases, to
the provisions of Section 8 hereof), a certificate or certificates for the
number of Warrant Shares purchased by the Holder on such exercise, plus, in lieu
of any fractional share to which the Holder would otherwise be entitled, cash
equal to such fraction multiplied by the Fair Market Value.

2.3           Shares To Be Fully Paid and Nonassessable.  All Warrant Shares
issued upon the exercise of this Warrant shall be duly authorized, validly
issued, fully paid and nonassessable, free of all liens, taxes, charges and
other encumbrances or restrictions on sale (other than those set forth herein).

2.4           Issuance of New Warrants; Company Acknowledgment.  Upon any
partial exercise of this Warrant, the Company, at its expense, will forthwith
and, in any event within three (3) business days, issue and deliver to the
Holder a new warrant or warrants of like tenor, registered in the name of the
Holder, exercisable, in the aggregate, for the balance of the Warrant Shares. 
Moreover, the Company shall, at the time of any exercise of this Warrant, upon
the request of the Holder, acknowledge in writing its continuing obligation to
afford to the Holder any rights to which the Holder shall continue to be
entitled after such exercise in accordance with the provisions of this Warrant;
provided, however, that if the Holder shall fail to make any such request, such
failure shall not affect the continuing obligation of the Company to afford to
the Holder any such rights.

2.5           Payment of Taxes and Expenses.  The Company shall pay any
recording, filing, stamp or similar tax which may be payable in respect of any
transfer involved in the issuance of, and the preparation and delivery of
certificates (if applicable) representing, (i) any Warrant Shares purchased upon
exercise of this Warrant and/or (ii) new or replacement warrants in the Holder’s
name or the name of any transferee of all or any portion of this Warrant.

2.6           Cooperation with Filings.  The Company shall assist and cooperate
with any Holder required to make any governmental or regulatory filings or
obtain any governmental or regulatory approvals prior to or in connection with
any exercise of this Warrant (including, without limitation, making any filings
required to be made by the Company).

2.7           Conditions.  Notwithstanding any other provision of this Warrant,
if the exercise of all or any portion of this Warrant is to be made in
connection with a registered public offering, a sale of the Company or any other
transaction or event, such exercise may, at the election of the Holder, be
conditioned upon consummation of such transaction or event in which case such
exercise shall not be deemed effective until the consummation of such
transaction or event.

3.             Adjustment of Exercise Price and Warrant Shares.  The Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time upon the happening of certain events as described in this Section 3.

3.1           Subdivision or Combination of Stock.  If at any time or from time
to time after the date hereof, the Company shall subdivide (by way of stock
dividend, stock split or otherwise) its outstanding shares of Common Stock, the
Exercise Price in effect immediately prior to such subdivision shall be reduced
proportionately and the number of Warrant Shares (calculated to the nearest
whole share)

4

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

shall be increased proportionately, and conversely, in the event the outstanding
shares of Common Stock shall be combined (whether by stock combination, reverse
stock split or otherwise) into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination shall be increased proportionately
and the number of Warrant Shares (calculated to the nearest whole share) shall
be decreased proportionately.  The Exercise Price and the number of Warrant
Shares, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described in this Section 3.1.

3.2           Adjustments

(a)           Adjustment for Stock Dividends. If at any time after the date
hereof, the Company shall declare a dividend or make any other distribution upon
any class or series of stock of the Company payable in shares of Common Stock,
the Exercise Price in effect immediately prior to such declaration or
distribution shall be reduced proportionately and the number of Warrant Shares
(calculated to the nearest whole share) shall be increased proportionately, to
reflect the issuance of any shares of Common Stock, issuable in payment of such
dividend or distribution.  The Exercise Price and the number of Warrant Shares,
as so adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described in this Section 3.2.

(b)           Adjustments for Other Dividends and Distributions.  In the event
the Company at any time or from time to time after the date hereof shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Company (other than shares of Common Stock) or in cash or other property,
then and in each such event provision shall be made so that the Holder shall
receive upon exercise hereof, in addition to the number of shares of Common
Stock issuable hereunder, the kind and amount of securities of the Company
and/or cash and other property which the Holder would have been entitled to
receive had this Warrant been exercised into Common Stock on the date of such
event and had the Holder thereafter, during the period from the date of such
event to and including the exercise date, retained any such securities
receivable, giving application to all adjustments called for during such period
under this Section 3 with respect to the rights of the Holder.

3.3           Adjustments for Reclassifications.  If the Common Stock issuable
upon the conversion of this Warrant shall be changed into the same or a
different number of shares of any class(es) or series of stock and/or the right
to receive property, whether by reclassification or otherwise (other than an
adjustment under Sections 3.1 and 3.2 or a merger, consolidation, or sale of
assets provided for under Section 3.4), then and in each such event, the Holder
hereof shall have the right thereafter to convert each Warrant Share into the
kind and amount of shares of stock and other securities and property receivable
upon such reclassification, or other change by holders of the number of shares
of Common Stock into which such Warrant Shares would have been convertible
immediately prior to such reclassification or change, all subject to successive
adjustments thereafter from time to time pursuant to and in accordance with, the
provisions of this Section 3.

3.4           Adjustments for Merger or Consolidation. In the event that, at any
time or from time to time after the date hereof, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other Person, or (c) sell
or transfer all or substantially all of its properties or assets or more than
50% of the voting capital stock of the Company (whether issued and outstanding,
newly issued, from treasury, or any combination thereof) to any other person
under any plan or arrangement contemplating the consolidation or merger, sale or
transfer, or dissolution of the Company (each, a “Merger Transaction”), then, in
each such case, the Holder, upon the exercise of this Warrant as provided in
Section 2.1 or the conversion of this warrant as provided in Section 2.2 hereof
at any time or from time to time after the consummation of such reorganization,
consolidation, merger or sale or the effective date of

5

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

such dissolution, as the case may be, shall receive, in lieu of the Warrant
Shares issuable on such exercise immediately prior to such consummation or such
effective date, as the case may be, the stock and property (including cash) to
which the Holder would have been entitled upon the consummation of such
consolidation or merger, or sale or transfer, or in connection with such
dissolution, as the case may be, if the Holder had so exercised this Warrant
immediately prior thereto (assuming the payment by the Holder of the Exercise
Price therefor as required hereby in a form permitted hereby, which payment
shall be included in the assets of the Company for the purposes of determining
the amount available for distribution), all subject to successive adjustments
thereafter from time to time pursuant to, and in accordance with, the provisions
of this Section 3. The Company shall not effect any such reorganization,
consolidation, merger, sale or transfer unless, prior to the consummation
thereof, the successor entity (if other than the Company) resulting from the
consolidation or merger or the entity purchasing such assets assumes by written
instrument the obligation to deliver to each holder of Warrants such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire; provided, that any assumption shall not
relieve the Company of its obligations hereunder.

3.5           Continuation of Terms.  Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any such transfer) referred to
in this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of Common Stock and other
securities and property receivable upon the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such Common Stock or other securities,
including, in the case of any such transfer, the Person acquiring all or
substantially all of the properties or assets or more than 50% of the voting
capital stock of the Company (whether issued and outstanding, newly issued or
from treasury or any combination thereof), whether or not such Person shall have
expressly assumed the terms of this Warrant.

3.6           Minimum Adjustment of Exercise Price.  If the amount of any
adjustment of the Exercise Price required pursuant to this Section 3 would be
less than one-tenth (1/10) of one percent (1%) of the Exercise Price in effect
at the time such adjustment is otherwise so required to be made, such amount
shall be carried forward and adjustment with respect thereto made at the time of
and together with any subsequent adjustment which, together with such amount and
any other amount or amounts so carried forward, shall aggregate at least one
tenth (1/10) of one percent (1%) of such Exercise Price.

3.7           Certificate as to Adjustments.  Upon the occurrence of each
adjustment or readjustment of the Exercise Price and number of Warrant Shares
pursuant to this Section 3, this Warrant shall, without any action on the part
of the Holder, be adjusted in accordance with this Section 3, and the Company,
at its expense, promptly shall compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to the Holder a
certificate setting forth such adjustment or readjustment, showing in detail the
facts upon which such adjustment or readjustment is based.  The Company will
forthwith send a copy of each such certificate to the Holder in accordance with
Section 9.4 below.

4.             Registration Rights.  The holders of the Warrant Shares shall be
entitled to the registration rights and other rights applicable to such shares
provided by the Registration Rights Agreement.

5.             Notices of Record Date.  Upon (a) any establishment by the
Company of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or right or option to acquire securities of the
Company, or any other right, or (b) any capital reorganization,
reclassification, recapitalization, merger or consolidation of the Company with
or into any other Person, any transfer of all or substantially all the assets of
the

6

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

Company, or any voluntary or involuntary dissolution, liquidation or winding up
of the Company, or the sale, in a single transaction, of a majority of the
Company’s voting stock (whether newly issued, or from treasury, or previously
issued and then outstanding, or any combination thereof), the Company shall mail
to the Holder at least ten (10) business days, or such longer period as may be
required by law, prior to the record date specified therein and at least ten
(10) business days prior to the date specified in clause (ii) or (iii) hereof, a
notice specifying (i) the date established as the record date for the purpose of
such dividend, distribution, option or right and a description of such dividend,
distribution, option or right, (ii) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up, or sale is expected to become effective and (iii) the date, if any,
fixed as to when the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.  Nothing herein shall prohibit
the Holder from exercising this Warrant during the ten (10) business day period
commencing on the date of such notice.

6.             Exchange of Warrant.  Subject to the provisions of Section 7
hereof (if and to the extent applicable), this Warrant shall be exchangeable,
upon the surrender hereof by the Holder at the principal office of the Company,
for new warrants of like tenor, each registered in the name of the Holder or,
subject to compliance with applicable federal and state securities laws, in the
name of such other Persons as the Holder may direct (upon payment by the Holder
of any applicable transfer taxes). Each of such new warrants shall be
exercisable for such number of Warrant Shares as the Holder shall direct,
provided that all of such new warrants shall represent, in the aggregate, the
right to purchase the same number of Warrant Shares and cash, securities or
other property, if any, which may be purchased by the Holder upon exercise of
this Warrant at the time of its surrender.

7.             Transfer Provisions, etc.

7.1           Legends.  Subject to the provisions of Section 6.2 of the
Securities Purchase Agreement, each certificate representing any Warrant Shares
issued upon exercise of this Warrant, and of any shares of Common Stock into
which such Warrant Shares may be converted, shall bear the following legend:

“THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  IN ADDITION, THE TRANSFER HEREOF IS SUBJECT TO
VARIOUS AGREEMENTS CONTAINED IN A SECURITIES PURCHASE AGREEMENT DATED OCTOBER
19, 2006.  A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER UPON
REQUEST.  THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.”

7

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

7.2           Mechanics of Transfer.

(a)           Any transfer of all or any portion of this Warrant (and the
Warrant Shares), or of any interest herein or therein, that is otherwise in
compliance with applicable law and Sections 6.1 and 6.2 of the Securities
Purchase Agreement shall be effected by surrendering this Warrant to the Company
at its principal office, together with a duly executed form of assignment, in
the form attached hereto.  In the event of any such transfer of this Warrant,
subject to compliance with applicable federal and state securities laws and
Sections 6.1 and 6.2 of the Securities Purchase Agreement, the Company shall
issue a new warrant or warrants of like tenor to the transferee(s),
representing, in the aggregate, the right to purchase the same number of Warrant
Shares and cash, securities or other property, if any, which may be purchased by
the Holder upon exercise of this Warrant at the time of its surrender, in
accordance with Section 2 hereof.

(b)           In the event of any transfer of all or any portion of this Warrant
in accordance with Section 7.2(a) above, the Company shall issue (i) a new
warrant of like tenor to the transferee, representing the right to purchase the
number of Warrant Shares, and cash, securities or other property, if any, which
were purchasable by the Holder of the transferred portion of this Warrant at the
time of said transfer, and (ii) a new warrant of like tenor to the Holder,
representing the right to purchase the number of Warrant Shares, if any, and
cash, securities or other property, if any, purchasable by the Holder of the
un-transferred portion of this Warrant.  Until this Warrant or any portion
thereof is transferred on the books of the Company, the Company may treat the
Holder as the absolute holder of this Warrant and all right, title and interest
therein for all purposes, notwithstanding any notice to the contrary.

7.3           No Restrictions on Transfer.  Subject to compliance with
applicable federal and state securities laws and Sections 6.1 and 6.2 of the
Securities Purchase Agreement, this Warrant and any portion hereof, the Warrant
Shares and the rights hereunder may be transferred by the Holder in its sole
discretion at any time and to any Person or Persons, including without
limitation Affiliates and affiliated groups of such Holder, without the consent
of the Company.

7.4           Warrant Register.  The Company shall keep at its principal office
a register for the registration, and registration of transfers, of the
Warrants.  The name and address of each Holder of one or more of the Warrants,
each transfer thereof and the name and address of each transferee of one or more
of the Warrants shall be registered in such register.  The Company shall give to
any Holder of a Warrant promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered Holders of the Warrants.

8.             Lost, Stolen or Destroyed Warrant.  Upon receipt by the Company
of evidence satisfactory to it of loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, on delivery of a
customary affidavit of the Holder and customary unsecured indemnity agreement,
or, in the case of mutilation, upon surrender of this Warrant, the Company at
its expense will execute and deliver, or will instruct its transfer agent to
execute and deliver, a new Warrant of like tenor and date and representing the
same rights represented by such lost, stolen, destroyed or mutilated warrant and
any such lost, stolen, mutilated or destroyed Warrant thereupon shall become
void.

9.             General.

9.1           Authorized Shares, Reservation of Shares for Issuance.  At all
times while this Warrant is outstanding, the Company shall maintain its
corporate authority to issue, and shall have authorized and reserved for
issuance upon exercise of this Warrant, such number of shares of Common Stock,
and any other capital stock or other securities as shall be sufficient to
perform its obligations under

8

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

this Warrant (after giving effect to any and all adjustments to the number and
kind of Warrant Shares purchasable upon exercise of this Warrant).

9.2           No Impairment.  The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities, sale or
other transfer of any of its assets or properties, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder hereunder against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the amount payable therefor on such exercise,
and (b) will take all action that may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

9.3           No Rights as Stockholder.  Except as provided herein (including
Sections 3 and 5), the Holder shall not be entitled to vote or to receive
dividends or to be deemed the holder of Common Stock that may at any time be
issuable upon exercise of this Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holder any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings (except to the extent otherwise
provided in this Warrant), or to receive dividends or subscription rights, until
the Holder shall have exercised this Warrant and been issued Warrant Shares in
accordance with the provisions hereof and continues to hold Warrant Shares.

9.4           Notices. Any notices, reports or other correspondence (hereinafter
collectively referred to as “correspondence”) required or permitted to be given
hereunder shall be sent by postage prepaid first class mail, overnight courier
or facsimile transmission, or delivered by hand to the party to whom such
correspondence is required or permitted to be given hereunder. The date of
giving any notice shall be the date of its actual receipt.

(a)           All correspondence to the Company shall be addressed as follows:

Particle Drilling Technologies, Inc.
11757 Katy Freeway, Suite 1300
Houston, Texas 77079
Attn:  Chief Financial Officer
Facsimile: (713) 224-6361

with a copy to:

Vinson & Elkins LLP
First City Tower
1001 Fannin Street, Suite 2300
Houston, Texas 77002-676
Attn:  W. Matthew Strock
Facsimile: (713) 615-5650

9

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

(b)           All correspondence to the Holder shall be addressed to the Holder
at its address appearing in the books maintained by the Company.

10.           Amendment and Waiver.  No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. This Warrant
is one of a series of Warrants issued by the Company, all dated the date hereof
and of like tenor, except as to the number of shares of Common Stock subject
thereto (collectively, the “Company Warrants”).  Any term of this Warrant may be
amended or waived upon the written consent of the Company and the holders of
Company Warrants representing at least a majority of the number of shares of
Common Stock then subject to outstanding Company Warrants; provided that (i) any
such amendment or waiver must apply to all Company Warrants then outstanding;
(ii) the number of Warrant Shares subject to this Warrant, the Exercise Price or
Expiration Date of this Warrant and the number of shares or class of stock
obtainable upon exercise of this Warrant may not be amended, (iii) the right to
exercise this Warrant may not be waived, without the written consent of the
Holder of this Warrant (it being agreed that an amendment to or waiver under any
of the provisions of Section 3 of this Warrant shall not be considered an
amendment of the number of Warrant Shares or the Exercise Price) and (iv) any
amendment that adversely affects any particular Holder without a corresponding
affect upon all Holders must be approved by the particular Holder so affected. 
The Company shall promptly give notice to all holders of the Company Warrants of
any amendments effected in accordance with this Section 10.  No special
consideration may be given to any holder as inducement to waive or amend this
Warrant unless such consideration is given equally and ratably to all holders of
Company Warrants.

11.           Governing Law.  This Warrant shall be governed by and construed in
accordance with the laws of the State of New York, as such laws are applied to
contracts entered into and wholly to be performed within the State of New York
and without giving effect to any principles of conflicts or choice of law that
would result in the application of the laws of any other jurisdiction.

12.           Covenants To Bind Successor and Assigns.  All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company shall bind its successors and assigns, whether so expressed or
not.

13.           Severability.  In case any one or more of the provisions contained
in this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.  The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

14.           Construction.  The definitions of this Warrant shall apply equally
to both the singular and the plural forms of the terms defined. Wherever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The section and paragraph headings used herein are
for convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.

15.           Remedies. The Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any

10

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

action for specific performance that a remedy at law would be adequate. In any
action or proceeding brought to enforce any provision of this Warrant or where
any provision hereof is validly asserted as a defense, the successful party to
such action or proceeding shall be entitled to recover reasonable attorneys’
fees in addition to any other available remedy.

[SIGNATURE PAGE TO FOLLOW]

11

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

IN WITNESS WHEREOF, the Company has executed this Common Stock Purchase Warrant
as of the date first written above.

COMPANY:

 

 

 

PARTICLE DRILLING TECHNOLOGIES, INC.

 

 

 

By:

/s/ JIM B. TERRY

 

 

 

Name:

Jim B. Terry

 

 

Title:

President and Chief Executive Officer

 

 

 

 

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

NOTICE AND
SUBSCRIPTION

To:                              Particle Drilling Technologies, Inc.
11757 Katy Freeway, Suite 1300
Houston, Texas 77079
Attn:  Chief Financial Officer

The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to exercise thereunder, __________
shares of Common Stock, of PARTICLE DRILLING TECHNOLOGIES, INC., a Nevada
corporation (the “Company”), and tenders herewith payment of $__________,
representing the aggregate purchase price for such shares based on the price per
share provided for in such Warrant. Such payment is being made in accordance
with Section 2.1(a) of the attached Warrant.

The undersigned hereby represents and warrants as follows:

(a)           the undersigned is acquiring such shares of Common Stock for its
own account for investment and not for resale or with a view to distribution
thereof in violation of the Securities Act of 1933, as amended, and the
regulations promulgated thereunder (the “Securities Act”); and

(b)           the undersigned is an “accredited investor” as defined in Rule 501
of Regulation D promulgated under the Securities Act and was not organized for
the purpose of acquiring the Warrant or such shares of Common Stock.  The
undersigned’s financial condition is such that it is able to bear the risk of
holding such securities for an indefinite period of time and the risk of loss of
its entire investment.  The undersigned has sufficient knowledge and experience
in investing in companies similar to the Company so as to be able to evaluate
the risks and merits of its investment in the Company.

Please issue a certificate or certificates for such shares of Common Stock in
the following name or names and denominations and deliver such certificate or
certificates to the person or persons listed below at their respective address
set forth below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If said number of shares of Common Stock shall not be all the shares of Common
Stock issuable upon exercise of the attached Warrant, a new Warrant is to be
issued in the name of the undersigned for the remaining balance of such shares
of Common Stock less any fraction of a share of Common Stock paid in cash
pursuant to Section 2.2 of the attached warrant.

Dated:___________, ____

 

 

 

 

 

 

 

 

Signature

 

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

 

The undersigned Particle Drilling Technologies, Inc. hereby acknowledges receipt
of this Notice and Subscription and authorizes issuance of the shares of Common
Stock described above.

Particle Drilling Technologies, Inc.

 

By:

 

 

Title:

 

 

Date:

 

 

 

 

 

 

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

FORM OF ASSIGNMENT

(To be executed upon assignment of Warrant)

For value received, __________________________________ hereby sells, assigns and
transfers unto __________________ the attached Warrant [__% of the attached
Warrant], together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint ____________________ attorney to transfer
said Warrant [said percentage of said Warrant] on the books of PARTICLE DRILLING
TECHNOLOGIES, INC., a Nevada corporation, with full power of substitution in the
premises.

If not all of the attached Warrant is to be so transferred, a new Warrant is to
be issued in the name of the undersigned for the balance of said Warrant.

The undersigned hereby agrees that it will not sell, assign, or transfer the
right, title and interest in and to the Warrant unless applicable federal and
state securities laws have been complied with.

Dated:___________, ____

 

 

 

 

 

 

 

 

Signature

 

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

FORM OF CONVERSION NOTICE

To Particle Drilling Technologies, Inc.:

The undersigned registered holder of the attached Warrant hereby irrevocably
converts such Warrants with respect to ________(1) Warrant Shares which such
holder would be entitled to receive upon the exercise hereof, and requests that
the certificates for such shares be issued in the name of, and delivered to
_________________, whose address is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Such conversion is being made in accordance with Section 2.1(b) of the attached
Warrant.  The undersigned hereby represents and warrants as follows:

(a)           the undersigned is acquiring such shares of Common Stock for its
own account for investment and not for resale or with a view to distribution
thereof in violation of the Securities Act; and

(b)           the undersigned is an “accredited investor” as defined in Rule 501
of Regulation D promulgated under the Securities Act and was not organized for
the purpose of acquiring the Warrant or such shares of Common Stock.  The
undersigned’s financial condition is such that it is able to bear the risk of
holding such securities for an indefinite period of time and the risk of loss of
its entire investment.  The undersigned has sufficient knowledge and experience
in investing in companies similar to the Company so as to be able to evaluate
the risks and merits of its investment in the Company.

Dated:

 

 

(Signature must conform in all respects to name of holder as specified on the
face of Warrant)

 

 

 

 

 

(Street Address)

 

 

 

 

 

(City)

(State)

(Zip Code)

 

The undersigned Particle Drilling Technologies, Inc. hereby acknowledges receipt
of this Conversion Notice and authorizes issuance of the shares of Common Stock
described above.

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

(1)             Insert here the number of Warrant Shares into which the Warrant
is convertible (or, in the case of a partial conversion, the number of Warrant
Shares as to which the Warrants evidenced by this Warrant Certificate are then
being converted). In the case of a partial conversion, a new Warrant Certificate
will be issued and delivered, representing the unconverted portion of the
Warrants, to the holder surrendering this Warrant Certificate.

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

Particle Drilling Technologies, Inc.

 

By:

 

 

Title:

 

 

Date:

 

 

 

 

 

 

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

Schedule of Substantially Identical Common Stock Purchase Warrants

Not Filed with the Securities and Exchange Commission

Pursuant to Instruction 2 of Item 601 of Regulation S-K, the Company has filed
only one of the Common Stock Purchase Warrants issued to the purchasers in
connection with the Private Placement because each of the Common Stock Purchase
Warrants are substantially identical in all material respects except as to the
parties thereto and the number of shares of common stock issuable thereunder. 
The following table sets forth the holder of each of the other Common Stock
Purchase Warrants issued by the Company and the number of shares of common stock
that may be purchased by each holder thereof.

Name of Shareholder

 

Number of Warrant Shares

Cadence Master, Ltd.

 

75,000

U.S.A. Fund, LLLP

 

60,000

The IBS Turnaround Fund (QP) (A Limited Partnership)

 

68,460

The IBS Opportunity Fund (BVI), Ltd.

 

14,190

The IBS Turnaround Fund, L.P.

 

22,350

Greywolf Capital Partners II LP

 

46,500

Greywolf Capital Overseas Fund

 

103,500

Karen Singer

 

30,000

SF Capital Partners Ltd.

 

120,000

LB I Group Inc.

 

71,100

Millennium Partners, L.P.

 

187,500

Fort Mason Partners, LP

 

19,421

Fort Mason Master, LP

 

299,479

LC Capital Master Fund, Ltd.

 

187,500

Schottenfeld Qualified Associates, LP

 

75,000

Phaeton International (BVI) Limited

 

37,530

Phoenix Partners II, L.P.

 

11,070

Phoenix Partners L.P.

 

41,400

 

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