Document:

EXHIBIT
4.2

     

    MORGAN
STANLEY

    2009
REPLACEMENT EQUITY INCENTIVE COMPENSATION PLAN FOR MORGAN
 STANLEY SMITH
BARNEY EMPLOYEES

    

     

    1.        Purpose.   The
primary purpose of the Morgan Stanley 2009 Replacement Equity Incentive
Compensation Plan for Morgan Stanley Smith Barney Employees is to induce
employees employed by the Smith Barney or Quilter businesses of Citigroup,
employees of Citigroup (or its affiliates), and consultants or other persons who
perform services for Citigroup or any of its affiliates, to commence employment
with the Company or the MS Group, as applicable, in connection with the
Transaction and to contribute to the growth and profits of the
Company.

     

    2.        Definitions.  Except
as otherwise provided in an applicable Award Document, the following capitalized
terms shall have the meanings indicated below for purposes of the Plan and any
Award:

     

    “Administrator”
means the individual or individuals to whom the Committee delegates authority
under the Plan in accordance with Section 5(b).

     

    “Award”
means any award of Restricted Stock, Stock Units, Options, SARs or Other Awards
(or any combination thereof) made under and pursuant to the terms of the
Plan.

     

    “Award
Date” means the date specified in a Participant’s Award Document as the
grant date of the Award.

     

    “Award
Document” means a written document (including in electronic form) that
sets forth the terms and conditions of an Award.  Award Documents
shall be authorized in accordance with Section 12(e).

     

    “Board”
means the Board of Directors of Morgan Stanley.

     

    “Citigroup”
means Citigroup Inc., a Delaware corporation.

     

    “Code”
means the Internal Revenue Code of 1986, as amended, and the applicable rulings,
regulations and guidance thereunder.

     

    “Committee”
means the Compensation, Management Development and Succession Committee of the
Board, any successor committee thereto or any other committee of the Board
appointed by the Board to administer the Plan or to have authority with respect
to the Plan, or any subcommittee appointed by such Committee.

     

    “Company”
means MSSB and all of its Subsidiaries.

     

    “Eligible
Individuals” means the individuals described in Section 6 who are
eligible for Awards.

     

    
      
         

      

      
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    “Employee
Trust” means any trust established or maintained by the MS Group in
connection with an employee benefit plan (including the Plan) under which
current and former employees of the Company or the MS Group constitute the
principal beneficiaries.

     

    “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the
applicable rulings and regulations thereunder.

     

    “Fair Market
Value” means, with respect to a Share, the fair market value thereof as
of the relevant date of determination, as determined in accordance with a
valuation methodology approved by the Committee.

     

    “Incentive Stock
Option” means an Option that is intended to qualify for special federal
income tax treatment pursuant to Sections 421 and 422 of the Code, as now
constituted or subsequently amended, or pursuant to a successor provision of the
Code, and which is so designated in the applicable Award Document.

     

    “Morgan
Stanley” means Morgan Stanley, a Delaware corporation.

     

    “MS Group”
means Morgan Stanley and its Subsidiaries.

     

    “MSSB”
means Morgan Stanley Smith Barney Holdings LLC, a Delaware Limited Liability
Company.

     

    “Option” or
“Stock
Option” means a right, granted to a Participant pursuant to
Section 9, to purchase one Share.

     

     “Other
Award” means any other form of award authorized under Section 11 of the
Plan, including any such Other Award the receipt of which was elected pursuant
to Section 12(a).

     

    “Participant”
means an individual to whom an Award has been made.

     

    “Plan”
means the Morgan Stanley 2009 Replacement Equity Incentive Compensation Plan for
Morgan Stanley Smith Barney Employees, as amended from time to time in
accordance with Section 15(e) below.

     

    “Restricted
Stock” means Shares granted or sold to a Participant pursuant to
Section 7.

     

    “SAR” means
a right, granted to a Participant pursuant to Section 10, to receive upon
exercise of such right, in cash or Shares (or a combination thereof) as
authorized by the Committee, an amount equal to the increase in the Fair Market
Value of one Share over a specified exercise price.

     

    “Section
409A” means Section 409A of the Code (or any successor provisions
thereto).

     

    “Shares”
means shares of Stock.

     

    “Stock”
means the common stock, par value $0.01 per share, of Morgan
Stanley.

     

    
      
         

      

      
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    “Stock
Unit” means a right, granted to a Participant pursuant to Section 8,
to receive one Share or an amount in cash equal to the Fair Market Value of one
Share, as authorized by the Committee.

     

    “Subsidiary”
means (i) a corporation or other entity with respect to which either MSSB or
Morgan Stanley (as applicable), directly or indirectly, has the power, whether
through the ownership of voting securities, by contract or otherwise, to elect
at least a majority of the members of such corporation’s board of directors or
analogous governing body, or (ii) any other corporation or other entity in
which either MSSB or Morgan Stanley (as applicable), directly or indirectly, has
an equity or similar interest and which the Committee designates as a Subsidiary
for purposes of the Plan.  For purposes of the Plan, the Company shall
not be deemed to be a Subsidiary of Morgan Stanley.

     

    “Transaction”
means the transactions contemplated pursuant to the Joint Venture Contribution
and Formation Agreement, dated as of January 13, 2009, as it may be amended, by
and between Morgan Stanley and Citigroup.

     

    3.        Effective Date and Term of
Plan.

     

    (a)       Effective
Date.  The Plan shall become effective upon the later of its
adoption by the Board and the consummation of the Transaction.

     

    (b)       Term of Plan.   No
Awards may be made under the Plan after the date that is five years from the
Plan’s effective date.

     

    4.        Stock
Subject to Plan.

     

    (a)        Overall Plan
Limit.  The total number of Shares that may be delivered
pursuant to Awards shall be 5,000,000 as calculated pursuant to Section
4(c).  The number of Shares available for delivery under the Plan
shall be adjusted as provided in Section 4(b).  Shares delivered under
the Plan may be authorized but unissued shares or treasury shares that Morgan
Stanley acquires in the open market, in private transactions or
otherwise.

     

    (b)        Adjustments for Certain
Transactions.  In the event of a stock split, reverse stock
split, stock dividend, recapitalization, reorganization, merger, consolidation,
extraordinary dividend or distribution, split-up, spin-off, combination,
reclassification or exchange of shares, warrants or rights offering to purchase
Stock at a price substantially below Fair Market Value or other change in
corporate structure or any other event that affects Morgan Stanley’s
capitalization, the Committee shall equitably adjust (i) the number and kind of
shares authorized for delivery under the Plan, including the maximum number of
Incentive Stock Options as provided in Section 4(d), and (ii) the number and
kind of shares subject to any outstanding Award and the exercise or purchase
price per share, if any, under any outstanding Award.  In the
discretion of the Committee, such an adjustment may take the form of a cash
payment to a Participant.  The Committee shall make all such
adjustments, and its determination as to what adjustments shall be made, and the
extent thereof, shall be final.  Unless the Committee determines
otherwise, such adjusted Awards shall be subject to the same vesting schedule
and restrictions to which the underlying Award is subject.

     

    
      
         

      

      
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    (c)       Calculation of Shares Available for
Delivery.  In calculating the number of Shares that remain
available for delivery pursuant to Awards at any time, the following rules shall
apply (subject to the limitation in Section 4(d)):

     

    1.      The
number of Shares available for delivery shall be reduced by the number of Shares
subject to an Award and, in the case of an Award that is not denominated in
Shares, the number of Shares actually delivered upon payment or settlement of
the Award.

     

    2.      The
number of Shares tendered (by actual delivery or attestation) or withheld from
an Award to pay the exercise price of the Award or to satisfy any tax
withholding obligation or liability of a Participant shall be added back to the
number of Shares available for delivery pursuant to Awards.

     

    3.      The
number of Shares in respect of any portion of an Award that is canceled or that
expires without having been paid or settled by the Company or the MS Group shall
be added back to the number of Shares available for delivery pursuant to Awards
to the extent such Shares were counted against the Shares available for delivery
pursuant to clause (1).

     

    4.      If
an Award is settled or paid by the Company or the MS Group in whole or in part
through the delivery of consideration other than Shares, or by delivery of fewer
than the full number of Shares that was counted against the Shares available for
delivery pursuant to clause (1), there shall be added back to the number of
Shares available for delivery pursuant to Awards the excess of the number of
Shares that had been so counted over the number of Shares (if any) actually
delivered upon payment or settlement of the Award.

     

    (d)        ISO Limit.  The
full number of Shares available for delivery under the Plan may be delivered
pursuant to Incentive Stock Options, except that in calculating the number of
Shares that remain available for Awards of Incentive Stock Options the rules set
forth in Section 4(c) shall not apply to the extent not permitted by Section 422
of the Code.

     

    5.        Administration.

     

    (a)       Committee Authority
Generally.  The Committee shall administer the Plan and shall
have full power and authority to make all determinations under the Plan, subject
to the express provisions hereof, including without limitation: (i) to select
Participants from among the Eligible Individuals; (ii) to make Awards; (iii) to
determine the number of Shares subject to each Award or the cash amount payable
in connection with an Award; (iv) to establish the terms and conditions of each
Award, including, without limitation, those related to vesting, cancellation,
payment, exercisability, and the effect, if any, of certain events on a
Participant’s Awards, such as the Participant’s termination of employment with
the Company or the MS Group; (v) to specify and approve the provisions of the
Award Documents delivered to Participants in connection with their Awards; (vi)
to construe and interpret any Award Document delivered under the Plan; (vii) to
prescribe, amend and rescind rules and procedures relating to the Plan; (viii)
to make all determinations necessary or advisable in administering the Plan and
Awards, including without limitation determinations as to whether (and if so as
of what date) a Participant has commenced, or has experienced a termination of,
employment; provided,
however, that to the
extent full or partial payment of any Award that constitutes a deferral of
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    subject
to Section 409A is made upon or as a result of a Participant’s termination of
employment, the Participant will be considered to have experienced a termination
of employment if, and only if, the Participant has experienced a separation from
service with the Participant’s employer for purposes of Section 409A; (ix) to
vary the terms of Awards to take account of securities law and other legal or
regulatory requirements of jurisdictions in which Participants work or reside or
to procure favorable tax treatment for Participants; and (x) to formulate such
procedures as it considers to be necessary or advisable for the administration
of the Plan.

     

    (b)       Delegation.  To the
extent not prohibited by applicable laws or rules of the New York Stock
Exchange, the Committee may from time to time delegate some or all of its
authority under the Plan to one or more Administrators consisting of one or more
members of the Committee as a subcommittee or subcommittees thereof or of one or
more members of the Board who are not members of the Committee or one or more
officers of the Company or the MS Group (or of any combination of such
persons).  Any such delegation shall be subject to the restrictions
and limits that the Committee specifies at the time of such delegation or
thereafter.  The Committee may at any time rescind all or part of the
authority delegated to an Administrator or appoint a new
Administrator.  At all times, an Administrator appointed under this
Section 5(b) shall serve in such capacity at the pleasure of the
Committee.  Any action undertaken by an Administrator in accordance
with the Committee’s delegation of authority shall have the same force and
effect as if undertaken directly by the Committee, and any reference in the Plan
to the Committee shall, to the extent consistent with the terms and limitations
of such delegation, be deemed to include a reference to an
Administrator.

     

    (c)       Authority to Construe and
Interpret.  The Committee shall have full power and authority,
subject to the express provisions hereof, to construe and interpret the
Plan.

     

    (d)      Committee
Discretion.  All of the Committee’s determinations in carrying
out,  administering, construing and interpreting the Plan shall be
made or taken in its sole discretion and shall be final, binding and conclusive
for all purposes and upon all persons.  In the event of any
disagreement between the Committee and an Administrator, the Committee’s
determination on such matter shall be final and binding on all interested
persons, including any Administrator.  The Committee’s determinations
under the Plan need not be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, Awards under the Plan (whether
or not such persons are similarly situated).  Without limiting the
generality of the foregoing, the Committee shall be entitled, among other
things, to make non-uniform and selective determinations, and to enter into
non-uniform and selective Award Documents, as to the persons receiving Awards
under the Plan, and the terms and provisions of Awards under the
Plan.

     

    (e)       No
Liability.  Subject to applicable law: (i) no member of the
Committee or any Administrator shall be liable for anything whatsoever in
connection with the exercise of authority under the Plan or the administration
of the Plan except such person’s own willful misconduct; (ii) under no
circumstances shall any member of the Committee or any Administrator be liable
for any act or omission of any other member of the Committee or an
Administrator; and (iii) in the performance of its functions with respect to the
Plan, the Committee and an Administrator shall be entitled to rely upon
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    by the
officers, accountants and counsel of the Company or the MS Group and any other
party the Committee or the Administrator deems necessary, and no member of the
Committee or any Administrator shall be liable for any action taken or not taken
in good faith reliance upon any such advice.

     

    6.        Eligibility; Nature of
Awards.  Eligible Individuals shall include all officers and
other employees (including prospective employees) of the Company or the MS Group
who were formerly employed by the Smith Barney or Quilter businesses of
Citigroup, and all other employees of Citigroup (or its affiliates), and
consultants or other persons who performed services for Citigroup or any of its
affiliates, in each case, who commence employment with the Company or the MS
Group in connection with the Transaction (or whose employer becomes an affiliate
of MSSB in connection with the Transaction).  Any Award made to a
prospective employee shall be conditioned upon, and effective not earlier than,
such person’s becoming an employee.  An individual’s status as an
Administrator will not affect his or her eligibility to receive Awards under the
Plan.  Notwithstanding the above, Awards shall be granted under the
Plan only in compliance with the rules of the New York Stock Exchange governing
inducement awards or such other rules of the New York Stock Exchange, including
the New York Stock Exchange Corporate Governance Listing Standards, that allow
grants of equity compensation awards without obtaining stockholder approval of
the plan pursuant to which such award is granted, or of the award
itself.

     

    7.        Restricted
Stock.  An Award of Restricted Stock shall be subject to the
terms and conditions established by the Committee in connection with the Award
and specified in the applicable Award Document.  Restricted Stock may,
among other things, be subject to restrictions on transfer, vesting requirements
or cancellation under specified circumstances.

     

    8.        Stock Units.  An
Award of Stock Units shall be subject to the terms and conditions established by
the Committee in connection with the Award and specified in the applicable Award
Document.  Each Stock Unit awarded to a Participant shall correspond
to one Share.  Upon satisfaction of the terms and conditions of the
Award, a Stock Unit will be payable, at the discretion of the Committee, in
Stock or in cash equal to the Fair Market Value on the payment date of one
Share.  As a holder of Stock Units, a Participant shall have only the
rights of a general unsecured creditor of Morgan Stanley.  A
Participant shall not be a stockholder with respect to the Shares underlying
Stock Units unless and until the Stock Units convert to Shares.  Stock
Units may, among other things, be subject to restrictions on transfer, vesting
requirements or cancellation under specified circumstances.

     

    9.        Options.

     

    (a)       Options
Generally.  An Award of Options shall be subject to the terms
and conditions established by the Committee in connection with the Award and
specified in the applicable Award Document.  The Committee shall
establish (or shall authorize the method for establishing) the exercise price of
all Options awarded under the Plan, except that the exercise price of an Option
shall not be less than 100% of the Fair Market Value of one Share on the Award
Date.  Upon satisfaction of the conditions to exercisability of the
Award, a Participant shall be entitled to exercise the Options included in the
Award and to have delivered, upon Morgan Stanley’s receipt of payment of the
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    conditions
or procedures specified by Morgan Stanley, the number of Shares in respect of
which the Options shall have been exercised.  Options may be either
nonqualified stock options or Incentive Stock Options; provided that, unless the
Committee specifically determines otherwise upon the advice of counsel,
Incentive Stock Options may not be granted to employees of the
Company.  Options and the Shares acquired upon exercise of Options
may, among other things, be subject to restrictions on transfer, vesting
requirements or cancellation under specified circumstances.

     

    (b)       Prohibition on Restoration Option
Grants.  Anything in the Plan to the contrary notwithstanding,
the terms of an Option shall not provide that a new Option will be granted,
automatically and without additional consideration in excess of the exercise
price of the underlying Option, to a Participant upon exercise of the
Option.

     

    (c)       Prohibition on Repricing of Options
and SARs.  Anything in the Plan to the contrary
notwithstanding, the Committee may not reprice any Option or
SAR.  “Reprice” means any action that constitutes a “repricing” under
the rules of the New York Stock Exchange.

     

    (d)       Payment of Exercise
Price.  Subject to the provisions of the applicable Award
Document and to the extent authorized by rules and procedures of Morgan Stanley
from time to time, the exercise price of the Option may be paid in cash, by
actual delivery or attestation to ownership of freely transferable Shares
already owned by the person exercising the Option, or by such  other
means as Morgan Stanley may authorize.

     

    (e)       Maximum Term on Stock Options and
SARs.  No Option or SAR shall have an expiration date that is
later than the tenth anniversary of the Award Date thereof.

     

    10.     SARs.  An Award of
SARs shall be subject to the terms and conditions established by the Committee
in connection with the Award and specified in the applicable Award
Document.  The Committee shall establish (or shall authorize the
method for establishing) the exercise price of all SARs awarded under the Plan,
except that the exercise price of a SAR shall not be less than 100% of the Fair
Market Value of one Share on the Award Date.  Upon satisfaction of the
conditions to the payment of the Award, each SAR shall entitle a Participant to
an amount, if any, equal to the Fair Market Value of one Share on the date of
exercise over the SAR exercise price specified in the applicable Award
Document.  At the discretion of the Committee, payments to a
Participant upon exercise of an SAR may be made in Shares, cash or a combination
thereof.  SARs and the Shares that may be acquired upon exercise of
SARs may, among other things, be subject to restrictions on transfer, vesting
requirements or cancellation under specified circumstances.

     

    11.     Other Awards.  The
Committee shall have the authority to establish the terms and provisions of
other forms of equity-based or equity-related Awards (such terms and provisions
to be specified in the applicable Award Document) not described above that the
Committee determines to be consistent with the purpose of the Plan and the
interests of the Company or the MS Group, which Awards may provide for (i) cash
or Stock payments based in whole or in part on the value or future value of
Stock or on any amount that Morgan Stanley pays as dividends or otherwise
distributes with respect to Stock, (ii) the acquisition or future acquisition of
Stock, (iii) cash or Stock payments (including  payment of
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    on one or
more criteria determined by the Committee unrelated to the value of Stock, or
(iv) any combination of the foregoing.  Awards pursuant to this
Section 11 may, among other things, be made subject to restrictions on transfer,
vesting requirements or cancellation under specified circumstances.

     

    12.     General
Terms and Provisions.

     

    (a)       Awards in
General.  Awards may, in the discretion of the Committee, be
made in substitution in whole or in part for cash or other compensation payable
to an Eligible Individual.  In accordance with rules and procedures
authorized by the Committee, an Eligible Individual may elect one form of Award
in lieu of any other form of Award, or may elect to receive an Award in lieu of
all or part of any compensation that otherwise might have been paid to such
Eligible Individual; provided, however, that any such
election shall not require the Committee to make any Award to such Eligible
Individual.  Any such substitute or elective Awards shall have terms
and conditions consistent with the provisions of the Plan applicable to such
Award.  Awards may be granted in tandem with, or independent of, other
Awards. The grant, vesting or payment of an Award may, among other things, be
conditioned on the attainment of performance objectives, including without
limitation objectives based in whole or in part on net income, pre-tax income,
return on equity, earnings per share, total shareholder return or book value per
share.

     

    (b)       Discretionary
Awards.  All grants of Awards and deliveries of Shares, cash or
other property under the Plan shall constitute a special discretionary incentive
payment to the Participant and shall not be required to be taken into account in
computing the amount of salary, wages or other compensation of the Participant
for the purpose of determining any contributions to or any benefits under any
pension, retirement, profit-sharing, bonus, life insurance, severance or other
benefit plan of the Company or the MS Group or other benefits from either the
Company or the MS Group or under any agreement with the Participant, unless the
Company or the MS Group specifically provide otherwise.

     

    (c)       Dividends and
Distributions.  If Morgan Stanley pays any dividend or makes
any distribution to holders of Stock, the Committee may in its discretion
authorize payments (which may be in cash, Stock (including Restricted Stock) or
Stock Units or a combination thereof) with respect to the Shares corresponding
to an Award, or may authorize appropriate adjustments to outstanding Awards, to
reflect such dividend or distribution.  The Committee may make any
such payments subject to vesting, deferral, restrictions on transfer or other
conditions.  Any determination by the Committee with respect to a
Participant’s entitlement to receive any amounts related to dividends or
distributions to holders of Stock, as well as the terms and conditions of such
entitlement, if any, will be part of the terms and conditions of the Award, and
will be included in the Award Document for such Award.

     

    (d)       Deferrals.  In
accordance with the procedures authorized by, and subject to the approval of,
the Committee, Participants may be given the opportunity to defer the payment or
settlement of an Award to one or more dates selected by the
Participant.  To the extent an Award constitutes a deferral of
compensation subject to Section 409A, the Committee shall set forth in writing
(which may be in electronic form), on or before the date the applicable deferral
election is required to be irrevocable in order to meet the requirements of
Section 409A, the conditions under which such election may be made.

     

    
      
         

      

      
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    (e)       Award Documentation and Award
Terms.  The terms and conditions of an Award shall be set forth
in an Award Document authorized by the Committee.  The Award Document
shall include any vesting, exercisability, payment and other restrictions
applicable to an Award (which may include, without limitation, the effects of
termination of employment, cancellation of the Award under specified
circumstances, restrictions on transfer or provision for mandatory resale to the
Company or the MS Group).

     

    13.     Certain
Restrictions.

     

    (a)       Stockholder
Rights.  No Participant (or other persons having rights
pursuant to an Award) shall have any of the rights of a stockholder of Morgan
Stanley with respect to Shares subject to an Award until the delivery of the
Shares, which shall be effected by entry of the Participant’s (or other
person’s) name in the share register of Morgan Stanley or by such other
procedure as may be authorized by Morgan Stanley.  Except as otherwise
provided in Section 4(b) or 12(c), no adjustments shall be made for dividends or
distributions on, or other events relating to, Shares subject to an Award for
which the record date is prior to the date such Shares are
delivered.  Notwithstanding the foregoing, the terms of an Employee
Trust may authorize some or all Participants to give voting or tendering
instructions to the trustee thereof in respect of Shares that are held in such
Employee Trust and are subject to Awards.  Except for the risk of
cancellation and the restrictions on transfer that may apply to certain Shares
(including restrictions relating to any dividends or other rights) or as
otherwise set forth in the applicable Award Document, the Participant shall be
the beneficial owner of any Shares delivered to the Participant in connection
with an Award and, upon such delivery shall be entitled to all rights of
ownership, including, without limitation, the right to vote the Shares and to
receive cash dividends or other dividends (whether in Shares, other securities
or other property) thereon.

     

    (b)       Transferability.  No
Award granted under the Plan shall be transferable, whether voluntarily or
involuntarily, other than by will or by the laws of descent and distribution;
provided that, except with respect to Incentive Stock Options, the Committee may
permit transfers on such terms and conditions as it shall
determine.  During the lifetime of a Participant to whom Incentive
Stock Options were awarded, such Incentive Stock Options shall be exercisable
only by the Participant.

     

    14.     Representation; Compliance with
Law.  The Committee may condition the grant, exercise,
settlement or retention of any Award on the Participant making any
representations required in the applicable Award Document.  Each Award
shall also be conditioned upon the making of any filings and the receipt of any
consents or authorizations required to comply with, or required to be obtained
under, applicable law.

     

    15.     Miscellaneous
Provisions.

     

    (a)       Satisfaction of
Obligations.  As a condition to the making or retention of any
Award, the vesting, exercise or payment of any Award or the lapse of any
restrictions pertaining thereto, Morgan Stanley may require a Participant to pay
such sum to the Company or the MS Group as may be necessary to discharge such
entities’ obligations with respect to any taxes, assessments or other
governmental charges (including FICA and other social security or similar tax)
imposed on property or income received by a Participant pursuant to the Award or to satisfy any obligation 

     

    
      
         

      

      
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    that the
Participant owes to the Company or the MS Group. In accordance with rules and
procedures authorized by Morgan Stanley, (i) such payment may be in the form of
cash or other property, including the tender
of previously owned Shares, and (ii)
in satisfaction of such taxes, assessments or other governmental charges or, exclusively in the case of an Award that does not
constitute a deferral of compensation subject to Section 409A, of other obligations that a Participant owes to
the Company or the MS Group, Morgan Stanley may make available for delivery a
lesser number of Shares in payment or settlement of an Award, may withhold from
any payment or distribution of an Award or may enter into any other suitable
arrangements to satisfy such withholding or other obligation.  To the extent an Award constitutes a deferral of
compensation subject to Section 409A, neither the Company nor the MS Group may offset from the payment of such Award amounts that a
Participant owes to the Company or the MS
Group with respect to any such other
obligation except to the extent such offset is not prohibited by Section 409A
and would not cause a Participant to recognize income for United States federal
income tax purposes prior to the time of payment of the Award  or to
incur interest or additional tax under Section 409A.

     

    (b)       No Right to Continued
Employment.  Neither the Plan nor any Award shall give rise to
any right on the part of any Participant to continue in the employ of the
Company or the MS Group.

     

    (c)       Headings.  The
headings of sections herein are included solely for convenience of reference and
shall not affect the meaning of any of the provisions of the Plan.

     

    (d)       Governing Law.  The
Plan and all rights hereunder shall be construed in accordance with and governed
by the laws of the State of New York, without regard to any conflicts or choice
of law, rule or principle that might otherwise refer the interpretation of the
award to the substantive law of another jurisdiction.

     

    (e)       Amendments and
Termination.  The Board or Committee may modify, amend, suspend
or terminate the Plan in whole or in part at any time and may modify or amend
the terms and conditions of any outstanding Award (including by amending or
supplementing the relevant Award Document at any time); provided, however, that
no such modification, amendment, suspension or termination shall, without a
Participant’s consent, materially adversely affect that Participant’s rights
with respect to any Award previously made; and provided, further, that the
Committee shall have the right at any time, without a Participant’s consent and
whether or not the Participant’s rights are materially adversely affected
thereby, to amend or modify the Plan or any Award under the Plan in any manner
that the Committee considers necessary or advisable to comply with any law,
regulation, ruling, judicial decision, accounting standards, regulatory guidance
or other legal requirement.  Notwithstanding the preceding sentence,
neither the Board nor the Committee may accelerate the payment or settlement of
any Award, including, without limitation, any Award subject to a prior deferral
election, that constitutes a deferral of compensation for purposes of Section
409A except to the extent such acceleration would not result in the Participant
incurring interest or additional tax under Section 409A.  No amendment
to the Plan may render any Board member who is not an employee of the Company or
the MS Group eligible to receive an Award at any time while such member is
serving on the Board.  To the extent required by applicable law or the
rules of the New York Stock Exchange, amendments to the Plan shall not be
effective unless they are approved by Morgan Stanley’s
stockholders.

     

     

    10exh10-1_agreement.htm

     

    
      

      

    

     

     

     

     

     

    EXHIBIT 10.1

     

    PURCHASE AND SALE AGREEMENT BETWEEN PETROHUNTER
ENERGY CORPORTION,

    PETROHUNTER OPERATING COMPANY AND SWEETPEA
PETROLEUM PTY LTD. AND

    FALCON OIL & GAS LTD., FALCON OIL & GAS
USA, INC. AND FALCON OIL & GAS AUSTRALIA PTY LTD.

    DATED MAY 26, 2009

    
 

    
      
         

      

      
         

        
          

        

      

      
         

        
          EXECUTION
COPY

        

      

    

    SECOND
PURCHASE AND SALE AGREEMENT

     

    

     

    BY
AND BETWEEN:

     

    

     

    PETROHUNTER
ENERGY CORPORATION

     

    -
and -

     

    PETROHUNTER
OPERATING COMPANY

     

    -
and -

     

    SWEETPEA
PETROLEUM PTY LTD

     

    -
and -

     

    FALCON
OIL & GAS LTD.

     

    -
and -

     

    FALCON
OIL & GAS USA, INC.

     

    -
and -

     

    FALCON
OIL & GAS AUSTRALIA PTY LTD

     

    

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

        
           

        

      

    

     

    
      TABLE
OF CONTENTS

      

      Page

    

    
 

    
      
        
          
            
              
                	
                        ARTICLE
      1 INTERPRETATION AND GENERAL

                      	
                        1

                      
	 
      	
                        1.1

                      	
                        Defined
      Terms

                      	
                        1

                      
	 
      	
                        1.2

                      	
                        Meaning
      of Subsidiary

                      	
                        6

                      
	 
      	
                        1.3

                      	
                        Meaning
      of Control or Controlled

                      	
                        7

                      
	 
      	
                        1.4

                      	
                        General

                      	
                        7

                      
	 
      	
                        1.5

                      	
                        Governing
      Law

                      	
                        7

                      
	 
      	 
      	 
      	 
      
	
                        ARTICLE
      2 PURCHASE AND SALE

                      	
                        8

                      
	 
      	
                        2.1

                      	
                        PetroHunter
      Parties’ Consideration

                      	
                        8

                      
	 
      	
                        2.2

                      	
                        Falcon
      Parties’ Consideration

                      	
                        8

                      
	 
      	 
      	 
      	 
      
	
                        ARTICLE
      3 REPRESENTATIONS AND WARRANTIES

                      	
                        9

                      
	 
      	
                        3.1

                      	
                        Representations
      and Warranties by PetroHunter Parties

                      	
                        9

                      
	 
      	
                        3.2

                      	
                        Representations
      and Warranties of Falcon Parties

                      	
                        12

                      
	 
      	 
      	 
      	
                         
      

                      
	
                        ARTICLE
      4 WARRANTY CLAIMS

                      	
                        12

                      
	 
      	
                        4.1

                      	
                        Survival
      of Warranties

                      	
                        12

                      
	 
      	
                        4.2

                      	
                        Limitations
      on Warranty Claims

                      	
                        13

                      
	 
      	 
      	 
      	 
      
	
                        ARTICLE
      5 COVENANTS

                      	
                         13 

                      
	 
      	
                        5.1

                      	
                        Mutual
      Covenants

                      	
                        13

                      
	 
      	
                        5.2

                      	
                        Covenants
      of PetroHunter Parties

                      	
                        14

                      
	 
      	
                        5.3

                      	
                        Covenants
      of Falcon Parties

                      	
                        15

                      
	 
      	
                        5.4

                      	
                        Right
      of First Offer

                      	
                        15

                      
	 
      	 
      	 
      	 
      
	
                        ARTICLE
      6 CLOSING

                      	
                        16

                      
	 
      	
                        6.1

                      	
                        Closing
      or Termination

                      	
                        16

                      
	 
      	
                        6.2

                      	
                        Conditions
      for the Benefit of the Falcon Parties

                      	
                        17

                      
	 
      	
                        6.3

                      	
                        Conditions
      for Benefit of PetroHunter Parties

                      	
                        17

                      
	 
      	
                        6.4

                      	
                        PetroHunter
      Parties’ Deliveries on Closing

                      	
                        17

                      
	 
      	
                        6.5

                      	
                        Falcon
      Parties’ Deliveries on Closing

                      	
                        19

                      
	 
      	 
      	 
      	 
      
	
                        ARTICLE
      7 RESOLUTION OF DISPUTES

                      	
                        21

                      
	 
      	
                        7.1

                      	
                        Artibration

                      	
                        21

                      
	 
      	 
      	 
      	 
      
	
                        ARTICLE
      8 INDEMNITY

                      	
                        22

                      
	 
      	
                        8.1

                      	
                        Indemnity
      by the PetroHunter Parties

                      	
                        22

                      
	 
      	
                        8.2

                      	
                        Provisions
      Relating to Indemnity Claims

                      	
                        23

                      
	 
      	 
      	 
      	 
      
	
                        ARTICLE
      9 GST

                      	
                        25

                      
	 
      	
                        9.1

                      	
                        Interpretation

                      	
                        25

                      

                 

                -i-

                
                  
                     

                  

                  
                     

                    
                      

                    

                  

                  
                     

                  

                

                
                  TABLE
OF CONTENTS

                  (continued)

                  

                  Page

                

                 

                	 
      	
                        9.2

                      	
                        Going
      concern

                      	
                        25

                      
	 
      	
                        9.3

                      	
                        GST
      gross-up

                      	
                        26

                      
	 
      	
                        9.4

                      	
                        Tax
      invoice

                      	
                        26

                      
	 
      	
                        9.5

                      	
                        Adjustment
      event

                      	
                        26

                      
	 
      	
                        9.6

                      	
                        Reimbursements

                      	
                        26

                      
	 
      	
                        9.7

                      	
                        Survival
      of Article 9

                      	
                        26

                      
	 
      	 
      	 
      	 
      
	
                        ARTICLE
      10 GENERAL

                      	
                        26

                      
	 
      	
                        10.1

                      	
                        Taxes
      and Fees

                      	
                        26

                      
	 
      	
                        10.2

                      	
                        Complete
      Closings

                      	
                        27

                      
	 
      	
                        10.3

                      	
                        Status
      of the Agreement

                      	
                        27

                      
	 
      	
                        10.4

                      	
                        Tender

                      	
                        27

                      
	 
      	
                        10.5

                      	
                        Specific
      Performance and other Remedies

                      	
                        27

                      
	 
      	
                        10.6

                      	
                        Obligations
      as Covenants

                      	
                        27

                      
	 
      	
                        10.7

                      	
                        Amendment
      of Agreement

                      	
                        27

                      
	 
      	
                        10.8

                      	
                        Further
      Assurances

                      	
                        27

                      
	 
      	
                        10.9

                      	
                        Waiver

                      	
                        28

                      
	 
      	
                        10.10

                      	
                        Time

                      	
                        28

                      
	 
      	
                        10.11

                      	
                        Entire
      Agreement

                      	
                        28

                      
	 
      	
                        10.12

                      	
                        Severability

                      	
                        28

                      
	 
      	
                        10.13

                      	
                        Counterparts
      and Facsimile

                      	
                        28

                      
	 
      	
                        10.14

                      	
                        Notices

                      	
                        29

                      
	 
      	
                        10.15

                      	
                        Confidentiality

                      	
                        30

                      
	 
      	
                        10.16

                      	
                        Successors
      and Assigns

                      	
                        30

                      
	 
      	
                        10.17

                      	
                        Enurement

                      	
                        30

                      
	 
      	
                        10.18

                      	
                        Language

                      	
                        30

                      
	
                        SCHEDULE
      "A" PERMIT TRANSFER INSTRUMENT

                      	 
      
	
                        SCHEDULE
      "B" ASSIGNMENT AND BILL OF SALE

                      	 
      
	
                        SCHEDULE
      "C" ASSIGNMENT AND BILL OF SALE (BEETALOO INVENTORY)

                      	 
      
	
                        SCHEDULE
      "D" ASSIGNMENT AND BILL OF SALE (25% INTEREST IN THE
    ASSETS)

                      	 
      
	
                        SCHEDULE
      "E" ASSIGNMENT AND BILL OF SALE (INITIAL WORKING INTEREST)

                      	 
      
	
                        SCHEDULE
      "F" BEETALOO PAYABLES

                      	 
      
	
                        SCHEDULE
      "G" ESCROW AGREEMENT

                      	 
      
	 SCHEDULE
      "H" ASSUMPTION UNDERTAKING	 

                 

                -ii-

                
                  
                     

                  

                  
                     

                    
                      

                    

                  

                  
                     

                  

                

                
                  TABLE
OF CONTENTS

                  

                  Page

                

                 

                 

                	SCHEDULE
      "I" BEETALOO BASIN JOINT OPERATING AGREEMENT 	 
	SCHEDULE
      "J" MATERIAL AGREEMENTS	 

              

            

          

        

      

    

     

     

     

     

     

     

     

     

     

     

     

     

    -iii-

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SECOND
PURCHASE AND SALE AGREEMENT

     

    THIS SECOND PURCHASE AND SALE
AGREEMENT (“Agreement”) is made and
entered into May 26, 2009, by and between PetroHunter Energy Corporation (“PetroHunter Energy”), Sweetpea
Petroleum Pty Ltd (“Sweetpea”), PetroHunter
Operating Company (“PetroHunter
Operating”), Falcon Oil & Gas Ltd. (“Falcon”), Falcon Oil & Gas
USA, Inc. (“Falcon USA”)
and Falcon Oil & Gas Australia Pty Ltd (“Purchaser”). PetroHunter
Energy, PetroHunter Operating, Sweetpea, Falcon, Falcon USA and Purchaser may
sometimes be referred to herein individually as a “Party” and collectively as the
“Parties”.

     

    WHEREAS, PetroHunter Energy and
Sweetpea, and Falcon and Purchaser entered into a purchase and sale agreement
dated August 22, 2008 (the “Beetaloo PSA”) with respect to
the Beetaloo Basin Project (as hereinafter defined) whereby Purchaser bought an
undivided 50% interest in the Beetaloo Basin Project from Sweetpea on September
30, 2008 (the “Initial
Transaction”);

     

    AND WHEREAS, Sweetpea is now
operator of the Beetaloo Basin Project and owner of the other undivided 50%
interest in the Beetaloo Basin Project;

     

    AND WHEREAS, Purchaser wishes
to buy an additional 25% undivided interest in the Beetaloo Basin Project from
Sweetpea and become the operator of the Beetaloo Basin Project;

     

    NOW THEREFORE, in
consideration of the mutual covenants and agreements set out in this Agreement
and for other good and valuable consideration (the receipt and sufficiency of
which are hereby acknowledged), the Parties hereto covenant and agree as
follows:

     

    ARTICLE
1

    INTERPRETATION
AND GENERAL

     

    
      	
              1.1  

            	
              Defined
      Terms

            

    

     

    In this
Agreement, the following defined terms shall mean as follows:

     

    “Acceptance Date” means the
last to occur of:

     

    
      	
              (a)    
        

            	
              the
      execution and delivery of this Agreement by all Parties;
    and

            

    

     

    
      	
              (b)    
        

            	
              written
      confirmation received by each Party that each other Party’s Board of
      Directors has approved the execution and delivery of this
      Agreement.

            

    

     

    “Agreement” means this purchase
and sale agreement, including all Schedules hereto, as amended from time to time
in accordance with the terms hereof, “hereof”, “hereto” and “hereunder” and
similar expressions refer to this Agreement and not any particular section of
this Agreement; “Article”, “Section” and “Schedule” mean and refer to the
specified article, section or Schedule of or to this Agreement.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    -2-

     

    “Amended and Restated Beetaloo
JOA” means the joint operating agreement between the Purchaser and
Sweetpea dated the Closing Date in the form attached hereto as SCHEDULE "I"
hereto.

    

    “Assets” means the undivided
25% interest in the Beetaloo Basin Project that will be subject to the
assignment delivered by Sweetpea to Purchaser at the Closing.

    

    “Bayless Override” has the
meaning ascribed thereto in the Beetaloo PSA.

    

    “Beetaloo Basin Project” means
(i) the Permits, (ii) the Well, (iii) the Data, (iv) the Material Agreements,
(v) all related licenses, permits, access rights, and other rights and
privileges, and (vi) all rights, titles and interests of the PetroHunter
Parties, whether derived under the Permits, the Material Agreements, or
otherwise, in and to all equipment, fixtures and personal property located on
lands covered by the Permits or used in connection with the exploration and
development of such lands.

    

    “Beetaloo Inventory” means the entire 100%
ownership interest in the inventory identified on SCHEDULE "C" hereto (together
with any other personal property owned, leased or otherwise held for use by or
on behalf of a PetroHunter Party that is related to the Beetaloo Basin Project,
even if such property is omitted or misdescribed in SCHEDULE "C") that will be
subject to the bill of sale delivered by Sweetpea to Purchaser at the
Closing.

    

    “Beetaloo JOA” means the joint
operating agreement between Purchaser and Sweetpea dated August 22,
2008.

     

    “Beetaloo Payables” means all
amounts owing by the PetroHunter Parties to contractors, creditors and all other
parties in connection with the Beetaloo Basin Project up to a maximum of
A$1,500,000.

     

    “Board of Directors” means the
board of directors of a Party, as the context may require.

     

    “Breaching Party” has the
meaning ascribed thereto in Section 10.5.

     

    “Buckskin JOA” means the joint
operating agreement dated October 31, 2008, between PetroHunter Operating, as
operator, and Falcon USA, as non-operator.

     

    “Buckskin PSA” means the
purchase and sale agreement between PetroHunter Energy and PetroHunter
Operating, and Falcon and Falcon USA dated August 22, 2008, as amended on
October 31, 2008.

     

    “Buckskin Mesa Project” means
PetroHunter’s 20,000-acre Buckskin Mesa project located in the Piceance Basin,
Colorado.

     

    “Business Day” means a day of
the week, other than a Saturday, Sunday or any other day which is a statutory
holiday in the Province of Ontario, the Northern Territory of Australia, or the
State of Colorado.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -3-

       

    

    “Closing” means the matters
contemplated by ARTICLE 6 of this Agreement at the offices of Davis Graham &
Stubbs LLP in Denver, Colorado on the Closing Date.

     

    “Closing Date” means 11:00 a.m.
(Denver time) five Business Days after:

     

    
      	
              (c)    
        

            	
              the
      first to occur of the following:

            

    

     

    
      	
              (i)    
        

            	
              the
      Treasurer of the Commonwealth of Australia ceasing to be empowered to make
      an order under Part II of the Foreign Acquisitions and Takeovers Act 1975
      (Cth) in respect of the Transaction;
or

            

    

     

    
      	
              (ii)      

            	
              the
      Treasurer of the Commonwealth of Australia giving the Purchaser advice in
      writing of a decision by the Treasurer that the Commonwealth Government
      has no objection to the Transaction;
and

            

    

     

    
      	
              (d)    
        

            	
              the
      satisfaction or waiver of the closing conditions by the relevant Parties
      contained in Sections 6.2 and 6.3, as the case may
  be.

            

    

     

    “Commissioner of Taxation”
means the commissioner of taxation of the Australian Taxation
Office.

     

    “Common Shares” means common
shares in the capital of Falcon.

     

    “Completion Capital” has the
meaning ascribed thereto in the Buckskin PSA.

     

    “Control” has the meaning
ascribed in Section 1.3;

     

    “Data” means all files,
records, correspondence and information in the possession or under the control
of the PetroHunter Parties that relate to the Beetaloo Basin Project, including
without limitation invoice and payment records; Permit, contract, and
correspondence files; and geological, geophysical, engineering and interpretive
data.

     

    “Escrow Agent” means the escrow
agent appointed by Falcon in its sole discretion under the Escrow
Agreement.

     

    “Escrow Agreement” means the
escrow agreement among, the Escrow Agent, the Falcon Parties and PetroHunter
Parties dated the Closing Date in the form of escrow agreement attached hereto
as SCHEDULE "G" to this Agreement and which will be dated the Closing
Date.

     

    “Falcon Encumbrances” means
liens, charges, security interests, options, claims, mortgages, pledges, or
other restrictions on title or transfer, except for Permitted Falcon
Encumbrances.

     

    “Falcon Parties” means,
together, Falcon, Falcon USA and the Purchaser, or any one of them, as the case
may be.

     

    “Governmental Authority” means
any federal, state or local government, regulatory authority, governmental
department, agency, commission, board, tribunal or court.

     

    “GST” has the meaning given to
that expression in the GST Law.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -4-

       

    

    “GST Law” has the meaning given
to that expression in the A
New Tax System (Goods and Services Tax) Act 1999, as amended, of the
Commonwealth of Australia.

     

    “Indemnity” has the meaning
ascribed thereto in ARTICLE 8.

     

    “Initial Working Interest” has
the meaning ascribed thereto in the Buckskin PSA.

     

    “Loan” means the $5,000,000
loan made by Falcon to PetroHunter Energy in accordance with the Loan
Agreement.

     

    “Loan Agreement” means the loan
agreement dated October 1, 2008, as amended on December 10, 2008, between
PetroHunter Energy and Falcon.

     

    “Material Agreements” means the
contracts identified on Schedule “C” to the Beetaloo PSA and those identified on
SCHEDULE "J" hereto.

     

    “Mortgage” means the mortgage,
assignment, security agreement, fixture filing and security agreement, dated
October 1, 2008 and recorded in the real property records of Rio Blanco County,
Colorado under Document No. 293828, from PetroHunter Energy and PetroHunter
Operating, as mortgagors, to Falcon, as mortgagee.

     

    “New Wells” means the five
wells (Excalibur Nos. 5054 through 5058, inclusive) identified on Schedule 3 to
the Buckskin PSA.

     

    “Northern Land Council Exploration
Agreements” means the Exploration Agreement between Sweetpea, Local
Aboriginal Groups and the Northern Land Council relating to Petroleum
Exploration Permits 76, 98 and 99 and the Exploration Agreement between
Sweetpea, Local Aboriginal Groups and the Northern Land Council relating to
Petroleum Exploration Permit 117.

     

    “Northern Land Council Royalty”
means the royalty interest payable to the Local Aboriginal Groups
(through the Northern Land Council) in accordance with the Northern Land Council
Exploration Agreements.

     

    “Northern Territory Royalty”
means the royalty payable to the Northern Territory in accordance with Part III,
Division 5, Section 84 of the Petroleum Act of the Northern
Territory.

     

    “Notice” has the meaning
attributed to it in Section 10.14.

     

    “Offered Interest” means the
remaining 25% interest in the Beetaloo Basin Project held by the PetroHunter
Parties immediately following the Closing Date.

     

    “Operator Bonds” means,
collectively: (i) the five standby letters of credit issued by Wells Fargo Bank,
National Association, relating to the Beetaloo Basin Project in the aggregate
amount of A$496,000; (ii) all underlying cash security provided to Wells Fargo
Bank, National Association, in connection with such letters of credit; and (iii)
all other bonds and instruments that may now be in place for the benefit of the
Northern Land Council or any Governmental 

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -5-

    

     

    Authority,
together with all security given in connection therewith, relating to Sweetpea’s
status as title holder of the Permits or its activities as operator of the
Permits.

     

    “Permits” means Petroleum
Exploration Permits 76, 98, 99 and 117, together with any renewals or extensions
thereof as more fully described on SCHEDULE "A" to the Beetaloo
PSA.

     

    “Permitted Falcon
Encumbrances” means:

     

    
      	
              (a)    
        

            	
              liens
      for taxes or assessments, not yet due or
  payable;

            

    

     

    
      	
              (b)    
        

            	
              easements,
      rights-of-way, servitudes, permits, and surface leases held by third
      parties on, over, or in respect of lands covered by the Initial Working
      Interest; and

            

    

     

    
      	
              (c)    
        

            	
              any
      Falcon Encumbrance, title defect or matter that is expressly waived by
      PetroHunter Energy.

            

    

     

    “Permitted PetroHunter
Encumbrances” means:

     

    
      	
              (a)    
        

            	
              Bayless
      Override, Northern Land Council Royalty, Northern Territory Royalty, and
      Russenberger Override;

            

    

     

    
      	
              (b)    
        

            	
              liens
      for taxes or assessments, not yet due or
  payable;

            

    

     

    
      	
              (c)    
        

            	
              all
      rights to consent by, required notices to, filings with, or other actions
      by Northern Territory or Australian governmental entities in connection
      with the ownership of the Permits, but only if the same are customarily
      obtained after such transfer of
ownership;

            

    

     

    
      	
              (d)    
        

            	
              easements,
      rights-of-way, servitudes, permits, and surface leases held by third
      parties on, over, or in respect of lands covered by the
      Permits;

            

    

     

    
      	
              (e)    
        

            	
              the
      terms and conditions of the Material Agreements and all documents of
      record;

            

    

     

    
      	
              (f)    
        

            	
              the
      Beetaloo Payables; and

            

    

     

    
      	
              (g)    
        

            	
              any
      PetroHunter Encumbrance, title defect or matter that is expressly waived
      by Purchaser.

            

    

     

    “Person” is to be broadly
interpreted and includes an individual, a corporation, a partnership, a trust,
an unincorporated organization, the government of a country or any political
subdivision thereof, or any agency or department of any such government, and the
executors, administrators or other legal representatives of an individual in
such capacity.

     

    “PetroHunter Encumbrances”
means liens, charges, security interests, options, claims, mortgages, pledges,
or other restrictions on title or transfer, except for Permitted PetroHunter
Encumbrances.

     

    “PetroHunter Parties” means,
together, PetroHunter, PetroHunter Operating and Sweetpea, or any one of them,
as the case may be.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -6-

       

       

    

    “Pledge Agreement” means the
pledge and security agreement dated October 1, 2008, as modified by letter
agreement dated December 10, 2008, between PetroHunter Energy, as pledgor, and
Falcon, as pledgee.

     

    “Purchaser” means Falcon Oil
& Gas Australia Pty Ltd.

     

    “Remaining Completion Capital”
means the Completion Capital that has not been expended on costs relating to the
Buckskin Mesa Project as of the Closing Date.

     

    “Russenberger Override” means
the overriding royalty interest on production from lands covered by the Permits
that was created by MAB Resources LLC under the terms of its Acquisition and
Consulting Agreement with PetroHunter Energy dated effective January 1,
2007.

     

    “Seller” has the meaning
ascribed thereto in the Beetaloo PSA.

     

    “Sellers” has the meaning
ascribed thereto in the Beetaloo PSA.

     

    “Subsidiary” has the meaning
ascribed in Section 1.2.

     

    “Transaction” has the meaning
ascribed thereto in ARTICLE 2.

     

    “Transaction Agreements” means,
collectively, this Agreement, the Amended and Restated Beetaloo JOA and the
Escrow Agreement.

     

    “Transaction Fees” means,
collectively, all fees, costs and expenses of every type and nature arising out
of or relating to the activities of the PetroHunter Parties in Australia that
are not specifically set forth in SCHEDULE "F".

     

    “TSXV” means the TSX Venture
Exchange.

     

    “TSXV Policies” means the TSXV
Corporate Finance Manual as constituted on the date hereof.

     

    “U.S.” means the United States
of America and its territories.

     

    “U.S. Securities Act” means the
Securities Act of 1933, as amended, of the
U.S., and the rules and regulations promulgated thereunder.

     

    “Warranty Claim” means a claim
made by a Party based on or with respect to the inaccuracy or non-performance or
non-fulfilment or breach of any representation, warranty or covenant made or
given by another Party contained in the Transaction Agreements or contained in
any document or certificate given in order to carry out the
Transaction.

     

    “Well” means the Shenandoah #1
well, as more fully described on SCHEDULE "B" to the Beetaloo PSA.

     

    
      	
              1.2  

            	
              Meaning
      of Subsidiary

            

    

     

    A Person
shall be deemed to be a subsidiary of another Person if:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -7-

       

       

    

    
      	
              (a)    
       

            	
              it
      is controlled by,

            

    

     

    
      	
              (i)    
       

            	
              that
      other, or

            

    

     

    
      	
              (ii)     
      

            	
              that
      other and one or more Persons each of which is controlled by that other,
      or

            

    

     

    
      	
              (iii)    
      

            	
              two
      or more Persons each of which is controlled by that other;
    or

            

    

     

    
      	
              (b)     

            	
              it
      is a subsidiary of a Person that is that other’s
    subsidiary.

            

    

     

    
      	
              1.3  

            	
              Meaning
      of Control or Controlled

            

    

     

    A Person
shall be deemed to be controlled by another Person or by two or more Persons
if:

     

    
      	
              (a)  

            	
              voting
      securities of the first-mentioned Person carrying more than 50 percent of
      the votes for the election of directors are held, other than by way of
      security only, by or for the benefit of such other Person or by or for the
      benefit of such other Person; and

            

    

     

    
      	
              (b)  

            	
              the
      votes carried by such securities are sufficient, if exercised, to elect a
      majority of the board of directors of the first-mentioned
      Person.

            

    

     

    
      	
              1.4  

            	
              General

            

    

     

    The
schedules attached to this Agreement are incorporated herein by reference and
shall be deemed to be a part hereof.  In this Agreement, the singular
includes the plural, the plural the singular, and any gender the other
genders.  Unless otherwise indicated references to dollars or amounts
stated in dollars are to United States dollars.  Headings are included
for convenience or reference only and shall not affect the interpretation
hereof.  If anything herein is to be done or held on a day which is
not a Business Day, the same shall be done or held either on the next succeeding
Business Day or as otherwise expressly provided in this Agreement.

     

    
      	
              1.5  

            	
              Governing
      Law

            

    

     

    With
respect to all matters related to the Assets and the Beetaloo Inventory, and
related to the interpretation and enforcement of this Agreement, this Agreement
shall be governed by the laws of the Northern Territory of Australia and the
applicable laws of Australia. With respect to all matters related to the Common
Shares, this Agreement shall be governed by the laws of the Province of Ontario
and the applicable laws of Canada.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -8-

       

      ARTICLE
2

    

    PURCHASE
AND SALE

     

    
      	
              2.1  

            	
              PetroHunter
      Parties’ Consideration

            

    

     

    As
consideration for the actions described in Section 2.2, the PetroHunter Parties,
as the case may be, shall at Closing:

     

    
      	
              (a)    
       

            	
              subject
      to the Permitted PetroHunter Encumbrances, assign the Assets to the
      Purchaser;

            

    

     

    
      	
              (b)    
       

            	
              assign
      the Beetaloo Inventory to the
Purchaser;

            

    

     

    
      	
              (c)    
       

            	
              resign
      as operator under the Beetaloo JOA with immediate effect, despite any
      longer notice period that may otherwise be provided in the Beetaloo
      JOA;

            

    

     

    
      	
              (d)    
       

            	
              execute
      the Amended and Restated Beetaloo JOA;

            

    

     

    
      	
              (e)    
       

            	
              assign
      or cause to be assigned to the Purchaser or Purchaser’s designee 100% of
      the Operator Bonds in accordance with the terms
  thereof;

            

    

     

    
      	
              (f)    
       

            	
              grant
      the Falcon Parties the Indemnity;

            

    

     

    
      	
              (g)    
       

            	
              terminate
      the Buckskin JOA;

            

    

     

    
      	
              (h)    
       

            	
              enter
      into the Escrow Agreement, and comply with the terms and conditions
      therein; and

            

    

     

    
      	
              (i)    
       

            	
              grant
      the Falcon Parties the right provided in Section
  5.3,

            

    

     

    and the
PetroHunter Parties agree to such actions on and subject to the terms and
conditions of this Agreement (collectively, the “PetroHunter
Consideration”).

     

    
      	
              2.2  

            	
              Falcon
      Parties’ Consideration

            

    

     

    As
consideration for the actions described in Section 2.1, the Falcon Parties, as
the case may be, shall at Closing:

     

    
      	
              (a)    
       

            	
              subject
      to the Permitted Falcon Encumbrances, reassign the Initial Working
      Interest to PetroHunter;

            

    

     

    
      	
              (b)    
       

            	
              except
      as set forth in this Agreement, accept the PetroHunter Consideration as
      full and complete payment of any and all obligations owed by PetroHunter
      Energy to Falcon under the Loan and the Loan
  Agreement;

            

    

     

    
      	
              (c)    
       

            	
              execute
      the Amended and Restated Beetaloo
JOA;

            

    

     

    
      	
              (d)    
       

            	
              release
      any and all interest of the Falcon Parties in the
  Mortgage;

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -9-

       

       

    

    
      	
              (e)    
       

            	
              release
      any and all interest of the Falcon Parties in the Pledge Agreement and
      instruct the brokerage firm holding the Common Shares subject to the
      Pledge Agreement at the Closing Date to transfer such Common Shares to the
      Escrow Agent;

            

    

     

    
      	
              (f)    
       

            	
              convey
      any and all interest of the Falcon Parties in the Remaining Completion
      Capital;

            

    

     

    
      	
              (g)    
       

            	
              execute
      the assumption undertaking to retire the Beetaloo
  Payables;

            

    

     

    
      	
              (h)    
       

            	
              terminate
      the Buckskin JOA;

            

    

     

    
      	
              (i)    
       

            	
              assume
      all obligations arising after Closing with respect to the Beetaloo
      Inventory, including but not limited to storing and insuring the Beetaloo
      Inventory for the periods after the Closing Date;
  and

            

    

     

    
      	
              (j)    
       

            	
              enter
      into the Escrow Agreement, and comply with the terms and conditions
      therein,

            

    

     

    and the
Falcon Parties agree to such actions on and subject to the terms and conditions
of this Agreement (collectively, the “Falcon Consideration” and
together with the PetroHunter Consideration, the “Transaction”).

     

    ARTICLE
3

    REPRESENTATIONS
AND WARRANTIES

     

    
      	
              3.1  

            	
              Representations
      and Warranties by PetroHunter
Parties

            

    

     

    The
PetroHunter Parties hereby jointly and severally guarantee, represent and
warrant to the Falcon Parties that as at the date hereof:

     

    
      	
              (a)    
       

            	
              other
      than the Permitted PetroHunter Encumbrances, Sweetpea has good and valid
      title to the Assets;

            

    

     

    
      	
              (b)    
       

            	
              other
      than the Permitted PetroHunter Encumbrances, the Assets are free and clear
      of all PetroHunter Encumbrances, and the PetroHunter Parties have not
      agreed to encumber or alienate any interest in the
  Assets;

            

    

     

    
      	
              (c)      
      

            	
              other
      than the Permitted PetroHunter Encumbrances, Sweetpea has good and valid
      title to the Beetaloo Inventory;

            

    

     

    
      	
              (d)    
       

            	
              all
      storage, insurance and other charges in respect of the Beetaloo Inventory
      have been fully paid, the Beetaloo Inventory is free and clear of all
      PetroHunter Encumbrances, and the PetroHunter Parties have not agreed to
      encumber or alienate any interest in the Beetaloo
    Inventory;

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -10-

       

       

    

    
      	
              (e)    
       

            	
              to
      the best knowledge of the PetroHunter Parties, the Operator Bonds will not
      be cancelled or terminated or any of the coverage thereunder allowed to
      lapse before the Closing;

            

    

     

    
      	
              (f)    
       

            	
              the
      PetroHunter Parties either have good and valid title to the Operator Bonds
      or have obtained the consent of the titleholder to assign the Operator
      Bonds to the Falcon Parties;

            

    

     

    
      	
              (g)    
       

            	
              none
      of the Operator Bonds are encumbered or alienated in any respect, nor have
      the PetroHunter Parties agreed to do so, and the Operator Bonds are free
      and clear of all PetroHunter
Encumbrances;

            

    

     

    
      	
              (h)    
       

            	
              other
      than: (i) the Beetaloo Payables; (ii) except as may be set forth in the
      most recent joint interest billing sent to Purchaser under the Beetaloo
      JOA; (iii) the Transaction Fees; and (iv) and the fees related to the
      Permits, none of the PetroHunter Parties has any other accounts payable,
      indebtedness or liability to any other person or entity in connection with
      ownership of, or operations or activities conducted on or otherwise
      relating to, the Beetaloo Basin
Project;

            

    

     

    
      	
              (i)    
       

            	
              the
      amount of the Remaining Completion Capital is $855,205, and such amount is
      more than sufficient to pay 100% of the cost of reclamation and plugging
      and abandonment requirements in connection with the Initial Working
      Interest;

            

    

     

    
      	
              (j)    
       

            	
              there
      are no unpaid amounts, whether billed or unbilled, due from PetroHunter
      Operating or Falcon USA for materials, services, fees or other reasons in
      connection with the Initial Working Interest or the Initial Completion
      Program;

            

    

     

    
      	
              (k)    
       

            	
              the
      Beetaloo Payables represents a true, complete and correct list of all
      amounts owing by any PetroHunter Parties to any persons in connection with
      the Beetaloo Basin Project, and there is no contingency, agreement or
      other legal basis upon which that total amount can increase between the
      date hereof and the Closing Date, absent the provision of new services or
      materials after the date hereof or any applicable interest
      thereon;

            

    

     

    
      	
              (l)    
       

            	
              the
      PetroHunter Parties directly or indirectly have control or direction over
      26,100,000 Common Shares, of which 14,500,000 Common Shares are currently
      pledged as security for the Loan in accordance with the terms of the Loan
      Agreement;

            

    

     

    
      	
              (m)    
       

            	
              the
      PetroHunter Parties will continue to bear (i) their income tax liabilities
      and their GST liability associated with the Initial Transaction, and (ii)
      any obligations with respect to approval by Governmental Authorities,
      consent of the Northern Land Council, and registration on the Petroleum
      Register of the Bayless Override, the Russenberger Override (including any
      predecessor overrides), and the Initial
  Transaction;

            

    

     

    
      	
              (n)    
       

            	
              each
      of the PetroHunter Parties:

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -11-

       

       

    

    
      	
              (i)    
       

            	
              is
      a corporation duly incorporated, organized and validly existing and in
      good standing under the laws of its applicable
    jurisdiction;

            

    

    

    
      	
              (ii)   
       

            	
              has
      the corporate power, authority and capacity to enter into the Transaction
      Agreements and all other agreements contemplated by the Transaction
      Agreements and to carry out and complete its obligations under the
      Transaction Agreements and all other agreements contemplated by the
      Transaction Agreements; and

            

    

    

    
      	
              (iii)  
       

            	
              the
      Transaction Agreements and the obligations of the PetroHunter Parties
      under the Transaction Agreements and the documents and transaction
      contemplated thereby have been duly and validly authorized by all
      requisite corporate proceedings;
and

            

    

    

    
      	
              (o)    
       

            	
              except
      as modified by the guarantees, representations and warranties made in
      Sections 3.1(a) to (m), inclusive, the representations and warranties of
      PetroHunter and Sweetpea contained in Section 3.1 of the Beetaloo PSA are
      true and correct as of the date hereof, and, notwithstanding any express,
      implied or other type of limitation contained in or suggested by the
      foregoing, the following guarantees, representations and warranties of
      PetroHunter and Sweetpea contained in Section 3.1 of the Beetaloo PSA are
      true and correct as of the date hereof:

            

    

     

    
      	
              (i)    
       

            	
              except
      as set forth on Schedule “I” to the Beetaloo PSA, each Seller has
      performed all material obligations which are required to be performed by
      it under the Material Agreements, including without limitation the
      Northern Land Council Exploration Agreements, and it is not in default
      under or in breach of or in receipt of any claim of default or breach
      under any Material Agreement, including without limitation the Northern
      Land Council Exploration Agreements, and no event has occurred which, with
      the passage of time or the giving of notice or both, would result in a
      default, breach or event of noncompliance by a Seller under any Material
      Agreement, including without limitation the Northern Land Council
      Exploration Agreements;

            

    

    

    
      	
              (ii)   
       

            	
              no
      Seller has any present expectation or intention of not fully performing on
      a timely basis all material obligations required to be performed by it
      under any Material Agreement or other instrument to which it is subject
      and to the knowledge of Sellers, there has been no breach or cancellation
      by the other parties to any Material Agreement or other instrument to
      which the Sellers are a party;

            

    

    

    
      	
              (iii)  
       

            	
              all
      of the Permits are in full force and effect, in good standing, and
      enforceable; and

            

    

    

    
      	
              (iv)   
       

            	
              Sweetpea
      is not in breach of any term or condition of any
  Permit.

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

      -12-

       

       

    

    
      	
              3.2  

            	
              Representations
      and Warranties of Falcon Parties

            

    

     

    The
Falcon Parties hereby jointly and severally guarantee, represent and warrant to
the PetroHunter Parties that as at the date hereof:

     

    
      	
              (a)    
       

            	
              none
      of the Falcon Parties has encumbered or alienated its interest in the
      Initial Working Interest in any respect or agreed to do so, and the
      Initial Working Interest is free and clear of all Falcon
      Encumbrances;

            

    

     

    
      	
              (b)    
       

            	
              Falcon
      has, or reasonably believes that it has access to, immediately available
      funds necessary to pay the Beetaloo
Payables;

            

    

     

    
      	
              (c)    
       

            	
              each
      of the Falcon Parties:

            

    

     

    
      	
              (i)    
       

            	
              is
      a corporation duly incorporated, organized and validly existing and in
      good standing under the laws of its applicable
    jurisdiction;

            

    

     

    
      	
              (ii)     

            	
              has
      the corporate power, authority and capacity to enter into the Transaction
      Agreements and all other agreements contemplated by the Transaction
      Agreements and to carry out and complete its obligations under the
      Transaction Agreements and all other agreements contemplated by the
      Transaction Agreements; and

            

    

     

    
      	
              (iii)  
       

            	
              the
      Transaction Agreements and the obligations of the Falcon Parties under the
      Transaction Agreements and the documents and transaction contemplated
      thereby have been duly and validly authorized by all requisite corporate
      proceedings; and

            

    

     

    
      	
              (d)    
       

            	
              except
      as modified by the guarantees, representations and warranties made in
      Section 3.2(a) above, the representations and warranties of Falcon and
      Purchaser contained in Section 3.2 of the Beetaloo PSA are true and
      correct as of the date hereof.

            

    

     

    ARTICLE
4

    WARRANTY
CLAIMS

     

    
      	
              4.1  

            	
              Survival
      of Warranties

            

    

     

    
      	
              (a)    
       

            	
              The
      representations and warranties contained in this Agreement or contained in
      any document or certificate given in order to carry out the Transaction
      will survive Closing and shall continue in full force and effect, subject
      to the following provisions of this
section:

            

    

     

    
      	
              (i)    
       

            	
              except
      as expressly provided in this section, no Warranty Claim may be made or
      brought by any Party after the date which is 18 months after
      the Closing Date; and

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -13-

       

       

       

    

    
      	
              (ii)   
       

            	
              any
      Warranty Claim which is based on intentional misrepresentation or fraud by
      a Party may be made or brought at any
time.

            

    

     

    
      	
              (b)    
       

            	
              It
      is a condition of the liability of each Party under the representations
      and warranties contained in this Agreement that the Party making a
      Warranty Claim shall have given written notice to the other of such
      Warranty Claim, with such particularity as the circumstances reasonably
      permit, before the expiry of the 18 month period referred to
      above.  After the expiration of such 18 month period, each Party
      will be released from all obligations and liabilities in respect of the
      representations and warranties contained in this Agreement or contained in
      any document or certificate given in order to carry out the Transaction,
      except as  previously set forth in a written
    notice.

            

    

     

    
      	
              4.2  

            	
              Limitations
      on Warranty Claims

            

    

     

    
      	
              (a)    
       

            	
              No
      Party shall be entitled to make a Warranty Claim if that Party has been
      advised in a writing addressed to it and signed by an officer of the
      advising Party prior to Closing Date of the inaccuracy, non-performance,
      non-fulfilment or breach which is the basis for such Warranty Claim and
      that Party completes the Transaction hereunder notwithstanding such
      inaccuracy, non-performance, non-fulfilment or
  breach.

            

    

     

    
      	
              (b)    
       

            	
              The
      amount of any damages which may be claimed by a Party pursuant to a
      Warranty Claim shall be calculated to be the cost or loss to that Party
      after giving effect to any insurance proceeds available to that Party in
      relation to the matter which is the subject of the Warranty
      Claim.

            

    

     

    
      	
              (c)    
       

            	
              Subject
      to the receipt of all necessary approvals and all applicable laws, the
      satisfaction of any amounts owing by PetroHunter Parties to Falcon
      Parties, or by Falcon Parties to PetroHunter Parties, may be paid by the
      indemnifying party through the delivery of either cash or check, in either
      case such method of payment shall be determined by the indemnifying party
      in its discretion.

            

    

     

    ARTICLE
5

    COVENANTS

     

    
      	
              5.1  

            	
              Mutual
      Covenants

            

    

     

    The
PetroHunter Parties and the Falcon Parties hereby covenant and agree that,
without the prior written consent of the other Party (such consent not to be
unreasonably withheld or delayed) or except as expressly contemplated in this
Agreement, from the date hereof until the earlier of the Closing Date or the day
upon which this Agreement is terminated, each shall:

     

    
      	
              (a)    
       

            	
              take
      all such actions as are necessary to terminate the Buckskin JOA;
      and

            

    

     

    
      	
              (b)    
       

            	
              take
      all such actions as are necessary to enter into the Amended and Restated
      Beetaloo JOA.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -14-

       

       

    

    
      	
              5.2  

            	
              Covenants
      of PetroHunter Parties

            

    

     

    The
PetroHunter Parties hereby covenant and agree that, except as expressly
contemplated by this Agreement and the other elements of the Transaction, until
the earlier of five days prior to the Closing Date and the day upon which this
Agreement is terminated (unless otherwise indicated in the covenant), the
PetroHunter Parties, in a timely and expeditious manner, shall:

     

    
      	
              (a)    
       

            	
              allow
      the Falcon Parties, any of their respective representatives or agents
      access during normal business hours to the premises and the properties of
      PetroHunter Parties and their respective subsidiaries and to all of the
      files, books, records and offices of PetroHunter Parties and their
      subsidiaries related to the Beetaloo Basin
  Project;

            

    

     

    
      	
              (b)    
       

            	
              resign
      as operator under the Beetaloo JOA with immediate effect, despite any
      longer notice period that may otherwise be provided in the Beetaloo
      JOA;

            

    

     

    
      	
              (c)    
       

            	
              use
      their best efforts (and cause each of its Subsidiaries to use reasonable
      commercial efforts) to cause its current insurance policies, as such item
      relates to the Beetaloo Basin Project, and the Operator Bonds not to be
      cancelled or terminated or any of the coverage thereunder to
      lapse;

            

    

     

    
      	
              (d)    
       

            	
              each
      of the PetroHunter Parties: (i) will not make an assignment in favour of
      its creditors or a proposal in bankruptcy to its creditors or any class
      thereof; (ii) have not initiated proceedings with respect to a compromise
      or arrangement with its creditors or for its winding up, liquidation or
      dissolution; and (iii) will immediately deliver written notice to Falcon
      if the PetroHunter Parties’ creditors delivers a notice to the PetroHunter
      Parties demanding payment in 21 days or otherwise, which notice shall
      contain reasonable detail sufficient to inform Falcon of the nature of any
      such notice;

            

    

     

    
      	
              (e)    
       

            	
              allow
      Falcon the full, exclusive and unfettered authority to: (i) negotiate with
      any Governmental Authority related to the Beetaloo Basin Project and agree
      to any changes in the timing, extent and nature of the work required to
      keep the Permits in effect; and (ii) bind both Falcon and PetroHunter to
      any such changes related to the Beetaloo Basin
  Project;

            

    

     

    
      	
              (f)    
       

            	
              accept,
      support and vote in favour of such work plans and budgets as Falcon may
      propose under the Beetaloo Basin JOA for the remainder of 2009, but only
      to the extent such work programs and budgets are intended by Falcon in
      good faith to satisfy the minimum work requirements under the Permits in a
      manner that Falcon believes to be commercially and technically reasonable,
      and with the understanding that Falcon’s present intention is to limit the
      capital expenditures in the work plan and budget for 2010 to the minimum
      believed necessary to keep the Permits in full force and
      effect;

            

    

     

    
      	
              (g)    
       

            	
              not
      with respect to the Beetaloo Basin Project: (i) undertake any material
      operations; (ii) incur any material obligations; or (iii) enter into any
      transaction or 

            

       

      
        
           

        

        
           

          
            

          

        

        
           

        

        -15-

         

         

      

      	 	
              refrain
      from doing any action which, if effected before the date of this
      Agreement, would constitute a breach of any representation, warranty,
      covenant or other obligation of one or more of the PetroHunter Parties
      contained herein, in connection with the Beetaloo Basin Project, without
      the prior written consent of
Falcon;

            

    

     

    
      	
              (h)    
       

            	
              pay
      all interest owing under the Loan until the Closing Date;
    and

            

    

     

    
      	
              (i)    
       

            	
              immediately
      deliver written notice to Falcon if litigation is commenced against any
      PetroHunter Parties, which notice shall contain reasonable detail
      sufficient to inform Falcon of the nature of any such litigation, so long
      as Falcon maintains the confidentiality of any material non-public
      information in accordance with Section 10.15 of this
      Agreement.

            

    

     

    
      	
              5.3  

            	
              Covenants
      of Falcon Parties

            

    

     

    As of the
Closing Date, the Falcon Parties hereby covenant and agree to assume their
proportionate share of all costs, duties, liabilities and obligations with
respect to their ownership interests in the Beetaloo Basin Project including,
but not limited to, those burdens described in the Permitted PetroHunter
Encumbrances.

     

    
      	
              5.4  

            	
              Right
      of First Offer

            

    

     

    
      	
              (a)    
       

            	
              Following
      the Closing Date and subject to Section  5.3(e), if any of the
      PetroHunter Parties desires or is obliged by law or otherwise to sell,
      assign,  transfer or otherwise dispose of the Offered Interest
      to a third party, the Falcon Parties shall have the prior right to
      purchase the Offered Interest (the “First Offer”) and the
      PetroHunter Parties shall deliver to the Falcon Parties a copy of the
      First Offer addressed to the Falcon Parties together with a statement
      executed by the PetroHunter Parties (the “First Offer Notice”)
      notifying the Falcon Parties that the PetroHunter Parties are exercising
      their rights and obligations under this Section 5.3, with full particulars
      of any proposed transfer of the Offered
  Interest.

            

    

     

    
      	
              (b)    
       

            	
              The
      First Offer Notice shall:

            

    

     

    
      	
              (i)    
       

            	
              set
      out the price for which the sale of the Offered Interest is to be
      transacted;

            

    

     

    
      	
              (ii)   
       

            	
              specify
      the date on which the sale is to close and the other closing
      arrangements;

            

    

     

    
      	
              (iii)  
       

            	
              specify
      the date by which a written response to the First Offer must be received
      by The PetroHunter Parties (which, in any event, shall be not less than
      fifteen (15) days from the date of the First Offer Notice);
      and

            

    

     

    
      	
              (iv)   
       

            	
              provide
      for the method and timing of
payment.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -16-

       

       

    

    
      	
              (c)    
       

            	
              The
      Falcon Parties shall be entitled to accept and purchase all but not less
      than all the Offered Interest upon the terms and conditions specified in
      the First Offer Notice by delivering a written notice to purchase (the
      “Purchase Notice”)
      to the PetroHunter Parties within the time period specified in the First
      Offer Notice.

            

    

     

    
      	
              (d)    
       

            	
              If
      the Falcon Parties offer to purchase all, but not less than all, of the
      Offered Interest and the PetroHunter Parties have received the Purchase
      Notice within the time period specified in the First Offer Notice, then
      closing shall take place at the offices of Falcon on the date which is
      fifteen (15) days following receipt of all necessary documents required to
      be obtained in order to effect a valid transfer of the Offered Interest
      (and the parties hereto covenant and agree to use their best efforts to
      obtain such documents) and such closing shall include all documentation
      customary for transactions of this
nature.

            

    

     

    
      	
              (e)    
       

            	
              If
      the Falcon Parties do not offer to purchase all, but not less than all, of
      the Offered Interest or the PetroHunter Parties do not receive the
      Purchase Notice within the time period specified in the First Offer
      Notice, then Section 5.3 shall become null and void in respect of the
      particular transaction described in the First Offer
  Notice.

            

    

     

    
      	
              (f)    
       

            	
              For
      greater certainty, until such time as the PetroHunter Parties sell,
      assign, transfer or otherwise dispose of the 100% of the Offered Interest,
      each offer to sell, assign, transfer or otherwise dispose of the Offered
      Interest shall be subject to Section
5.3.

            

    

     

    ARTICLE
6

    CLOSING

     

    
      	
              6.1  

            	
              Closing
      or Termination

            

    

     

    
      	
              (a)    
       

            	
              This
      Agreement may be terminated at any time prior to the Closing
      Date:

            

    

     

    
      	
              (i)    
       

            	
              at
      any time with the written consent of the Parties;
  and

            

    

     

    
      	
              (ii)   
       

            	
              by
      Falcon if Falcon is not satisfied in its sole
  discretion:

            

    

     

    
      	
              (A)   
       

            	
              with
      the performance by PetroHunter of the PetroHunter Covenants contained in
      ARTICLE 5; or

            

    

     

    
      	
              (B)   
       

            	
              Falcon
      otherwise concludes that PetroHunter will not be able to fulfill the
      condition contained in Section 6.2(a) on or before the Closing
      Date.

            

    

     

    
      	
              (b)    
       

            	
              This
      Agreement shall automatically terminate if the closing falls on or after
      June 10, 2009 or such other date as may be agreed to in writing by the
      Parties.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -17-

       

       

    

    
      	
              6.2  

            	
              Conditions
      for the Benefit of the Falcon
Parties

            

    

     

    The
obligation of the Falcon Parties to complete the Transaction is subject to the
satisfaction by the PetroHunter Parties or waiver by the Falcon Parties on or
before the Closing Date, for the exclusive benefit of the Falcon Parties, of the
following conditions:

     

    
      	
              (a)    
       

            	
              all
      representations and warranties of PetroHunter Parties contained in Section
      3.1 must be true in all material respects at and as of the Closing Date;
      

            

    

     

    
      	
              (b)    
       

            	
              all
      of the covenants and conditions in favour of the Falcon Parties to be
      complied with, performed or waived by the PetroHunter Parties on or before
      the Closing Date shall have been complied with, performed or
      waived;

            

    

     

    
      	
              (c)    
       

            	
              the
      timing, extent and nature of the work required under the Permits must have
      been changed by the Government in a way satisfactory to Purchaser, or
      Purchaser must believe, in its sole discretion, that satisfactory changes
      will be made; and

            

    

     

    
      	
              (d)    
       

            	
              the
      50% interest in the Beetaloo Basin Project previously purchased by the
      Purchaser must have been transferred of record in the appropriate
      government offices, or Purchaser must believe, in its sole discretion,
      that such transfer will occur in due
course.

            

    

     

    
      	
              6.3  

            	
              Conditions
      for Benefit of PetroHunter Parties

            

    

     

    The
obligation of PetroHunter Parties to complete the Transaction is subject to the
satisfaction by the Falcon Parties or waiver by the PetroHunter Parties on or
before the Closing Date, for the exclusive benefit of PetroHunter Parties, of
each of the following conditions:

     

    
      	
              (a)    
       

            	
              all
      representations and warranties of the applicable Falcon Parties contained
      in Section 3.2 must be true in all material respect at and as of the
      Closing Date; and

            

    

     

    
      	
              (b)    
       

            	
              all
      of the covenants and conditions in favour of the PetroHunter Parties to be
      complied with, performed or waived by the Falcon Parties on or before the
      Closing Date shall have been complied with, performed or
      waived.

            

    

     

    
      	
              6.4  

            	
              PetroHunter
      Parties’ Deliveries on Closing

            

    

     

    On the
Closing Date, PetroHunter Parties will deliver the following documents, all duly
executed and to be dated as of the Closing Date:

     

    
      	
              (a)    
       

            	
              an
      executed copy of the Transaction
Agreements;

            

    

     

    
      	
              (b)    
       

            	
              a
      legal opinion, satisfactory to the TSXV and Aird & Berlis LLP,
      relating to the status of each PetroHunter Parties, the Permits, and other
      matters as required by the TSXV;

            

    

     

    
      	
              (c)    
       

            	
              a
      permit transfer instrument conveying an undivided 25% interest in the
      Permits, substantially in the form attached as SCHEDULE
    "A";

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -18-

       

       

    

    
      	
              (d)    
       

            	
              an
      assignment and bill of sale substantially in the form attached as SCHEDULE
      "B", assigning and selling an undivided 25% interest in the
      Assets;

            

    

     

    
      	
              (e)    
       

            	
              a
      deed of assignment and assumption substantially in the form attached as
      SCHEDULE "D", assigning and selling an undivided 25% interest in the
      Assets and by which Purchaser assumes its proportionate share of the
      obligations owed to Northern Land
Council;

            

    

     

    
      	
              (f)    
       

            	
              a
      countersigned Resignation of Beetaloo Operator and Appointment of
      Successor executed by Sweetpea, in a form satisfactory to the Purchaser
      acting reasonably, whereby Sweetpea
will:

            

    

     

    
      	
              (i)    
       

            	
              resign
      as operator under the Beetaloo JOA with immediate effect;
    and

            

    

     

    
      	
              (ii)   
       

            	
              appoint
      Falcon Australia as the operator of the Beetaloo Basin Project with
      immediate effect;

            

    

     

    
      	
              (g)    
       

            	
              an
      assignment and bill of sale substantially in the form attached as SCHEDULE
      "C" hereto, assigning and selling a 100% interest in the Beetaloo
      Inventory on an “as is, where is”
basis;

            

    

     

    
      	
              (h)    
       

            	
              a
      letter executed by Sweetpea, in a form satisfactory to the Purchaser
      acting reasonably, instructing Wells Fargo Bank, National Association, to
      transfer and, if necessary, reissue all standby letters of credit forming
      a part of the Operator Bonds, so that such letters of credit support and
      secure the obligations of Purchaser, rather than Sweetpea, to the
      Government Authorities;

            

    

     

    
      	
              (i)    
       

            	
              assignments,
      signature cards, and all other instruments necessary, in a form
      satisfactory to the Purchaser acting reasonably, to transfer to
      Purchaser’s designee the accounts, cash and certificates of deposit that
      secure Wells Fargo Bank, National Association, under the standby letters
      of credit forming a part of the Operator Bonds, in each case fully
      executed by the owner of the concerned account, cash or certificate of
      deposit, so that such accounts, cash and certificates of deposit are then
      owned by Purchaser, rather than the current
  owners;

            

    

     

    
      	
              (j)    
       

            	
              the
      escrow agreement substantially in the form attached as SCHEDULE "G"
      hereto;

            

    

     

    
      	
              (k)    
       

            	
              any
      financial information if required by TSXV or other Governmental
      Authority;

            

    

     

    
      	
              (l)    
       

            	
              all
      other documents or information as may be required by the TSXV, corporate
      or securities regulatory
authorities;

            

    

     

    
      	
              (m)    
       

            	
              the
      approval, acceptance, authorization, exemption, waiver or consent of each
      of the third parties from whom consents are
  required;

            

    

     

    
      	
              (n)    
       

            	
              a
      certificate of each of PetroHunter Parties’ signed by any two of their
      respective officers certifying
that:

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -19-

       

       

    

    
      	
              (i)    
       

            	
              the
      representations and warranties of such PetroHunter Parties herein
      contained are true and correct as of the Closing
  Date;

            

    

     

    
      	
              (ii)   
       

            	
              the
      resolutions of the Boards of Directors of such PetroHunter Parties
      approving the Transaction Agreements are in full force and
      effect;

            

    

     

    
      	
              (iii)  
       

            	
              PetroHunter
      Parties have performed and complied with all covenants and agreements
      contained in the Transaction Agreements to be performed or complied with
      by such PetroHunter Parties at or prior to the Closing Date;
      and

            

    

     

    
      	
              (iv)   
       

            	
              all
      necessary corporate action has been taken by such PetroHunter Parties to
      authorize the execution and delivery of the Transaction Agreements and to
      consummate the Transaction contemplated by the Transaction;
      and

            

    

     

    
      	
              (o)    
       

            	
              such
      other documents and assurances as may be reasonably required by Falcon or
      Purchaser,

            

    

     

    all in
form and substance satisfactory to the Falcon Parties, each acting reasonably
and in good faith.

     

    
      	
              6.5  

            	
              Falcon
      Parties’ Deliveries on Closing

            

    

     

    On the
Closing Date, the applicable Falcon Parties will deliver the following documents
all duly executed and to be dated as of the Closing Date:

     

    
      	
              (a)    
       

            	
              an
      executed copy of the Transaction
Agreements;

            

    

     

    
      	
              (b)    
       

            	
              a
      permit transfer instrument conveying an undivided 25% interest in the
      Permits, substantially in the form attached as SCHEDULE
    "A";

            

    

     

    
      	
              (c)    
       

            	
              an
      assignment and bill of sale substantially in the form attached as SCHEDULE
      "B", assigning and selling an undivided 25% interest in the
      Assets;

            

    

     

    
      	
              (d)    
       

            	
              a
      countersigned Resignation of Beetaloo Operator and Appointment of
      Successor executed by Purchaser, in a form satisfactory to the Purchaser
      acting reasonably, whereby Sweetpea
will:

            

    

     

    
      	
              (i)    
       

            	
              resign
      as operator under the Beetaloo JOA with immediate effect;
    and

            

    

     

    
      	
              (ii)   
       

            	
              appoint
      Falcon Australia as the operator of the Beetaloo Basin Project with
      immediate effect;

            

    

     

    
      	
              (e)    
       

            	
              an
      assignment and bill of sale substantially in the form attached as SCHEDULE
      "C" hereto, assigning and selling a 100% interest in the Beetaloo
      Inventory on an “as is, where is”
basis;

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -20-

       

       

    

    
      	
              (f)    
       

            	
              an
      assignment and bill of sale substantially in the form attached as SCHEDULE
      "E" hereto assigning and selling the Initial Working Interest to
      PetroHunter Operating;

            

    

     

    
      	
              (g)    
       

            	
              the
      escrow agreement substantially in the form attached as SCHEDULE "G"
      hereto;

            

    

     

    
      	
              (h)    
       

            	
              a
      release of the Mortgage;

            

    

     

    
      	
              (i)    
       

            	
              an
      assumption undertaking substantially in the form as attached as SCHEDULE
      "H" hereto undertaking to retire the Beetaloo
  Payables;

            

    

     

    
      	
              (j)    
       

            	
              the
      approval, acceptance, authorization, exemption, waiver or consent of each
      of the TSXV;

            

    

     

    
      	
              (k)    
       

            	
              a
      certificate of each of Falcon Parties signed by any two of their
      respective officers certifying
that:

            

    

     

    
      	
              (i)    
       

            	
              the
      representations and warranties of the appropriate Falcon Party herein
      contained are true and correct as of the Closing
  Date;

            

    

     

    
      	
              (ii)   
       

            	
              the
      resolutions of the Board of Directors of the appropriate Falcon Party
      approving the Transaction Agreements and the Transaction are in full force
      and effect;

            

    

     

    
      	
              (iii)  
       

            	
              the
      appropriate Falcon Party has performed and complied with all covenants and
      agreements contained in this Agreement to be performed or complied with by
      the appropriate Falcon Party at or prior to the Closing Date;
      and

            

    

     

    
      	
              (iv)   
       

            	
              all
      necessary corporate action has been taken by the appropriate Falcon Party
      to authorize the execution and delivery of the Transaction Agreements and
      to consummate the Transaction contemplated by the
    Transaction;

            

    

     

    
      	
              (l)    
       

            	
              conditional
      approval of the TSXV for the Transaction if required;
  and

            

    

     

    
      	
              (m)     

            	
              such
      other documentation and assurances as may be reasonably required by the
      PetroHunter Parties,

            

    

     

    all in
form and substance satisfactory to the PetroHunter Parties, each acting
reasonably and in good faith.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -21-

       

    

    ARTICLE
7

    RESOLUTION
OF DISPUTES

     

    
      	
              7.1  

            	
              Arbitration

            

    

     

    Except
with respect to matters where irreparable damage would occur and that the
Parties are entitled to seek an injunction or specific performance of the terms
hereof under applicable law, any dispute between the Parties arising during the
period of this Agreement or at any time thereafter which touches upon the
validity, construction, meaning, performance or effect of this Agreement or the
rights and liabilities of the Parties or any matter arising out of or connected
with this Agreement shall be exclusively and definitively resolved through final
and binding arbitration.

     

    
      	
               
      

            	
              (a)

            	
              The
      arbitration shall be conducted in accordance with and subject to The
      Institute of Arbitrators & Mediators Australia Rules for the Conduct
      of Commercial Arbitrations.

            

    

     

    
      	
               
      

            	
              (b)

            	
              The
      arbitration shall be conducted by three arbitrators, unless all parties to
      the dispute agree to a sole arbitrator within 30 days after the filing of
      the arbitration.

            

    

     

    
      	
               
      

            	
              (c)

            	
              If
      the arbitration is to be conducted by a sole arbitrator, then the
      arbitrator will be jointly selected by the parties to the
      dispute.  If the parties to the dispute fail to agree on the
      arbitrator within 30 days after the filing of the arbitration, then the
      IAMA shall appoint the arbitrator. If the arbitration is to be conducted
      by three arbitrators and there are only two parties to the dispute, then
      each party to the dispute shall appoint one arbitrator within 30 days of
      the filing of the arbitration, and the two arbitrators so appointed shall
      select the presiding arbitrator within 30 days after the latter of the two
      arbitrators has been appointed by the parties to the
      dispute.  If a party to the dispute fails to appoint its
      party-appointed arbitrator or if the two party-appointed arbitrators
      cannot reach an agreement on the presiding arbitrator within the
      applicable time period, then the IAMA shall appoint the remainder of the
      three arbitrators not yet
appointed.  

            

    

     

    
      	
               
      

            	
              (d)

            	
              Unless
      otherwise agreed by all parties to the dispute, the place of arbitration
      shall be Sydney, New South Wales.

            

    

     

    
      	
               
      

            	
              (e)

            	
              The
      award of the arbitral tribunal shall be final and
      binding.  Judgment on the award of the arbitral tribunal may be
      entered and enforced by any court of competent
    jurisdiction.

            

    

     

    
      
        	
                 
      

              	
                (f)

              	
                Any
      party to the dispute may apply to a court for interim measures (i) prior
      to the constitution of the arbitral tribunal (and thereafter as necessary
      to enforce the arbitral tribunal’s rulings); or (ii) in the absence of the
      jurisdiction of the arbitral tribunal to rule on interim measures in a
      given jurisdiction.  The Parties agree that seeking and
      obtaining such interim measures shall not waive the right to
      arbitration.  The arbitrators (or in an emergency the presiding
      arbitrator acting alone in the event one or more of the other arbitrators
      is unable to be involved in a timely fashion) may grant interim measures
      including injunctions, attachments and 

              

         

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        -22-

         

         

         

        	 	 	
                conservation
      orders in appropriate circumstances, which measures may be immediately
      enforced by court order.  Hearings on requests for interim
      measures may be held in person, by telephone, by video conference or by
      other means that permit the parties to the dispute to present evidence and
      arguments.  Without limiting the generality of the foregoing,
      any party to the dispute may have recourse to and shall be bound by the
      Pre-arbitral Referee Procedure of the International Chamber of Commerce in
      accordance with its rules then in
effect.

              

      

    

     

    
      	
               
      

            	
              (g)

            	
              The
      arbitral tribunal is authorized to award costs and attorneys’ fees and to
      allocate them between the parties to the dispute.  The costs of
      the arbitration proceedings, including attorneys’ fees, shall be borne in
      the manner determined by the arbitral
      tribunal.   

            

    

     

    
      	
               
      

            	
              (h)

            	
              The
      Parties waive their rights to claim or recover, and the arbitral tribunal
      shall not award, any punitive, multiple, or other exemplary damages
      (whether statutory or common law) except to the extent such damages have
      been awarded to a third party and are subject to allocation between or
      among the parties to the dispute.

            

    

     

    
      	
               
      

            	
              (i)

            	
              To
      the extent permitted by law, any right to appeal or challenge any arbitral
      decision or award, or to oppose enforcement of any such decision or award
      before a court or any Governmental Authority, is hereby waived by the
      Parties except with respect to the limited grounds for modification or
      non-enforcement provided by any applicable arbitration statute.
      

            

    

     

    ARTICLE
8

    INDEMNITY

     

    
      	
              8.1  

            	
              Indemnity
      by the PetroHunter Parties

            

    

     

    The
PetroHunter Parties hereby jointly and severally agree to indemnify, defend,
hold and save the Falcon Parties and their respective officers, directors,
partners, shareholders, employees, agents, representatives, successors and
assigns harmless from and against any claims, demands, actions, causes of
action, damage, loss, deficiency, cost, liability and expense which may be made
or brought against the Falcon Parties or which the Falcon Parties may suffer or
incur as a result of, in respect of or arising out of:

     

    
      	
              (a)    
       

            	
              any
      obligation, commitment or liability or claim (whether absolute, accrued or
      contingent) relating to the Assets, other than the Beetaloo Payables,
      arising prior to the Closing Date;

            

    

     

    
      	
              (b)    
       

            	
              any
      obligation, commitment or liability or claim (whether absolute, accrued or
      contingent) relating to the Beetaloo Basin Inventory, other than the
      Beetaloo Payables, arising prior to the Closing
  Date;

            

    

     

    
      	
              (c)    
       

            	
              any
      obligation, commitment or liability or claim (whether absolute, accrued or
      contingent) relating to the Initial Working Interest, including, without
      limitation, all plugging, abandonment and reclamation costs associated
      with the New Wells arising at any
time;

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -23-

       

       

       

    

    
      	
              (d)    
       

            	
              any
      loss, damage or liability or claim (whether absolute, accrued or
      contingent) relating to any failure to pay duties or stamp duties in
      relation to the Transaction or any Transaction Agreement and any failure
      to lodge any document or statement required by a Government Authority
      (including a revenue office of an Australian State or Territory) in
      connection with the Transaction or any Transaction
    Agreement;

            

    

     

    
      	
              (e)    
       

            	
              any
      non-performance or non-fulfillment of any covenant or agreement on the
      part of the PetroHunter Parties contained in this Agreement or in any
      document given in order to carry out the transactions contemplated hereby;
      and

            

    

     

    
      	
              (f)    
       

            	
              all
      costs and expenses including, without limitation, legal fees on a
      solicitor and client basis, incidental to, arising from or in respect of
      the foregoing.

            

    

     

    
      	
              8.2  

            	
              Provisions
      Relating to Indemnity Claims

            

    

     

    The
following provisions will apply to any claim by any Falcon Party or its
respective officers, directors, partners, shareholders, employees, agents,
representatives, successors and assigns (the “Claiming Party”) for
indemnification by one or more of the PetroHunter Parties, as the case may be
(the “Responding
Party”), pursuant to Section 8.1 (an “Indemnity
Claim”):

    

    
      	
              (a)    
       

            	
              promptly
      after becoming aware of any matter that may give rise to an Indemnity
      Claim, the Claiming Party will provide to the Responding Party written
      notice of the Indemnity Claim specifying (to the extent that information
      is available) the factual basis for the Indemnity Claim and the amount of
      the Indemnity Claim or, if an amount is not then determinable, an estimate
      of the amount of the Indemnity Claim, if an estimate is feasible in the
      circumstances;

            

    

     

    
      	
              (b)    
       

            	
              if
      an Indemnity Claim relates to an alleged liability to any other person (a
      “Third Party
      Liability”), including without limitation any Governmental
      Authority or regulatory body, which is of a nature such that the Claiming
      Party is required by applicable law to make a payment to a third party
      before the relevant procedure for challenging the existence or quantum of
      the alleged liability can be implemented or completed, then the Claiming
      Party may, notwithstanding the provisions of subsection (c) of this
      section, make such payment and forthwith demand reimbursement for such
      payment from the Responding Party in accordance with this Agreement;
      provided that, if the alleged Third Party Liability as finally determined
      on completion of settlement negotiations or related legal proceedings is
      less than the amount which is paid by the Responding Party in respect of
      the related Indemnity Claim, then the Claiming Party shall forthwith
      following the final determination pay to the Responding Party the amount
      by which the amount of the Third Party Liability as finally determined is
      less than the amount which is so paid by the Responding
    Party;

            

    

     

    
      	
              (c)    
       

            	
              the
      Claiming Party shall not negotiate, settle, compromise or pay (except in
      the case of payment of a judgment) any Third Party Liability as to which
      it proposes 

            

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      -24-

       

       

      	 	
              to
      assert an Indemnity Claim, except with the prior written consent of the
      Responding Party (which consent shall not be unreasonably withheld or
      delayed);

            

    

     

    
      	
              (d)    
       

            	
              with
      respect to any Third Party Liability, provided the Responding Party first
      admits the Claiming Party’s right to indemnification for the amount of
      such Third Party Liability which may at any time be determined or settled,
      then, in any legal, administrative or other proceedings in connection with
      the matters forming the basis of the Third Party Liability, the following
      procedures will apply:

            

    

     

    
      	
              (i)    
       

            	
              except
      as contemplated by paragraph (iii) of this subsection, the Responding
      Party will have the right to assume carriage of the compromise or
      settlement of the Third Party Liability and the conduct of any related
      legal, administrative or other proceedings, but the Claiming Party shall
      have the right and shall be given the opportunity to participate in the
      defence of the Third Party Liability, to consult with the Responding Party
      in the settlement of the Third Party Liability and the conduct of related
      legal, administrative and other proceedings (including consultation with
      counsel) and to disagree on reasonable grounds with the selection and
      retention of counsel, in which case counsel satisfactory to the Responding
      Party and the Claiming Party shall be retained by the Responding
      Party;

            

    

     

    
      	
              (ii)   
       

            	
              the
      Responding Party will co-operate with the Claiming Party in relation to
      the Third Party Liability, will keep it fully advised with respect
      thereto, will provide it with copies of all relevant documentation as it
      becomes available, will provide it with access to all records and files
      relating to the defence of the Third Party Liability and will meet with
      representatives of the Claiming Party at all reasonable times to discuss
      the Third Party Liability; and

            

    

     

    
      	
              (iii)  
       

            	
              notwithstanding
      paragraph (i) of this subsection, the Responding Party will not settle the
      Third Party Liability or conduct any legal, administrative or other
      proceedings in any manner which could, in the reasonable opinion of the
      Claiming Party, have a material adverse affect on the Condition of the
      Business or the Claiming Party, except with the prior written consent of
      the Claiming Party;

            

    

     

    
      	
              (e)    
       

            	
              If,
      with respect to any Third Party Liability, the Responding Party does not
      admit the Claiming Party’s right to indemnification or declines to assume
      carriage of the settlement or of any legal, administrative or other
      proceedings relating to the Third Party Liability, then the following
      provisions will apply:

            

    

     

    
      	
              (i)    
       

            	
              the
      Claiming Party, at its discretion, may assume carriage of the settlement
      or of any legal, administrative or other proceedings relating to the Third
      Party Liability and may defend or settle the Third Party Liability on such
      terms as the Claiming Party, acting in good faith, considers advisable;
      and

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -25-

       

       

    

    
      	
              (ii)   
       

            	
              any
      cost, loss, damage or expense incurred or suffered by the Claiming Party
      in the settlement or defence of such Third Party Liability or the conduct
      of any legal, administrative or other proceedings shall be added to the
      amount of the Indemnity Claim;

            

    

     

    
      	
              (f)    
       

            	
              The
      amount of any damage, loss, cost, liability or expense (including
      reasonable professional fees and disbursements) in connection with any
      claim for which indemnification is provided hereunder shall be net of any
      amounts actually received by the Claiming Party under insurance policies
      with third parties (i.e.: actual insurance policies and not self insurance
      or retention programs) with respect to such claim and shall be net of any
      tax benefit received by the Claiming Party in respect of such claim;
      and

            

    

     

    
      	
              (g)    
       

            	
              Any
      liability for indemnification hereunder shall be determined without
      duplication of recovery by reason of the state of facts giving rise to
      such liability constituting a breach of more than one representation,
      warranty, covenant or agreement.

            

    

     

    ARTICLE
9

    GST

     

    
      	
              9.1  

            	
              Interpretation

            

    

     

    For the
purposes of ARTICLE 9, terms that are not otherwise defined in this Agreement
shall have the meaning ascribed thereto in the GST Law.

     

    
      	
              9.2  

            	
              Going
      concern

            

    

     

    
      	
              (a)    
       

            	
              The
      parties covenant and agree that the supplies described in Section 2.1 are
      the supply of a going concern by the Seller to the Purchaser that is
      GST-free under the GST Law; and

            

    

     

    
      	
              (b)    
       

            	
              The
      Seller warrants and represents that it carries on, and will continue to
      carry on, the enterprise to which the supply in Section 9.2(a) relates up
      to and including the Closing Date.

            

    

     

    
      	
              (c)    
       

            	
              Section
      9.3 shall not apply to a supply described in Section 2.1 unless the
      Commissioner of Taxation issues a private ruling or otherwise determines
      in writing that the supply is a taxable supply. If Section 9.3 does apply
      to a supply described in Section 2.1, the recipient can withhold payment
      of the GST Amount until three business days after the later
      of:

            

    

     

    
      	
              (i)    
       

            	
              the
      day it receives a copy of a private ruling or written determination issued
      by the Commissioner of Taxation;
and

            

    

     

    
      	
              (ii)    
       

            	
              the
      day the supplier (or the representative member for a GST group of which
      the supplier is a member) is required to lodge its GST return for the tax
      period to which the supply is
attributable.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -26-

       

       

    

    
      	
              9.3  

            	
              GST
      gross-up

            

    

     

    If GST is
payable by a supplier (or by the representative member for a GST group of which
the supplier is a member) on any supply made under this Agreement, the recipient
will pay to the supplier an amount (the “GST Amount”) equal to the GST
payable on the supply.  Subject to Section 9.2, the GST Amount is
payable by the recipient in addition to and at the same time that the
consideration for the supply is to be provided under this
Agreement.

     

    
      	
              9.4  

            	
              Tax
      invoice

            

    

     

    The
supplier must deliver a tax invoice to the recipient before the supplier is
entitled to payment of the GST Amount.  The recipient can withhold
payment of the GST Amount until the supplier provides a tax
invoice.

     

    
      	
              9.5  

            	
              Adjustment
      event

            

    

     

    If an
adjustment event arises in respect of a taxable supply made under this
Agreement, the GST Amount will be recalculated to reflect the adjustment event
and a payment will be made by the recipient to the supplier or by the supplier
to the recipient, as the case may be, to reflect the recalculation.

     

    
      	
              9.6  

            	
              Reimbursements

            

    

     

    If a
Party is required under this Agreement to reimburse or pay to another Party an
amount calculated by reference to a cost, expense, outgoing, or an amount paid
or incurred by that Party, the amount of the reimbursement or payment will be
reduced by the amount of any input tax credits or reduced input tax credits to
which that Party (or the representative member for a GST group of which it is a
member) is entitled in respect of any acquisition relating to that cost,
expense, outgoing or other amount.

     

    
      	
              9.7  

            	
              Survival
      of Article 9

            

    

     

    The
provisions of this ARTICLE 9 shall not merge on Closing.

     

    ARTICLE
10

    GENERAL

     

    
      	
              10.1  

            	
              Taxes
      and Fees

            

    

     

    The
PetroHunter Parties and the Falcon Parties agree that:

     

    
      	
              (a)    
       

            	
              the
      PetroHunter Parties shall be responsible for any duties or stamp duties
      applicable to the Transaction or in relation to any Transaction
      Agreements; and

            

    

     

    
      	
              (b)    
       

            	
              each
      Party shall pay its own legal and other professional fees in respect of
      the Transaction.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -27-

       

       

       

    

    
      	
              10.2  

            	
              Complete
      Closings

            

    

     

    All
matters of payment, execution and delivery of documents by each Party to the
other at the Closing shall be deemed to be concurrent requirements and nothing
will be complete at Closing until everything required at Closing has been paid,
executed and delivered.  Upon the written request of either Party, all
documents and monies shall be deemed delivered in escrow at Closing until the
Parties’ counsel can agree that all requirements of Closing have been
satisfied.

     

    
      	
              10.3  

            	
              Status
      of the Agreement

            

    

     

    Notwithstanding
anything else contained in this Agreement, this Agreement shall not constitute a
binding agreement between the Parties until the Acceptance Date.

     

    
      	
              10.4  

            	
              Tender

            

    

     

    Any
tender of documents or money or delivery of Notice pursuant to this Agreement
may be given by or made upon a Party’s legal counsel on behalf of such
Party.

     

    
      	
              10.5  

            	
              Specific
      Performance and other Remedies

            

    

     

    Each of
the Parties hereto hereby recognizes and acknowledges that a breach by any other
Party (the “Breaching
Party”) of any covenants or other commitments contained in this Agreement
will cause the non-Breaching Party to sustain injury for which it would not have
an adequate remedy at law for money damages.  Therefore, each of the
Parties hereto hereby agree that, in the event of any such breach, the
non-Breaching Party shall be entitled to the remedy of specific performance of
such covenants or commitments and provisional, interlocutory and permanent
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity, and each of the Parties hereto further
hereby agrees to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or other equitable
relief.

     

    
      	
              10.6  

            	
              Obligations
      as Covenants

            

    

     

    Each
agreement and obligation of the Parties contained in this Agreement, even though
not expressed as a covenant, shall be considered for all purposes to be a
covenant.

     

    
      	
              10.7  

            	
              Amendment
      of Agreement

            

    

     

    Subject
to Section 10.9, no modification or amendment of this Agreement shall be binding
unless executed in writing by the Parties in the same manner as the execution of
this Agreement.

     

    
      	
              10.8  

            	
              Further
      Assurances

            

    

     

    Each of
the Parties shall from time to time hereafter and upon any reasonable request of
any other Party, make or cause to be made all such further acts, deeds,
assurances and things as may be required or necessary to more effectually
implement and carry out the true intent and meaning of this
Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -28-

       

       

       

    

    
      	
              10.9  

            	
              Waiver

            

    

     

    Subject
to Section 10.7, no waiver of any default, breach or non-compliance under this
Agreement shall be effective unless in writing and signed by the Party to be
bound by the waiver or by its counsel.  Subject to Section 10.7, no
waiver shall be inferred from or implied by any failure to act or delay in
acting by a Party in respect of any default, breach or non-observance or by
anything done or omitted to be done by the other Party.  The waiver by
a Party of any default, breach or non-compliance under this Agreement shall not
operate as a waiver of that Party’s rights under this Agreement in respect of
any continuing or subsequent default, breach or non-observance (whether of the
same or any other nature).

     

    
      	
              10.10  

            	
              Time

            

    

     

    Time
shall in all respects be of the essence hereof provided that the time for doing
or completing any matter may be extended or abridged by an agreement in writing
between Falcon and PetroHunter Energy or their respective
counsel.  Except as expressly set out in this Agreement, the
computation of any period of time referred to in this Agreement shall exclude
the first day and include the last day of such period.

     

    
      	
              10.11  

            	
              Entire
      Agreement

            

    

     

    Except
for the defined terms identified in Section 1.1, this Agreement constitutes the
entire agreement between the Parties with respect to the subject matter hereof
and, except as stated in the instruments and documents to be executed and
delivered pursuant hereto, contains all of the representations, conditions,
warranties and agreements of the respective Parties with respect to the subject
matter hereof. There are no verbal representations, undertakings or agreements
of any kind between the Parties. This Agreement supersedes
all prior negotiations or agreements between the Parties, whether written or
verbal, with respect to the subject matter of this Agreement.

     

    
      	
              10.12  

            	
              Severability

            

    

     

    If any
covenant, obligation or provision of this Agreement, or the application thereof
to any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Agreement or the application of such covenant, obligation
or provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby.  Each
covenant, obligation and provision of this Agreement shall be separately valid
and enforceable to the fullest extent permitted by law.

     

    
      	
              10.13  

            	
              Counterparts
      and Facsimile

            

    

     

    For the
convenience of the Parties, this Agreement may be executed in several
counterparts, and delivered by facsimile transmission, each of which when so
executed and delivered shall be deemed to be an original instrument and such
counterparts together shall constitute one and the same instrument.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      -29-

       

       

    

    
      	
              10.14  

            	
              Notices

            

    

     

    Every
notice, consent, request, instruction, approval and other communication provided
for or permitted by this Agreement (each, a “Notice”) and all legal process
in regard hereto shall be validly given, made or served, if in writing and
delivered to, or sent by facsimile, to the Party to whom it is be given
at:

     

    
      	
              (a)    
       

            	
              to
      PetroHunter Parties:

            

    

     

    c/o
PetroHunter Energy Corporation

    1600
Stout Street, Suite 2000

    Denver,
Colorado 80202

    

    Attention:
Martin Oring, Chairman

    Facsimile
number:  (720) 889-8371

    

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

    

    Dill Dill
Carr Stonbraker & Hutchings, P.C.

    455
Sherman Street, Suite 300

    Denver,
Colorado 80203

    

    Attention:
Fay M. Matsukage, Esq.

    Facsimile
number: (303) 777-3823

    

    
      	
              (b)    
       

            	
              to
      Falcon Parties:

            

    

     

    c/o
Falcon Oil & Gas Ltd.

    1875
Lawrence Street, Suite 1400

    Denver,
Colorado  80202

    

    Attention:
Chief Financial Officer

    Facsimile
number: (303) 572-8927

    

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

    

    Aird
& Berlis LLP

    Brookfield
Place, 181 Bay Street

    Suite
1800, Box 754

    Toronto,
Ontario

    M5J
2T9

    

    Attention:
Daniel N. Bloch

    Facsimile
number: (416) 863-1515

    

    or to
such other address as any Party hereto may, from time to time, designate in
writing delivered in a like manner.  If delivered or sent by
facsimile, Notice shall be deemed delivered 

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    -30-

     

     

    on the
date of delivery or facsimile transmission, unless delivered or transmitted
after 4:00 p.m. on a Business Day or on a day which is not a Business Day,
in which event Notice shall be deemed delivered on the next Business
Day.

     

    
      	
              10.15  

            	
              Confidentiality

            

    

     

    PetroHunter
Parties and Falcon Parties agree that:

     

    
      	
              (a)    
       

            	
              their
      respective officers, directors, partners, shareholders, employees, agents
      and representatives shall keep the existence of and the terms of this
      Agreement in strictest confidence;
and

            

    

     

    
      	
              (b)    
       

            	
              prior
      to making any press releases concerning the Transaction, each of them
      shall provide a copy of such press release to the other in advance of it
      being released.

            

    

     

    
      	
              10.16  

            	
              Successors
      and Assigns

            

    

     

    This
Agreement shall not be assignable by the Falcon Parties, or otherwise, without
the written consent of PetroHunter Parties, which shall not be unreasonably
withheld.

     

    
      	
              10.17  

            	
              Enurement

            

    

     

    All of
the covenants and agreements contained in this Agreement shall be binding upon
the Parties and their respective successors and permitted assigns and shall
enure to the benefit of and be enforceable by the Parties and their respective
successors and permitted assigns pursuant to the terms and conditions of this
Agreement.

     

    
      	
              10.18  

            	
              Language

            

    

     

    The
Parties hereto acknowledge that they have requested and consented that this
Agreement and all documents related hereto be drawn up in
English.  Les Parties aux présentes reconnaissent qu’elles ont exigé
cette convention ainsi que tous les documents qui y ont rapport soient rédigés
en anglais, ce a quoi les parties aux présentes consentent.

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
Parties hereto have duly executed this agreement under seal as of the day and
year first above written.

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        
                                                                                          
                                                                                            
                                                                                              
                                                                                                
                                                                                                  
                                                                                                    	 
      	 
      PETROHUNTER
      ENERGY CORPORATION
	 Per:	
                                                                                                            /s/
      Martin B. Oring

                                                                                                          
	 	
                                                                                                            Name:   Martin
      B. Oring

                                                                                                          
	 	
                                                                                                            Title:     Chairman
      and CEO

                                                                                                          
	 	 
      
	 Per:	
                                                                                                            /s/
      Kyle L. WhiteJohnson

                                                                                                          
	 	
                                                                                                            Name:   Kyle
      L. WhiteJohnson

                                                                                                          
	 	
                                                                                                            Title:     Executive
      Vice President

                                                                                                          
	 	
                                                                                                            I/We
      have the authority to bind the corporation.

                                                                                                          
	 
      	 	 
      
	 
      	 
      PETROHUNTER
      OPERATING COMPANY
	 Per:	
                                                                                                            /s/
      Martin B. Oring

                                                                                                          
	 	
                                                                                                            Name:   Martin
      B. Oring

                                                                                                          
	 	
                                                                                                            Title:     Chairman
      and CEO

                                                                                                          
	 	 
      
	 Per:	
                                                                                                            /s/
      Kyle L. WhiteJohnson

                                                                                                          
	 	
                                                                                                            Name:   Kyle
      L. WhiteJohnson

                                                                                                          
	 	
                                                                                                            Title:     Executive
      Vice President

                                                                                                          
	 	
                                                                                                            I/We
      have the authority to bind the corporation.

                                                                                                          
	 
      	 	 
      
	 
      	 
      SWEETPEA
      PETROLEUM PTY LTD.
	 Per:	
                                                                                                            /s/
      Martin B. Oring

                                                                                                          
	 	
                                                                                                            Name:   Martin
      B. Oring

                                                                                                          
	 	
                                                                                                            Title:     Director

                                                                                                          
	 	 
      
	 Per:	
                                                                                                            /s/
      Kyle L. WhiteJohnson

                                                                                                          
	 	
                                                                                                            Name:   Kyle
      L. WhiteJohnson

                                                                                                          
	 	
                                                                                                            Title:     Director
      and Secretary

                                                                                                          
	 	
                                                                                                            I/We
      have the authority to bind the corporation.

                                                                                                          
	 
      	 	
                                                                                                             

                                                                                                          

                                                                                                  

                                                                                                

                                                                                              

                                                                                            

                                                                                          

                                                                                        

                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

      -2-

       

    

    
      	
            	 
      	 
      
	 
      	 
      	
              FALCON
      OIL & GAS LTD.

            
	
              Per:

            	
              /s/
      Marc A. Bruner

            
	 
      	
              Name:  Marc
      A. Bruner

            
	 
      	
              Title:     CEO

            
	 
      	 
      
	
              Per:

            	
              /s/
      Evan L. Wasoff

            
	 
      	
              Name:  Evan
      L. Wasoff

            
	 
      	
              Title:    Chief
      Financial Officer

            
	
              I/We
      have the authority to bind the corporation.

            
	 
      	 
      	 
      
	 
      	 
      	
              FALCON
      OIL & GAS USA, INC.

            
	
              Per:

            	
              /s/
      Marc A. Bruner

            
	 
      	
              Name:  Marc
      A. Bruner

            
	 
      	
              Title:    President

            
	 
      	 
      
	
              Per:

            	
              /s/
      Evan L. Wasoff

            
	 
      	
              Name:  Evan
      L. Wasoff

            
	 
      	
              Title:    VP/Sec

            
	
              I/We
      have the authority to bind the corporation.

            
	 
      	 
      	 
      
	 
      	 
      	
              FALCON
      OIL & GAS AUSTRALIA TY
      LTD

            
	
              Per:

            	
              /s/
      Carmen J. Lotito

            
	 
      	
              Name:     Carmen
      J. Lotito

            
	 
      	
              Title:       Director

            
	 
      	 
      
	
              Per:

            	
              /s/
      Evan L. Wasoff

            
	 
      	
              Name:     Evan
      L. Wasoff

            
	 
      	
              Title:       Director

            
	
              I/We
      have the authority to bind the
corporation.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00159-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00159-of-00352.parquet"}]]