ex10_1.htm


    
      

    

    
      Exhibit
        10.1

      


      NOTE
        AND WARRANT PURCHASE AGREEMENT

      


      


      This
        NOTE
        AND WARRANT PURCHASE AGREEMENT, dated as of November 9, 2007 (this
“Agreement”) is entered into by and among Petrosearch Energy Corporation,
        a Nevada corporation (the “Company”), and those individuals and entities
        listed on Schedule “A” (each a “Purchaser” and collectively, the
“Purchasers”).

      


      WHEREAS,
        the Company desires to raise an aggregate of $8,100,000 through the sale
        of a
        series of 8% Senior Secured Convertible Promissory Notes and three-year Warrants
        to purchase an aggregate of 1,928,575 shares of Common Stock (the
“Financing”) to the Purchasers in the amounts listed on Schedule
“A”; and

      


      WHEREAS,
        it is a condition to the Purchasers’ purchase of the Note and Warrant (as
        hereinafter defined) that the Purchasers be provided with certain registration
        rights with respect to the shares of Common Stock into which the Note is
        convertible and the shares of Common Stock underlying the Warrant.

      


      NOW
        THEREFORE, in consideration of the mutual covenants and agreements set forth
        herein and for good and valuable consideration, the receipt and sufficiency
        of
        which are hereby acknowledged, the Company and the Purchasers hereby agree
        as
        follows:

      


      ARTICLE
        I

      DEFINITIONS

      


      Section
        1.01    Definitions.  As
        used in this Agreement, and unless the context requires a different meaning,
        the
        following terms have the meanings indicated:

      


      “Action”
        against a Person means any lawsuit, action, proceeding or complaint before
        any
        Governmental Authority, mediator or arbitrator.

      


      “Acts”
        means the Securities Act and the Exchange Act.

      


      “Affiliate”
        means, with respect to a specified Person, any other Person, whether now
        in
        existence or hereafter created, directly or indirectly controlling, controlled
        by or under direct or indirect common control with such specified
        Person.  For purposes of this definition, “control” (including, with
        correlative meanings, “controlling,” “controlled by,” and “under common control
        with”) 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.

      


      “Agreement”
        shall have the meaning specified in the introductory paragraph.

      


      “Business
        Day” means any day other than a Saturday, Sunday, or a legal holiday for
        commercial banks in New York, New York.

      


      “Closing”
        shall have the meaning specified in Section 2.03.

      


      “Closing
        Date” shall have the meaning specified in Section
        2.03.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      “Code”
        means the Internal Revenue Code of 1986, as amended.

      


      “Collateral
        Agent” means Ironman PI Fund (QP), LP.

      


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

      


      “Common
        Stock” means the Company’s common stock, par value $0.001.

      


      “Company
        Material Adverse Effect” means a material and adverse effect on (i) the
        assets, liabilities, financial condition, business, or affairs of the Company
        or
        (ii) the ability of the Company to consummate the transactions under any
        Transaction Document.

      


      “Company
        Related Parties” shall have the meaning specified in Section
        7.02.

      


      “Company
        SEC Documents” shall have the meaning specified in Section
        3.06.

      


      “Conversion
        Price” shall have the meaning specified in the Notes.

      


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

      


      “GAAP”
        means generally accepted accounting principles in the United States of America
        in effect from time to time.

      


      “Governmental
        Authority” shall include the country, state, county, city and political
        subdivisions in which any Person or such Person’s Property is located or which
        exercises valid jurisdiction over any such Person or such Person’s Property, and
        any court, agency, department, commission, board, bureau or instrumentality
        of
        any of them and any monetary authorities that exercise valid jurisdiction
        over
        any such Person or such Person’s Property. Unless otherwise specified, all
        references to Governmental Authority herein shall mean a Governmental Authority
        having jurisdiction over, where applicable, the Company or any of its Property
        or the Purchasers.

      


      “Holders”
        means the record holders of the Notes, Warrants, Note Shares or Warrant
        Shares.

      


      “Indemnified
        Party” shall have the meaning specified in Section 7.03.

      


      “Indemnifying
        Party” shall have the meaning specified in Section 7.03.

      


      “Interest
        Shares” means the number of shares of Common Stock that could be paid as
        interest pursuant to Section 2(a) of the Notes at a rate of 8.5% under the
        Notes
        during the term of the Notes.

      


      “Law”
        means any federal, state, local or foreign order, writ, injunction, judgment,
        settlement, award, decree, statute, law, rule or regulation.

      


      “Lien”
        means any interest in Property securing an obligation owed to, or a claim
        by, a
        Person other than the owner of the Property, whether such interest is based
        on
        the common law, statute or contract, and whether such obligation or claim
        is
        fixed or contingent, and including but not limited to the lien or security
        interest arising from a mortgage, encumbrance, pledge, security agreement,
        conditional sale or trust receipt or a lease, consignment or bailment for
        security purposes.  For the purpose of this Agreement, a Person shall
        be deemed to be the owner of any Property that it has acquired or holds subject
        to a conditional sale agreement, or leases under a financing lease or other
        arrangement pursuant to which title to the Property has been retained by
        or
        vested in some other Person in a transaction intended to create a
        financing.


      
        
          Note
            and Warrant Purchase Agreement

          
          

        

        
          Page
            2

          
            

          

        

        
          
          

        

      


      “Notes”
        shall have the meaning specified in Section 2.01.

      


      “Note
        Shares” means (i) the shares of Common Stock to which the Holders are
        entitled upon conversion of the Notes and (ii) the Interest Shares.

      


      “Offering
        Notice” shall have the meaning specified in Section
        5.04.

      


      “OTC
        BB” shall mean the OTC Bulletin Board, on which the Company’s Common Stock
        is traded.

      


      “Party”
        or “Parties” means the Company and the Purchasers party to this
        Agreement, individually or collectively, as the case may be.

      


      “Person”
        means any individual, corporation, company, voluntary association, partnership,
        joint venture, trust, limited liability company, unincorporated organization
        or
        government or any agency, instrumentality or political subdivision thereof,
        or
        any other form of entity.

      


      “Pledge
        and Security Agreement” means the pledge and security agreement between the
        Company, the Purchasers and Collateral Agent in substantially the form attached
        hereto as Exhibit C pursuant to which the Company agrees to pledge as
        collateral securing the Notes 5.00% of the membership interests in Exploration
        Holding Co., L.L.C. which owns 100% of Barnett Petrosearch, L.L.C.

      


      “Preferred
        Stock” means, collectively, the Series A 8% convertible preferred stock and
        the Series B convertible preferred stock of the Company.

      


      “Property”
        means any interest in any kind of property or asset, whether real, personal
        or
        mixed, or tangible or intangible.

      


      “Proposed
        Financing” shall have the meaning specified in Section 5.04.

      


      “Purchase
        Price” means an aggregate of $8,100,000 as paid by the Purchasers in their
        respective pro rata portions as described on Schedule “A”.

      


      “Purchased
        Securities” means, collectively, the Notes and the Warrants.

      


      “Purchaser”
        shall have the meaning specified in the introductory paragraph.

      


      “Purchasers”
        shall mean all of the purchasers listed on Schedule “A”.

      


      “Purchaser
        Material Adverse Effect” means any material and adverse effect on (i) the
        ability of a Purchaser to meet its obligations under the Transaction Documents
        on a timely basis or (ii) the ability of a Purchaser to consummate the
        transactions under any Transaction Document.


      
        
          Note
            and Warrant Purchase Agreement

          
          

        

        
          Page
            3

          
            

          

        

        
          
          

        

      


      “Purchaser
        Related Parties” shall have the meaning specified in Section
        7.01.

      


      “Registration
        Rights Agreement” means the Registration Rights Agreement, substantially in
        the form attached to this Agreement as Exhibit D, to be entered into at
        the Closing, between the Company and the Purchasers.

      


      “Representatives”
        of any Person means the Affiliates, control persons, officers, directors,
        employees, agents, counsel, investment bankers and other representatives
        of such
        Person.

      


      “Securities
        Act” means the Securities Act of 1933, as amended from time to time, and the
        rules and regulations of the Commission promulgated thereunder.

      


      “Terminating
        Breach” shall have the meaning specified in Section
        8.09(a)(ii).

      


      “Transaction
        Documents” means, collectively, this Agreement, the Registration Rights
        Agreement, the Pledge and Security Agreement, the Notes and the Warrants
        and any
        and all other agreements or instruments executed and delivered by the Parties
        on
        even date herewith or at Closing, or any amendments, supplements, continuations
        or modifications thereto.

      


      “Transfer”
        shall have the meaning specified in Section 5.08(b).

      


      “Warrants”
        shall have the meaning specified in Section 2.02.

      


      “Warrant
        Shares” means the shares of Common Stock underlying the
        Warrants.

      


      Section
        1.02    Accounting
        Procedures and Interpretation.  Unless
        otherwise specified in this Agreement, all accounting terms used herein shall
        be
        interpreted, all determinations with respect to accounting matters under
        this
        Agreement shall be made, and all financial statements and certificates and
        reports as to financial matters required to be furnished to the Purchasers
        under
        this Agreement shall be prepared, in accordance with GAAP applied on a
        consistent basis during the periods involved (except, in the case of unaudited
        statements, as permitted by Form 10-QSB promulgated by the Commission) and
        in compliance as to form in all material respects with applicable accounting
        requirements and with the published rules and regulations of the Commission
        with
        respect thereto.

      


      ARTICLE
        II

      SALE
        AND PURCHASE 

      


      Section
        2.01    Sale and Issuance
        of the Notes.  Subject to the terms and conditions of this
        Agreement, the Purchasers agree to purchase and the Company agrees to sell
        to
        the Purchasers the series of 8% Senior Secured Convertible Promissory Notes
        in
        an aggregate original principal amount of $8,100,000 substantially the form
        attached hereto as Exhibit A (collectively, the “Notes”) and in
        the respective amounts listed on Schedule “A” for the Purchase
        Price.

      


      Section
        2.02    Issuance of
        Warrants.  As additional consideration for the Purchasers’
agreement to the terms and conditions of this Agreement and other valuable
        consideration, the Company shall issue to the Purchasers three-year warrants
        to
        purchase an aggregate of 1,928,572 shares of Common Stock in the amounts
        listed
        on Schedule “A”, with the exercise price and other additional terms and
        conditions set forth in the form of Warrant attached hereto as Exhibit B
        (collectively, the “Warrants”).


      
        
          Note
            and Warrant Purchase Agreement

          
          

        

        
          Page
            4

          
            

          

        

        
          
          

        

      


      Section
        2.03    Closing.  The
        execution and delivery of the Transaction Documents (other than this Agreement)
        and execution and delivery of all other instruments, agreements, and other
        documents required by this Agreement (the “Closing”) shall take place on
        or before November 9, 2007 (the “Closing Date”).   The
        Closing shall take place at the offices of Axelrod, Smith & Kirshbaum, 5300
        Memorial Drive, Houston, Texas  77007.

      


      ARTICLE
        III

      REPRESENTATIONS
        AND WARRANTIES OF THE COMPANY

      


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

      


      Section
        3.01    Valid
        Existence.  Each
        of the Company and its subsidiaries is duly organized, validly existing and
        in
        good standing under the laws of its state of incorporation or formation,
        and is
        duly qualified to do business in all jurisdictions in which the failure to
        be so
        qualified would result in a Company Material Adverse Effect. Each of the
        Company
        and its subsidiaries has all requisite power and authority (i) to own and
        lease
        the properties and assets it currently owns and leases and it contemplates
        owning and leasing and (ii) to conduct its activities as such activities
        are
        currently conducted and as currently contemplated to be conducted.

      


      Section
        3.02    Ownership of
        Exploration Holding Co. L.L.C.  The Company owns 100% of the
        issued and outstanding membership interests in Exploration Holding Co. L.L.C.,
        a
        Texas limited liability company (“Exploration Holding”); such membership
        interests are duly authorized and validly issued in accordance with the Company
        Agreement of Exploration Holding (the Exploration Holding LLC Agreement)
        and
        fully paid (to the extent required under the Exploration Holding LLC Agreement)
        and non-assessable (except as such nonassessability may be affected by the
        Texas
        Business Organizations Code (the “TBOC”)); and, except as set forth in
        Exhibit 3.02, the Company owns such membership interests free and clear of
        all
        Liens.

      


      Section
        3.03    Ownership of
        Barnett Petrosearch, L.L.C.  Exploration Holding owns 100% of the
        issued and outstanding membership interests in Barnett Petrosearch, L.L.C.,
        a
        Texas limited liability company (“Barnett”); such membership interests
        are duly authorized and validly issued in accordance with Barnett’s limited
        liability company agreement (the “Barnett LLC Agreement”) and fully paid
        (to the extent required under the Barnett LLC Agreement) and non-assessable
        (except as such nonassessability may be affected by the TBOC); and Exploration
        Holding owns such membership interests free and clear of all Liens.

      


      Section
        3.04    Ownership of
        DDJET.  Barnett owns a 5.54455% limited partnership interest in
        DDJET Limited, LLP, a Texas limited liability limited partnership (“DDJET”);
        such partnership interest is duly authorized and validly issued in accordance
        with DDJET’s partnership agreement (the “DDJET Partnership Agreement”)
        and fully paid (to the extent required under the DDJET Partnership Agreement
        )
        and non-assessable (except as such nonassessability may be affected by the
        TBOC); and Barnett owns such partnership interest free and clear of all
        Liens.


      
        
          Note
            and Warrant Purchase Agreement

          
          

        

        
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            5

          
            

          

        

        
          
          

        

      


      Section
        3.05    Capitalization and
        Valid Issuance.

       

      (a)           As
        of the date of this Agreement, the issued and outstanding equity of the Company
        consists of 39,742,653 shares of Common Stock, 483,416 shares
        of  Series A 8% convertible preferred stock and 43,000 shares of
        Series B convertible preferred stock. All of the outstanding Common Stock
        and
        Preferred Stock have been duly authorized and validly issued and are fully
        paid
        and nonassessable. The rights, privileges and preferences of the Preferred
        Stock
        are as stated in the Company’s Articles of Incorporation (the
“Articles”).

      


      (b)           Except
        for (i) the conversion privileges of the Preferred Stock, (ii) the
        conversion privileges of the Notes to be issued under this Agreement, (iii)
        the
        Warrants being issued in connection with this Agreement, (iv) the conversion
        privileges provided in the 8% Senior Secured Convertible Note dated February
        7,
        2007, by and between the Company and RCH Petro Investors, LP (the “RCH Note”),
        (v) the exercise privileges provided in the Warrant to Purchase Common Stock
        dated February 7, 2007 issued by the Company to RCH Petro Investors, LP (the
        “RCH Warrant”), (vi) stock which may be issued pursuant to an Asset Purchase
        Agreement dated November 15, 2005, for the purchase of Quinduno Water Flood
        Project (vii) warrants issued in February 2006 to certain investors, (viii)
        the
        shares of Common Stock issuable upon exercise of warrants granted pursuant
        to
        the Company’s incentive plan, and (ix) all warrants disclosed in the
        Company’s SEC Documents, there are no outstanding options, warrants, rights
        (including conversion, preemptive rights or similar rights) or agreements
        for
        the purchase or acquisition from the Company of any shares of its capital
        stock.  The Company is not a party or subject to any agreement or
        understanding, and, to the Company’s knowledge, there is no agreement or
        understanding between any persons and/or entities, which affects or relates
        to
        the voting or giving of written consents with respect to any security or
        by a
        director of the Company, except as provided for in the Articles.

      


      (c)           The
        issuance, offer and sale of the Notes and the issuance of the Warrants have
        been
        duly authorized by the Company and, when issued and delivered to the Purchasers
        against payment therefor in accordance with the terms of this Agreement,
        will be
        validly issued, fully paid and nonassessable and will be free of any and
        all
        Liens and restrictions on transfer, other than under applicable state and
        federal securities Laws and other than such Liens as are created by the
        Purchasers.

      


      (d)           The
        Company’s currently outstanding Common Stock is quoted on the OTC
        BB.

      


      (e)           The
        Company has reserved the Note Shares and the Warrant Shares for issuance
        and has
        adequate authorized capital under its Articles to issue such shares when
        the
        Notes are converted or the Warrants are exercised.


      
        
          Note
            and Warrant Purchase Agreement

          
          

        

        
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            6

          
            

          

        

        
          
          

        

      


      Section
        3.06    Company SEC
        Documents.  The
        Company has timely filed with the Commission all  reports, schedules
        and statements required to be filed by it under the Exchange Act since the
        filing of its Form 8-A12G on August 10, 2005 (all such documents filed on
        or
        prior to the date of this Agreement, collectively, the “the Company SEC
        Documents”).  The Company SEC Documents, including any audited or
        unaudited financial statements and any notes thereto or schedules included
        therein, at the time filed  (except to the extent corrected by a
        subsequently filed the Company SEC Document filed prior to the date of this
        Agreement) (i) did not contain any 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 light of the circumstances under
        which
        they were made, not misleading, (ii) complied in all material respects with
        the applicable requirements of the Exchange Act, (iii) complied as to form
        in all material respects with applicable accounting requirements and with
        the
        published rules and regulations of the Commission with respect thereto,
        (iv) were prepared in accordance with GAAP applied on a consistent basis
        during the periods involved (except as may be indicated in the notes thereto
        or,
        in the case of unaudited statements, as permitted by
        Form 10-QSB of the Commission) and (v) fairly present
        (subject in the case of unaudited statements to normal, recurring and year-end
        audit adjustments) in all material respects the consolidated financial position
        and the consolidated results of its operations and cash flows for the periods
        then ended.  Ham, Langston & Brezina, L.L.P. is an independent
        registered public accounting firm with respect to the Company and has not
        resigned or been dismissed as independent registered public accountants of
        the
        Company as a result of or in connection with any disagreement with the Company
        on any matter of accounting principles or practices, financial statement
        disclosure or auditing scope or procedures.

      


      Section
        3.07    No Material
        Adverse Change.  Except
        as set forth in or contemplated by the Company SEC Documents, since June
        30,
        2007, the Company has conducted its business in the ordinary course, consistent
        with past practice, and there has been no (i) change that has had or would
        reasonably be expected to have a Company Material Adverse Effect, (ii)
        acquisition or disposition of any material asset by the Company or any contract
        or arrangement therefor, otherwise than for fair value in the ordinary course
        of
        business, (iii) material change in the Company’s accounting principles,
        practices or methods or (iv) incurrence of material indebtedness.

      


      Section
        3.08    Litigation.  Except
        as set forth in the Company SEC Documents, there is no Action pending or,
        to the
        knowledge of the Company, contemplated or threatened against the Company
        or any
        of its officers (in their capacity as such), directors (in their capacity
        as
        such), Properties, which (individually or in the aggregate) reasonably would
        be
        expected to have a Company Material Adverse Effect or which challenges the
        validity of this Agreement or which would reasonably be expected to adversely
        affect or restrict the Company’s ability to consummate the transactions
        contemplated by the Transaction Documents.

      


      Section
        3.09    No
        Conflict.  Except
        as set forth in Exhibit 3.09, the execution, delivery and performance by
        the Company of the Transaction Documents to which it is a party and all other
        agreements and instruments to be executed and delivered by the Company pursuant
        hereto or thereto or in connection herewith and therewith, and compliance
        by the
        Company with the terms and provisions hereof and thereof, do not and will
        not
        (a) violate any provision of any Law, governmental permit, determination or
        award having applicability to the Company or any of its Properties,
        (b) conflict with or result in a violation of any provision of the articles
        of incorporation or bylaws of the Company (c) require any consent, approval
        or notice under or result in a violation or breach of or constitute (with
        or
        without due notice or lapse of time or both) a default (or give rise to any
        right of termination, cancellation or acceleration) under (i) any note,
        bond, mortgage, license, or loan or credit agreement to which the Company
        is a
        party or by which the Company or any of its Properties may be bound or
        (ii) any other agreement, instrument or obligation, or (d) result in
        or require the creation or imposition of any Lien upon or with respect to
        any of
        the Properties now owned or hereafter acquired by the Company, except in
        the
        cases of clauses (a), (c) and (d) where such violation, default, breach,
        termination, cancellation, failure to receive consent or approval, or
        acceleration with respect to the foregoing provisions of this Section 3.09
        would
        not, individually or in the aggregate, reasonably be expected to have a Company
        Material Adverse Effect.


      
        
          Note
            and Warrant Purchase Agreement

          
          

        

        
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            7

          
            

          

        

        
          
          

        

      


      Section
        3.10    Authority.  The
        execution and delivery of, and the performance by the Company of its obligations
        under the Transaction Documents have been duly and validly authorized by
        the
        Company, and the Transaction Documents have been duly executed and delivered
        by
        the Company and constitute the valid and legally binding agreements of the
        Company, enforceable against the Company in accordance with their terms,
        except
        as rights to indemnity and contribution hereunder and thereunder may be limited
        by federal or state securities laws or principles of public policy and subject
        to the qualification that the enforceability of the Company’s obligations
        hereunder and thereunder may be limited by bankruptcy, fraudulent conveyance,
        insolvency, reorganization, moratorium and other laws relating to or affecting
        creditors’ rights generally and by general equitable principles, regardless
        whether enforcement is considered in a proceeding in equity or at
        law.

      


      Section
        3.11    Compliance with
        Laws.  The
        Company is not in violation of any judgment, decree or order or any Law
        applicable to the Company, except as would not, individually or in the
        aggregate, have a Company Material Adverse Effect.  The Company
        possess all certificates, authorizations and permits issued by the appropriate
        regulatory authorities necessary to conduct its business, except where the
        failure to possess such certificates, authorizations or permits would not
        have,
        individually or in the aggregate, a Company Material Adverse Effect, and
        the
        Company has not received any notice of proceedings relating to the revocation
        or
        modification of any such certificate, authorization or permit, except where
        such
        potential revocation or modification would not have, individually in the
        aggregate, a Company Material Adverse Effect.

      


      Section
        3.12    Preemptive Rights
        or Registration Rights.  Except
        for as set forth on Exhibit 3.12, there are no preemptive rights or other
        rights to subscribe for or to purchase, nor any restriction upon the voting
        or
        transfer of, any capital stock of the Company pursuant to any agreement or
        instrument to which the Company is a party and is bound. Neither the execution
        of this Agreement nor the issuance of the Notes and Warrants as contemplated
        by
        this Agreement gives rise to any rights for or relating to the registration
        of
        any Common Stock, other than as set forth on Exhibit 3.12.

      


      Section
        3.13    Approvals.  Except
        as set forth in Exhibit 3.13 and as required by the Commission in
        connection with the Company’s obligations under the Registration Rights
        Agreement, no authorization, consent, approval, waiver, license, qualification
        or written exemption from, nor any filing, declaration, qualification or
        registration with, any Governmental Authority or any other Person is required
        in
        connection with the execution, delivery or performance by the Company of
        any of
        the Transaction Documents to which it is a party, except (i) as may be required
        under the state securities or “Blue Sky” Laws, (or (ii) where the failure to
        receive such authorization, consent, approval, waiver, license, qualification
        or
        written exemption or to make such filing, declaration, qualification or
        registration would not, individually or in the aggregate, reasonably be expected
        to have a Company Material Adverse Effect.

      


      Section
        3.14    Offering.  Assuming
        the accuracy of the representations and warranties of the Purchasers contained
        in this Agreement, the sale and issuance of the Purchased Securities pursuant
        to
        this Agreement is exempt from the registration requirements of the Securities
        Act, and neither the Company nor, to the Company’s knowledge, any authorized
        Representative acting on its behalf has taken or will take any action hereafter
        that would cause the loss of such exemption.


      
        
          Note
            and Warrant Purchase Agreement

          
          

        

        
          Page
            8

          
            

          

        

        
          
          

        

      


      Section
        3.15    Certain
        Fees.  Except
        for fees payable to Scarsdale Equities, LLC in its capacity as placement
        agent,
        no fees or commissions will be payable by the Company to brokers, finders,
        or
        investment bankers with respect to the sale of any of the Purchased Securities
        or the consummation of the transactions contemplated by this
        Agreement.  The Company agrees that it will indemnify and hold
        harmless the Purchasers from and against any and all claims, demands, or
        liabilities for broker’s, finder’s, placement, or other similar fees or
        commissions incurred by the Company or alleged to have been incurred by the
        Company in connection with the sale of Purchased Securities or the consummation
        of the transactions contemplated by this Agreement.

      


      Section
        3.16    No Side
        Agreements.  There
        are no other agreements by, among or between the Company or its Affiliates,
        on
        the one hand, and the Purchasers, on the other hand, with respect to the
        transactions contemplated hereby nor promises or inducements for future
        transactions between or among any of such parties.

      


      Section
        3.17    Investment Company
        Status.  The
        Company is not an “investment company” within the meaning of the Investment
        Company Act of 1940, as amended.

      


      ARTICLE
        IV

      REPRESENTATIONS
        AND WARRANTIES OF THE PURCHASERS

      


      Each
        Purchaser represents and warrants to the Company, on and as of the date of
        this
        Agreement and on and as of the Closing Date, as follows:

      


      Section
        4.01    Valid
        Existence.  The
        Purchaser: (i) is either (x) duly organized, validly existing and in good
        standing under the Laws of its jurisdiction of organization or (y) an individual
        of full age of majority, with full power, capacity, and authority to enter
        into
        this Agreement and perform the obligations contemplated hereby by and for
        himself/herself and his/her spouse; and (ii) has all requisite power, and
        has all material governmental licenses, authorizations, consents and approvals
        necessary to own its Properties and carry on its business as its business
        is now
        being conducted, except where the failure to obtain such licenses,
        authorizations, consents and approvals would not reasonably be expected to
        have
        a Purchaser Material Adverse Effect.

      


      Section
        4.02    No
        Conflicts.  The
        execution, delivery and performance by the Purchaser of the Transaction
        Documents to which it is a party and all other agreements and instruments
        to be
        executed and delivered by the Purchaser pursuant hereto or thereto or in
        connection herewith or therewith, compliance by the Purchaser with the terms
        and
        provisions hereof and thereof, and the purchase of the Purchased Securities
        by
        the Purchaser do not and will not (a) violate any provision of any Law,
        governmental permit, determination or award having applicability to the
        Purchaser or any of its Properties, (b) conflict with or result in a
        violation of any provision of the organizational documents of the Purchaser,
        or
        (c) require any consent (other than standard internal consents), approval
        or notice under or result in a violation or breach of or constitute (with
        or
        without due notice or lapse of time or both) a default (or give rise to any
        right of termination, cancellation or acceleration) under (i) any note,
        bond, mortgage, license, or loan or credit agreement to which the Purchaser
        is a
        party or by which the Purchaser or any of its Properties may be bound or
        (ii) any other such agreement, instrument or obligation, except in the case
        of clauses (a) and (c), where such violation, default, breach, termination,
        cancellation, failure to receive consent or approval, or acceleration with
        respect to the foregoing provisions of this Section 4.02 would not,
        individually or in the aggregate, reasonably be expected to have a Purchaser
        Material Adverse Effect.


      
        
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      Section
        4.03    Authority.  The
        execution and delivery of, and the performance by the Purchaser of its
        obligations under the Transaction Documents have been duly and validly
        authorized by the Purchaser, and the Transaction Documents have been duly
        executed and delivered by the Purchaser and constitute the valid and legally
        binding agreements of the Purchaser, enforceable against the Purchaser in
        accordance with their terms, except as rights to indemnity and contribution
        hereunder and thereunder may be limited by federal or state securities laws
        or
        principles of public policy and subject to the qualification that the
        enforceability of the Purchaser’s obligations hereunder and thereunder may be
        limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
        moratorium and other laws relating to or affecting creditors’ rights generally
        and by general equitable principles, regardless whether enforcement is
        considered in a proceeding in equity or at law.

      


      Section
        4.04    Investment.  The
        Purchased Securities are being acquired for the Purchaser’s own account, or the
        accounts of clients for whom the Purchaser exercises discretionary investment
        authority, not as a nominee or agent, and with no present intention of
        distributing the Purchased Securities or any part thereof, and that the
        Purchaser has no present intention of selling or granting any participation
        in
        or otherwise distributing the same in any transaction in violation of the
        securities Laws of the United States of America or any state, without prejudice,
        however, to the Purchaser’s right at all times (subject to the Purchaser’s
        agreement contained in Section 4.07) to sell or otherwise dispose
        of all or any part of the Purchased Securities under a registration statement
        under the Acts and applicable state securities Laws or under an exemption
        from
        such registration available thereunder (including, without limitation, if
        available, Rule 144 promulgated thereunder). If the Purchaser should in the
        future decide to dispose of any of the Purchased Securities, the Purchaser
        understands and agrees (a) that it may do so only (i) in compliance
        with the Acts and applicable state securities law, as then in effect, or
        (ii) in the manner contemplated by any registration statement pursuant to
        which such securities are being offered, and (b) that stop-transfer
        instructions to that effect will be in effect with respect to such
        securities.

      


      Section
        4.05    Nature of
        Purchaser.  The
        Purchaser represents and warrants to, and covenants and agrees with, the
        Company
        that, (a) it is an “accredited investor” within the meaning of
        Rule 501 of Regulation D promulgated by the Commission pursuant to the
        Securities Act and (b) by reason of its business and financial experience
        it has such knowledge, sophistication and experience in business and financial
        matters so as to be capable of evaluating the merits and risks of the
        prospective investment in the Purchased Securities, is able to bear the economic
        risk of such investment and, at the present time, would be able to afford
        a
        complete loss of such investment.

      


      Section
        4.06    Receipt of
        Information; Authorization.  The
        Purchaser acknowledges that it (a) has access to the Company SEC Documents
        and
        (b) has been provided a reasonable opportunity to ask questions of and receive
        answers from Representatives of the Company regarding such
        matters.


      
        
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      Section
        4.07    Restricted
        Securities.  The
        Purchaser understands that the Purchased Securities it is purchasing are
        characterized as “restricted securities” under the federal securities Laws
        inasmuch as they are being acquired from the Company in a transaction not
        involving a public offering and that under such Laws and applicable regulations
        such securities may be resold without registration under the Securities Act
        only
        in certain limited circumstances. In this connection, Purchaser represents
        that
        it is knowledgeable with respect to Rule 144 of the Commission promulgated
        under the Securities Act. Purchaser further understands that a restrictive
        legend will be placed on the Purchased Securities, the Note Shares and the
        Warrant Shares.  To assist in implementing the above provisions, the
        Purchaser hereby consents to the placement of the legend, or a substantially
        similar legend, set forth below, on all certificates representing ownership
        of
        the Purchased Securities, the Note Shares and the Warrant Shares acquired
        hereby
        until such securities have been sold, transferred, or otherwise disposed
        of,
        pursuant to the requirements hereof.  The legend shall read
        substantially as follows:

      


      


      
        	
                 

              	
                “THESE
                  SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
                  1933, AS
                  AMENDED, OR ANY APPLICABLE STATE SECURITIES ACTS.  THESE
                  SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, ARE RESTRICTED AS
                  TO
                  TRANSFERABILITY, AND MAY NOT BE SOLD, HYPOTHECATED, OR OTHERWISE
                  TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION AND QUALIFICATION
                  PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
                  EXEMPTIONS THEREFROM.”

              	
                 

              


      

       

      


      Section
        4.08    Certain
        Fees.  No
        fees or commissions will be payable by the Purchaser to brokers, finders,
        or
        investment bankers with respect to the sale of any of the Purchased Securities
        or the consummation of the transactions contemplated by this
        Agreement.  The Purchaser agrees that it will indemnify and hold
        harmless the Company from and against any and all claims, demands, or
        liabilities for broker’s, finder’s, placement, or other similar fees or
        commissions incurred by the Purchaser or alleged to have been incurred by
        the
        Purchaser in connection with the purchase of Purchased Securities or the
        consummation of the transactions contemplated by this Agreement.

      


      Section
        4.09    Short
        Sales.  The Purchaser has not engaged in short sales of the
        Company’s Common Stock during the three months preceding the Closing
        Date.

      


      ARTICLE
        V

      COVENANTS

      


      Section
        5.01    Notice of
        Default.  So long as any amounts remain outstanding under the
        Notes, the Company covenants that it shall give the Holders written notice
        of
        the occurrence of any Event of Default (as defined in Section 8 of the Notes)
        promptly upon the occurrence thereof.

      


      Section
        5.02    Observation and
        Information Rights.  So long as any amounts remain outstanding
        under the Notes, the Company covenants that, in the event that the Company
        has
        not timely filed the necessary Company SEC Documents, it shall notify each
        Holder when quarterly financial information becomes available and shall,
        upon
        subsequent request from any Holder, provide such Holder quarterly financial
        information, quarterly updates regarding the Company’s business, and other
        information which would have otherwise been filed with the
        Commission.


      
        
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      Section
        5.03    Price
        Protection. Without limiting any Holder’s right set forth in
        Section 5.04, if the Company issues and sells capital in the Company any
        time
        during the six months following the Closing Date with an equity price less
        than
        the Conversion Price, each Holder will have the option to: (i) participate
        up to
        the amount invested in this offering; (ii) demand that the Company redeem
        100%
        of the par value of the then outstanding balance plus any accrued unpaid
        interest; or (iii) choose to take no action.  The Company agrees that
        in the event any Holder acts pursuant to (i) or (ii), the Company shall take
        or
        cause to take all necessary action to effect such Holder’s participation in such
        a transaction or the redemption of the Notes. In the event the Notes are
        redeemed, the Company agrees that payment will be due to each Holder making
        such
        election in immediately available cash within 45 days of receipt of the Holder’s
        demand for redemption.

      


      Section
        5.04    Integration.  The
        Company shall not sell, offer for sale or solicit offers to buy or otherwise
        negotiate in respect of any security (as defined in Section 2 of the Securities
        Act) that would be integrated with the offer or sale of the Purchased Securities
        in a manner that would require the registration under the Securities Act
        of the
        sale of the Purchased Securities.

      


      Section
        5.05    Short
        Sales.  Each Holder agrees that it will not engage in short sales
        of the Company’s Common Stock while any amount is outstanding under the
        Notes.

      


      Section
        5.06    Taking of
        Necessary Action.  Each of the Parties hereto shall use its
        commercially reasonable efforts promptly to take or cause to be taken all
        action
        and promptly to do or cause to be done all things necessary, proper or advisable
        under applicable Law and regulations to consummate and make effective the
        transactions contemplated by this Agreement.  Without limiting the
        foregoing, the Company and each Holder will use its commercially reasonable
        efforts to make all filings and obtain all consents of Governmental Authorities
        that may be necessary or, in the reasonable opinion of each Holder or the
        Company, as the case may be, advisable for the consummation of the transactions
        contemplated by the Transaction Documents.

      


      Section
        5.07    Publicity.   Except
        for such disclosure as the Company is advised by counsel is required by law,
        the
        Company shall not use the name of, or make reference to, any Purchaser or
        any of
        its affiliates or any investment adviser of any Purchaser in any press release
        or in any public manner, including, without limitation, on the Company’s
        website, without the prior written consent of each affected party.

      


      Section
        5.08    Disclosure of
        Transaction.  Within one (1) business day following the completion
        of all funding requirements for the Financing, the Company will issue a press
        release describing the terms of the transactions contemplated by this Agreement,
        but shall not include the names of the Purchasers or any investment adviser
        or
        affiliate of any Purchaser, or the individual amounts of Purchased Securities
        purchased hereby without each affected party’s consent.

      


      Section
        5.09    Collateral
        Agent.   Each of the Purchasers hereby agrees to appoint
        Ironman PI Fund (QP), LP as the Collateral Agent for purposes of the Pledge
        and
        Security Agreement.  The Collateral Agent may employ agents and
        attorneys-in-fact in connection herewith and shall not be responsible for
        the
        gross negligence or willful misconduct of any such agents or attorneys-in-fact
        selected by it in good faith.


      
        
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      ARTICLE
        VI

      CLOSING
        CONDITIONS

      


      Section
        6.01    Conditions to the
        Closing.

      


      (a)           Mutual
        Conditions.  The respective obligation of each Party to consummate
        the purchase and issuance and sale of the Purchased Securities shall be subject
        to the satisfaction on or prior to the Closing Date of each of the following
        conditions (any or all of which may be waived by a particular Party on behalf
        of
        itself in writing, in whole or in part, to the extent permitted by applicable
        Law):

      


      (i)           no
        Law shall have been enacted or promulgated, and no action shall have been
        taken,
        by any Governmental Authority of competent jurisdiction which temporarily,
        preliminarily or permanently restrains, precludes, enjoins or otherwise
        prohibits the consummation of the transactions contemplated by this Agreement
        or
        makes the transactions contemplated by this Agreement  illegal;
        and

      


      (ii)           there
        shall not be pending any Action by any Governmental Authority seeking to
        restrain, preclude, enjoin or prohibit the transactions contemplated by this
        Agreement.

      


      (b)           Purchasers’
        Conditions.  The obligation of the Purchasers to consummate the
        purchase of the Purchased Securities shall be subject to the satisfaction
        on or
        prior to the Closing Date of each of the following conditions (any or all
        of
        which may be waived by a particular Purchaser on behalf of itself in writing,
        in
        whole or in part, to the extent permitted by applicable Law):

      


      (i)           The
        Company shall have performed and complied in all material respects with the
        covenants and agreements contained in this Agreement that are required to
        be
        performed and complied with by the Company on or prior to the Closing
        Date;

      


      (ii)           the
        representations and warranties of the Company contained in this Agreement
        shall
        be true and correct when made and as of the Closing Date;

      


      (iii)          since
        the date of this Agreement, no Company Material Adverse Effect shall have
        occurred and be continuing;

      


      (iv)          the
        Company shall have delivered, or caused to be delivered, to the Purchasers
        at
        the Closing, the Company’s closing deliveries described in Section
        6.02.

      


      (c)           The
        Company’s Conditions.   The obligation of the Company to
        consummate the sale of the Purchased Securities to each the Purchaser shall
        be
        subject to the satisfaction on or prior to the Closing Date of each of the
        following conditions (any or all of which may be waived by the Company in
        writing, in whole or in part, to the extent permitted by applicable
        Law):


      
        
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      (i)           each
        Purchaser shall have performed and complied with in all material respects
        the
        covenants and agreements contained in this Agreement that are required to
        be
        performed and complied with by that Purchaser on or prior to the Closing
        Date;

      


      (ii)           the
        representations and warranties of each Purchaser contained in this Agreement
        shall be true and correct when made and as of the Closing Date;

      


      (iii)          since
        the date of this Agreement, no Purchaser Material Adverse Effect shall have
        occurred and be continuing;

      


      (iv)         all
        necessary consents and approvals of lenders or other third parties shall
        have
        been obtained; and

      


      (v)          each
        Purchaser shall have delivered, or caused to be delivered, to the Company
        at the
        Closing, the Purchaser’s closing deliveries described in Section 6.03, except
        that funding shall occur immediately upon delivery of such Purchaser’s Note and
        Warrant.

      


      Section
        6.02    Company
        Deliveries.  At
        the Closing, subject to the terms and conditions of this Agreement, the Company
        will deliver, or cause to be delivered, to the Purchasers:

      


      (a)           the
        Purchased Securities, free and clear of any Liens, encumbrances or interests
        of
        any other party other than restrictions on transfer imposed by federal and
        state
        securities Laws and those imposed by Purchasers;

      


      (b)           the
        Registration Rights Agreement in substantially the form attached to this
        Agreement as Exhibit D, which shall have been duly executed by the
        Company;

      


      (c)           the
        Pledge and Security Agreement in substantially the form attached to this
        Agreement as Exhibit C, which shall have been duly executed by the
        Company;

      


      (d)           the
        original certificate representing a 5.00% interest in Exploration Holding
        Co.,
        L.L.C. along with a unit power executed in blank;

      


      (e)           copies
        of the UCC-1s evidencing that the same has been filed as required by the
        Pledge
        and Security Agreement;

      


      (f)           the
        consent required pursuant to Section 3.03 of the Company Agreement of
        Exploration Holding Co, L.L.C. permitting the pledge of the interests under
        the
        Pledge and Security Agreement;

      


      (g)           waiver
        of Fortuna Energy LP’s right to participate in this offering;


      
        
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      (h)           waiver
        of RCH Petro Investor LP’s rights to participate in this offering and RCH Petro
        Investor LP’s consent to this transaction;

      


      (i)           a
        cross-receipt, dated the Closing Date, executed by the Company and delivered
        to
        the Purchasers certifying that it has received the Purchase Price with respect
        to the Purchased Securities issued and sold to the Purchasers;

      


      (j)           an
        officer’s certificate of the Company substantially in the form attached to this
        Agreement as Exhibit E; and

      


      (k)           a
        legal opinion substantially in the form attached to this Agreement as Exhibit
“F”.

      


      Section
        6.03    Purchasers’
Deliveries.  At
        the Closing, subject to the terms and conditions of this Agreement, the
        Purchasers will deliver, or cause to be delivered to the Company:

      


      (a)           Payment
        to the Company of the Purchase Price by wire transfer(s) of immediately
        available funds to an account designated by the Company in writing immediately
        upon receipt by Purchasers of the Notes and Warrants;

      


      (b)           the
        Registration Rights Agreement in substantially the form attached to this
        Agreement as Exhibit D, which shall have been duly executed by each of
        the Purchasers;

      


      (c)           the
        Pledge and Security Agreement in substantially the form attached to this
        Agreement as Exhibit C which shall have been duly executed by each of the
        Purchasers;

      


      (d)           a
        cross-receipt, dated the Closing Date, executed by each of the Purchasers,
        and
        delivered to the Company certifying that each of the Purchasers has received
        the
        Purchased Securities; and

      


      (e)           an
        Officer’s Certificate substantially in the form attached to this Agreement as
Exhibit G.

      


      ARTICLE
        VII

      INDEMNIFICATION,
        COSTS AND EXPENSES

      


      Section
        7.01    Indemnification by
        the Company.  The
        Company agrees to indemnify the Purchasers and their Representatives
        (collectively, “Purchaser Related Parties”) from, and hold each of them
        harmless against any and all actions, suits, proceedings (including any
        investigations, litigation or inquiries), demands and causes of action, and,
        in
        connection therewith, and promptly on demand, pay and reimburse each of them
        costs, losses, liabilities,  damages, or expenses of any kind or
        nature whatsoever, including the reasonable fees and disbursements of counsel
        and all other reasonable expenses incurred in connection with investigating,
        defending or preparing to defend any such matter that may be incurred by
        them or
        asserted against or involve any of them as a result of, arising out of, or
        in
        any way related to the breach of any of the representations, warranties or
        covenants of the Company contained herein; provided that such claim for
        indemnification relating to a breach of a representation or warranty is made
        prior to the expiration of such representation or warranty.


      
        
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      Section
        7.02    Indemnification by
        Purchasers.  The
        Purchasers, severally and not jointly, agree to indemnify the Company and
        its
        Representatives (collectively, “the Company Related Parties”) from, and
        hold each of them harmless against, any and all actions, suits, proceedings
        (including any investigations, litigation, or inquiries), demands and causes
        of
        action and, in connection therewith, and promptly upon demand, pay and reimburse
        each of them costs, losses, liabilities,  damages, or expenses of any
        kind or nature whatsoever, including, without limitation, the reasonable
        fees
        and disbursements of counsel and all other reasonable expenses incurred in
        connection with investigating, defending or preparing to defend any such
        matter
        that may be incurred by them or asserted against or involve any of them as
        a
        result of, arising out of, or in any way related to the breach of any of
        the
        representations, warranties or covenants of the Purchaser contained herein;
        provided that such claim for indemnification relating to a breach of a
        representation or warranty is made prior to the expiration of such
        representation or warranty.

      


      Section
        7.03    Indemnification
        Procedure.  Promptly
        after any of the Company Related Party or Purchaser Related Party (hereinafter,
        the “Indemnified Party”) has received notice of any indemnifiable claim
        hereunder, or the commencement of any action or proceeding by a third party,
        which the Indemnified Party believes in good faith is an indemnifiable claim
        under this Agreement, the Indemnified Party shall give the indemnitor hereunder
        (the “Indemnifying Party”) written notice of such claim or the
        commencement of such action or proceeding, but failure to so notify the
        Indemnifying Party will not relieve the Indemnifying Party from any liability
        it
        may have to such Indemnified Party hereunder except to the extent that the
        Indemnifying Party is materially prejudiced by such failure. Such notice
        shall
        state the nature and the basis of such claim to the extent then
        known.  The Indemnifying Party shall have the right to defend and
        settle, at its own expense and by its own counsel who shall be reasonably
        acceptable to the Indemnified Party, any such matter as long as the Indemnifying
        Party pursues the same diligently and in good faith. If the Indemnifying
        Party
        undertakes to defend or settle, it shall promptly notify the Indemnified
        Party
        of its intention to do so, and the Indemnified Party shall cooperate with
        the
        Indemnifying Party and its counsel in all commercially reasonable respects
        in
        the defense thereof and the settlement thereof. Such cooperation shall include
        furnishing the Indemnifying Party with any books, records and other information
        reasonably requested by the Indemnifying Party and in the Indemnified Party’s
        possession or control.  Such cooperation of the Indemnified Party
        shall be at the cost of the Indemnifying Party.  After the
        Indemnifying Party has notified the Indemnified Party of its intention to
        undertake to defend or settle any such asserted liability, and for so long
        as
        the Indemnifying Party diligently pursues such defense, the Indemnifying
        Party
        shall not be liable for any additional legal expenses incurred by the
        Indemnified Party in connection with any defense or settlement of such asserted
        liability; provided, however, that the Indemnified Party shall be
        entitled (i) at its expense, to participate in the defense of such asserted
        liability and the negotiations of the settlement thereof and (ii) if (A)
        the
        Indemnifying Party has failed to assume the defense or employ counsel reasonably
        acceptable to the Indemnified Party or (B) if the defendants in any such
        action
        include both the Indemnified Party and the Indemnifying Party and counsel
        to the
        Indemnified Party shall have concluded that there may be reasonable defenses
        available to the Indemnified Party that are different from or in addition
        to
        those available to the Indemnifying Party or if the interests of the Indemnified
        Party reasonably may be deemed to conflict with the interests of the
        Indemnifying Party, then the Indemnified Party shall have the right to select
        a
        separate counsel and to assume such legal defense and otherwise to participate
        in the defense of such action, with the expenses and fees of such separate
        counsel and other expenses related to such participation to be reimbursed
        by the
        Indemnifying Party as incurred.  Notwithstanding any other provision
        of this Agreement, the Indemnifying Party shall not settle any indemnified
        claim
        without the consent of the Indemnified Party, unless the settlement thereof
        imposes no liability or obligation on, involves no admission of wrongdoing
        or
        malfeasance by, and includes a complete release from liability of, the
        Indemnified Party.


      
        
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      ARTICLE
        VIII

      MISCELLANEOUS
        

      


      Section
        8.01    Interpretation.  Article,
        Section, Schedule, and Exhibit references are to this Agreement, unless
        otherwise specified. All references to instruments, documents, contracts,
        and
        agreements are references to such instruments, documents, contracts, and
        agreements as the same may be amended, supplemented, and otherwise modified
        from
        time to time, unless otherwise specified. The word “including” shall mean
“including but not limited to.”  Whenever any determination, consent
        or approval is to be made or given by the Company under the Transaction
        Documents, such action shall be in the Company’s sole discretion unless
        otherwise specified therein.  Whenever the Company has an obligation
        under the Transaction Documents, the expense of complying with such obligation
        shall be an expense of the Company, as applicable, unless otherwise specified
        therein.  Whenever any determination, consent or approval is to be
        made or given by the Purchasers under the Transaction Documents, such action
        shall be in the Purchasers’ sole discretion unless otherwise specified
        therein.  If any provision in the Transaction Documents is held to be
        illegal, invalid, not binding, or unenforceable, such provision shall be
        fully
        severable and the Transaction Documents shall be construed and enforced as
        if
        such illegal, invalid, not binding, or unenforceable provision had never
        comprised a part of the Transaction Documents, and the remaining provisions
        shall remain in full force and effect. The Transaction Documents have been
        reviewed and negotiated by sophisticated parties with access to legal counsel
        and shall not be construed against the drafter.

      


      Section
        8.02    Survival of
        Provisions.  The
        representations and warranties set forth in Sections3.01,
3.02, 3.03, 3.04, 3.05, 3.10, 3.11,
3.13,
4.01,
4.03,
4.04,
4.05,
4.06,
        4.07, 4.08 and 4.09 of this Agreement shall survive the
        execution and delivery of this Agreement for the maximum amount of time allowed
        by law, and the other representations and warranties set forth in this Agreement
        shall survive for a period of twelve (12) months following the Closing Date
        regardless of any investigation made by or on behalf of the Company, or the
        Purchasers.  The covenants made in this Agreement or any other
        Transaction Document shall survive the closing of the transactions described
        herein and remain operative and in full force and effect regardless of
        acceptance of any of the Purchased Securities and payment therefor and
        repayment, conversion or repurchase thereof. All indemnification obligations
        of
        the Company, and the Purchasers pursuant to this Agreement shall remain
        operative and in full force and effect unless such obligations are expressly
        terminated in a writing by the Parties, regardless of any purported general
        termination of this Agreement.

      


      Section
        8.03    No Waiver;
        Modifications in Writing.

      


      (a)           Delay.  No
        failure or delay on the part of any Party in exercising any right, power,
        or
        remedy hereunder shall operate as a waiver thereof, nor shall any single
        or
        partial exercise of any such right, power, or remedy preclude any other or
        further exercise thereof or the exercise of any right, power, or remedy.
        The
        remedies provided for herein are cumulative and are not exclusive of any
        remedies that may be available to a Party at Law or in equity or
        otherwise.


      
        
          Note
            and Warrant Purchase Agreement

          
          

        

        
          Page
            17

          
            

          

        

        
          
          

        

      


      (b)           Specific
        Waiver. Except as otherwise provided herein, no amendment, waiver, consent,
        modification, or termination of any provision of this Agreement or any other
        Transaction Document shall be effective unless signed by each of Parties
        or each
        of the original signatories thereto affected by such amendment, waiver, consent,
        modification, or termination. Any amendment, supplement or modification of
        or to
        any provision of this Agreement or any other Transaction Document, any waiver
        of
        any provision of this Agreement or any other Transaction Document, and any
        consent to any departure by the Company from the terms of any provision of
        this
        Agreement or any other Transaction Document shall be effective only in the
        specific instance and for the specific purpose for which made or
        given.  Except where notice is specifically required by this
        Agreement, no notice to or demand on the Company in any case shall entitle
        the
        Company to any other or further notice or demand in similar or other
        circumstances.

      


      Section
        8.04    Binding Effect;
        Assignment.

      


      (a)           Binding
        Effect. This Agreement shall be binding upon the Company, the Purchasers,
        and their respective successors and permitted assigns. Except as expressly
        provided in this Agreement, this Agreement shall not be construed so as to
        confer any right or benefit upon any Person other than the Parties to this
        Agreement and as provided in Article VII, and their respective successors
        and
        permitted assigns.

      


      (b)           Assignment
        of Purchased Securities. All or any portion of the Purchased Securities
        purchased pursuant to this Agreement may be sold, assigned or pledged by
        the
        Purchasers, subject to compliance with applicable securities Laws.

      


      (c)           Assignment
        of Rights. The Purchasers may assign all or any portion of their rights
        hereunder; provided the assignee shall be deemed to be a Purchaser hereunder
        with respect to such assigned rights and shall agree to be bound by the
        provisions of this Agreement.

      


      Section
        8.05    Communications.  All
        notices and demands provided for hereunder shall be in writing and shall
        be
        given by registered or certified mail, return receipt requested, telecopy,
        air
        courier guaranteeing overnight delivery, electronic mail or personal delivery
        to
        the addresses listed on the signature pages hereto or to such other address
        as
        the Company or any of the Purchasers may designate in writing. All notices
        and
        communications shall be deemed to have been duly given: at the time delivered
        by
        hand, if personally delivered; at the time of transmittal, if sent via
        electronic mail; upon actual receipt if sent by registered or certified mail,
        return receipt requested, or regular mail, if mailed; when receipt acknowledged,
        if sent via telecopy; and upon actual receipt when delivered to an air courier
        guaranteeing overnight delivery.

      


      Section
        8.06    Entire
        Agreement.  This
        Agreement and the other Transaction Documents are intended by the Parties
        as a
        final expression of their agreement and intended to be a complete and exclusive
        statement of the agreement and understanding of the Parties hereto and thereto
        in respect of the subject matter contained herein and therein.  There
        are no restrictions, promises, warranties or undertakings, other than those
        set
        forth or referred to herein and therein with respect to the rights granted
        by
        the Company or any of the Purchasers set forth herein and
        therein.  This Agreement and the other Transaction Documents supersede
        all prior agreements and understandings between the Parties with respect
        to such
        subject matter.


      
        
          Note
            and Warrant Purchase Agreement

          
          

        

        
          Page
            18

          
            

          

        

        
          
          

        

      


      Section
        8.07    Governing
        Law.  This
        Agreement will be construed in accordance with and governed by the Laws of
        the
        State of Texas without regard to principles of conflicts of Laws.

      


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

      


      Section
        8.09    Termination.

      


      (a)           Notwithstanding
        anything herein to the contrary, this Agreement may be terminated with respect
        to a Purchaser at any time at or prior to the Closing:

      


      (i)           by
        the mutual written consent of any Purchaser and the Company;

      


      (ii)           by
        the written consent of any Purchaser or by the Company, (A) if any
        representation or warranty of the other party set forth in this Agreement
        shall
        be untrue in any material respect when made, or (B) upon a breach in any
        material respect of any covenant or agreement on the part of the other party
        set
        forth in this Agreement (either clause (A) or (B) above being a
“Terminating Breach”); provided, that, each Terminating Breach
        would cause the conditions to the non-terminating party’s obligations not to be
        satisfied and such Terminating Breach is not cured within 30 days after written
        notice from the non-breaching party; or

      


      (b)           Notwithstanding
        anything herein to the contrary, this Agreement shall automatically terminate
        at
        any time at or prior to the Closing:

      


      (i)           if
        a statute, rule, order, decree or regulation shall have been enacted or
        promulgated, or if any action shall have been taken by any Governmental
        Authority of competent jurisdiction which permanently restrains, precludes,
        enjoins or otherwise prohibits the consummation of the transactions contemplated
        by this Agreement or makes the transactions contemplated by this Agreement
        illegal; or

      


      (ii)           if
        the Closing shall not have occurred on or before November 9, 2007.

      


      (c)           In
        the event of the termination of this Agreement as provided in Section
        8.09(a) or Section 8.09(b), this Agreement shall forthwith become
        null and void.  In the event of such termination, there shall be no
        liability on the part of any party hereto, except with respect to the
        requirement to comply with any confidentiality agreement in favor of the
        Company; provided that nothing herein shall relieve any party from any
        liability or obligation with respect to any willful breach of this
        Agreement.


      
        
          Note
            and Warrant Purchase Agreement

          
          

        

        
          Page
            19

          
            

          

        

        
          
          

        

      


      Section
        8.10    Expenses.  If
        any action at law or equity is necessary to enforce or interpret the terms
        of
        the Transaction Documents, the prevailing party shall be entitled to reasonable
        attorney’s fees, out-of-pocket costs and necessary disbursements in addition to
        any other relief to which such party may be entitled.

      


      [Signature
        pages to follow]


      
        
          Note
            and Warrant Purchase Agreement

          
          

        

        
          Page
            20

          
            

          

        

        
          
          

        

      


      IN
        WITNESS WHEREOF, the Parties hereto execute this Note and Warrant Purchase
        Agreement, effective as of the date first above written.

       

    

    
      	
               

            	
              PETROSEARCH
                ENERGY CORPORATION

            	 
	 	 	 	 
	 	
              By:  
                

            	
              /s/
                Richard Dole

            	 
	 	Name:	
              Richard
                Dole, President and CEO

            	 
	 	 	 	 
	 	 	 	 
	 	PURCHASERS 	 
	 	 	 	 
	
               

            	
              IRONMAN
                PI FUND (QP), LP

            	 
	 	 	 	 
	 	
              By:

            	
              Ironman
                Energy Partners, LP,

            	 
	 	 	 	 
	 	
              By:

            	
              Ironman
                Capital Management, LLC,

            	 
	 	 	
              its
                General Partner

            	 
	 	 	 	 
	 	
              By:

            	
              /s/
                G. Bryan Dutt

            	 
	 	 	
              G.
                Bryan Dutt, President

            	 


    

    


    
      	 	
              WELLINGTON
                TRUST COMPANY, N.A.

              ON
                BEHALF OF MULTIPLE COLLECTIVE INVESTMENT FUNDS TRUST,
                

              MICRO
                CAP EQUITY PORTFOLIO

            
	 	 	 
	 	
              By:
                Wellington Management Company, LLP as investment
                adviser

            
	 	 	 
	 	
              By:

            	
              /s/  Steve
                Hoffman

            
	 	
              Name:

            	
              Steve
                Hoffman

            
	 	
              Title:

            	
              Vice
                President and Counsel

            
	 	
              Address:  
                

            	
              75
                State Street

            
	 	 	
              Boston,
                MA  02109

            


    

     

    
      	 	
              WELLINGTON
                TRUST COMPANY, N.A.

              ON
                BEHALF OF MULTIPLE COLLECTIVE INVESTMENT FUNDS TRUST,
                

              MICRO
                CAP EQUITY PORTFOLIO

            
	 	 	 
	 	 	 
	 	
              By:
                Wellington Management Company, LLP as investment
                adviser

            
	 	 	 
	 	
              By:

            	
              /s/  Steve
                Hoffman

            
	 	
              Name:

            	
              Steve
                Hoffman

            
	 	
              Title:

            	
              Vice
                President and Counsel

            
	 	
              Address:  
                

            	
              75
                State Street

            
	 	 	
              Boston,
                MA  02109

            


    

     

    
      
        Signature
          Page to Note and Warrant Purchase Agreement

        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    
      	 	
              CROSSCAP
                PARTNERS, LP

            
	 	 	 	 
	 	 	 	 
	 	
              By:  
                

            	
              /s/
                Mark Crosswell

            
	 	 	 	
              Mark
                Crosswell

            
	 	
              Address:  
                

            	
              5851
                San Felipe, Suite 230

            
	 	 	 	
              Houston,
                Texas  77057

            
	 	 	 	 
	 	 	 	 
	 	
              CROSSCAP
                PARTNERS ENHANCED, LP

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Mark Crosswell

            
	 	 	 	
              Mark
                Crosswell

            
	 	
              Address:

            	
              5851
                San Felipe, Suite 230

            
	 	 	 	
              Houston,
                Texas  77057

            


    

     

    
      	 	
              WILLIAM
                C. O’MALLEY

            
	 	 	 
	 	
              /s/
                William C. O’Malley

            
	 	
              William
                C. O’Malley, Individually

            
	 	
              Address:

            	
              4646
                Carlton Dunes Drive

            
	 	 	
              #12,
                Unit 5602

            
	 	 	
              Amelia
                Island, Florida  32034

            


    

     

    
      	 	
              J.
                BURKE O’MALLEY

            
	 	 	 
	 	
              /s/
                J. Burke O’Malley

            
	 	
              J.
                Burke O’Malley, Individually

            
	 	
              Address:  
                

            	
              2013
                Spring Branch Drive

            
	 	 	
              Vienna,
                Virginia  22181

            
	 	 	 
	 	
              LEO
                E. STEC

            
	 	 	 
	 	
              /s/
                Leo E. Stec

            
	 	
              Leo
                E. Stec, Individually

            
	 	
              Address:  
                

            	
              3527
                Vantage Lane

            
	 	 	
              Glenview,
                Illinois  60026

            
	 	 	 
	 	
              VAN
                G. BOHN

            
	 	 	 
	 	
              /s/
                Van G. Bohn

            
	 	
              Van
                G. Bohn, Individually

            
	 	
              Address:  
                

            	
              426
                Arlington Drive

            
	 	 	
              Metairie,
                Louisiana  70001

            


    

     

    
      
        Signature
          Page to Note and Warrant Purchase Agreement

        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    
      	 	
              JOHN
                W. KOONS III AND KATRINA P. KOONS  

            
	 	 	 	 
	 	
              By:

            	
              /s/
                John W. Koons, III 

            
	 	 	
              John
                W. Koons III, Individually, and on behalf of Katrina P.
                Koons, his Wife 

            
	 	
              Address:  
                

            	
              5348
                Chandley Farm Circle

            
	 	 	 	
              Centreville,
                Virginia  20120

            


    

    


    
      	 	
              GUTIERREZ
                HOLDINGS, LP

            
	 	 	 	 
	 	
              /s/
                Joe M. Gutierrez, Jr.

            
	 	
              By:

            	
              Joe
                M. Gutierrez, Jr.

            
	 	
              Title:  
                

            	 
	 	
              Address: 

            	
              5847
                San Felipe Street, Suite 1910

            
	 	 	 	
              Houston,
                Texas  77057

            


    

    


    
      	 	
              JERRY
                C. DEARING

            
	 	 	 
	 	
              /s/
                Jerry C. Dearing

            
	 	
              Jerry
                C. Dearing, Individually

            
	 	
              Address:

            	
              5300
                Doliver Drive

            
	 	 	
              Houston,
                Texas  77057

            


    

     

     

    Signature
      Page to Note and Warrant Purchase Agreement

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      SCHEDULE
        “A”

       

    

    
      
        	
                Purchaser/

                Address

              	 	
                Purchase
                  Price for Convertible Note

              	 	 	
                Number
                  of Warrants Purchased

              	 	 	
                Percentage
                  of Security Interest in Collateral

              	 
	
                Ironman
                  PI Fund (QP), LP

              	 	$	
                3,000,000

              	 	 	 	
                714,286

              	 	 	 	1.86	%
	
                Wellington
                  Trust Company— Client ID 9537

              	 	 	
                295,000

              	 	 	 	
                70,238

              	 	 	 	0.18	%
	
                Wellington
                  Trust Company— Client ID 0611

              	 	 	
                2,205,000

              	 	 	 	
                525,000

              	 	 	 	1.36	%
	
                CrossCap
                  Partners, LP

              	 	 	
                98,947

              	 	 	 	
                23,559

              	 	 	 	0.06	%
	
                CrossCap
                  Partners Enhanced, LP

              	 	 	
                901,053

              	 	 	 	
                214,536

              	 	 	 	0.56	%
	
                William
                  C. O’Malley

              	 	 	
                1,000,000

              	 	 	 	
                238,096

              	 	 	 	0.62	%
	
                J.
                  Burke O’Malley

              	 	 	
                100,000

              	 	 	 	
                23,810

              	 	 	 	0.06	%
	
                Leo
                  E. Stec

              	 	 	
                100,000

              	 	 	 	
                23,810

              	 	 	 	0.06	%
	
                Van
                  G. Bohn

              	 	 	
                100,000

              	 	 	 	
                23,810

              	 	 	 	0.06	%
	
                John
                  W. and Katrina P. Koons

              	 	 	
                100,000

              	 	 	 	
                23,810

              	 	 	 	0.06	%
	
                Gutierrez
                  Holdings, LP

              	 	 	
                100,000

              	 	 	 	
                23,810

              	 	 	 	0.06	%
	
                Jerry
                  C. Dearing

              	 	 	
                100,000

              	 	 	 	
                23,810

              	 	 	 	0.06	%
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	$	
                8,100,000.00

              	 	 	 	
                1,928,575

              	 	 	 	5.00	%


      


       

      Schedule
        A