Document:

Exhibit 10.3

    

    Exhibit
      10.3

    

    THIS
      AMENDMENT IS DATED JANUARY 9, 2006 TO THE ORIGINAL AGREEMENT DATED AUGUST 12,
      2005, BELOW. 

    

    DEBENTURE
      REGISTRATION
      RIGHTS AGREEMENT

    

    DENBENTURE
      REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August 12, 2005,
      by and between Hyperdynamics
      Corp..,
      a
      company
      organized under the laws of state of Delaware, (the “Company”), and the
      undersigned Holder (the “Holder”).

    

    WHEREAS,
      upon the terms and subject to the conditions of the Subscription Agreement
      between the Holder and the Company (the “Subscription Agreement”), the Company
      has agreed to issue and sell to the Holder convertible debentures of the Company
      (the “Debentures”), which will be convertible into shares of the Company's
      common stock, $.001 par value per share (the “Common Stock”), of the Company.

    

    WHEREAS,
      to induce the Holder to execute and deliver the Subscription Agreement, Warrant
      Agreement, Security Agreement, Irrevocable Transfer Agent Agreement and the
      Debenture Agreement, the Company has agreed to provide certain registration
      rights under the Securities Act of 1933, as amended, and the rules and
      regulations thereunder, or any similar successor statute (collectively, the
      “1933 Act”), and applicable state securities laws, with respect to the shares of
      Common Stock issuable pursuant to the Subscription Agreement, Warrant Agreement
      and Debenture Agreement.

    

    NOW,
      THEREFORE, in consideration of the foregoing premises and the mutual covenants
      contained hereinafter and other good and valuable consideration, the receipt
      and
      sufficiency of which are hereby acknowledged, the Company and the Holder hereby
      agree as follows:

    

    

    1.  
      DEFINITIONS.

    

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

    

    a.
      “Closing Date” shall mean the date in the preamble of this
      Agreement.

    

    b.
      “Debenture” or "Debentures" mean the convertible debenture issued by the Company
      to the Holder.

    

    c.
      “Holder” shall mean Dutchess Private Equities Fund, II, LP

    

    d.
      "Effective Date" shall mean the date the SEC has declared the Registration
      Statement effective and the Company has filed all necessary amendments,
      including the letter to request accelerated effectiveness and the following
      Prospectus covering the resale of Shares.

    

    e.
      "Face
      Amount" means one million five hundred thousand dollars ($1,500,000) to be
      invested by The Holder.

    

    f.
      "Filing Date" shall mean the date the Registration Statement has been filed
      with
      the SEC and no stop order of acceptance has been issued by the SEC.

    

    g.
      “Person” means a corporation, a limited liability company, an association, a
      partnership, an organization, a business, an individual, a governmental or
      political subdivision thereof or a governmental agency. 

    

    h.
      "Potential Material Event" means any of the following: (i) the possession by
      the
      Company of material information not ripe for disclosure in a Registration
      Statement, which shall be evidenced by determinations in good faith by the
      Board
      of Directors of the Company that disclosure of such information in the
      Registration Statement would be detrimental to the business and affairs of
      the
      Company, or (ii) any material engagement or activity by the Company which would,
      in the good faith determination of the Board of Directors of the Company, be
      adversely affected by disclosure in a Registration Statement at such time,
      which
      determination shall be accompanied by a good faith determination by the Board
      of
      Directors of the Company that the Registration Statement would be materially
      misleading absent the inclusion of such information.

    

    i.
      “Principal Market” means either The American Stock Exchange, Inc., The New York
      Stock Exchange, Inc., the Nasdaq National Market, The Nasdaq SmallCap Market,
      the National Association of Securities Dealer’s, Inc. OTC electronic bulletin
      board, whichever is the principal market on which the Common Stock is listed.
      

     

    j.
      “Register,” “Registered,” and “Registration” refer to a registration effected by
      preparing and filing with
      the
      United States Securities and Exchange Commission (the "SEC") one
      or
      more Registration Statements in compliance with the 1933 Act and pursuant to
      Rule 415 under the 1933 Act or any successor rule providing for offering
      securities on a continuous basis ("Rule 415"), and effectiveness
      of such Registration Statement(s).

    

    k.
      “Registrable Securities” means the shares of Common Stock issued or issuable (i)
      pursuant to the Subscription Agreement, (ii) any shares of capital stock issued
      or issuable with respect to the such shares of Common Stock and Warrants, if
      any, as a result of any stock split, stock dividend, recapitalization, exchange
      or similar event or otherwise, which have not been (x) included in a
      Registration Statement that has been declared effective by the SEC, or (y)
      sold
      under circumstances meeting all of the applicable conditions of Rule 144 (or
      any
      similar provision then in force) under the 1933 Act. 

    

    l.
      “Registration Statement” means a registration statement of the Company filed
      under the 1933 Act.

    All
      capitalized terms used in this Agreement and not otherwise defined herein shall
      have the same meaning ascribed to them as in the Subscription Agreement or
      Debenture Agreement.

    

    2. REGISTRATION.

    

    a. Mandatory
      Registration. Within fifteen (15) days of the Company filing its Form 10K for
      2005, but in no event later than October 15, 2005 (the "Filing Deadline"),
      the
      Company shall prepare and file with the SEC a Registration Statement or
      Registration Statements (as is necessary) on Form SB-2 (or, if such form is
      unavailable for such a registration, on such other form as is available for
      such
      a registration), covering the resale of all of the Registrable Securities,
      which
      Registration Statement(s) shall state that, in accordance with Rule 416
      promulgated under the 1933 Act, such Registration Statement also covers such
      indeterminate number of additional shares of Common Stock as may become issuable
      upon stock splits, stock dividends or similar transactions. The Company shall
      initially register for resale an amount of shares of Common Stock which would
      be
      issuable on the date preceding the filing of the Registration Statement based
      on
      the Fixed Conversion Price (as defined in the Debenture Agreement) of the
      Company’s Common Stock on such date and the amount reasonably calculated that
      represents the number of shares issuable pursuant to the terms of the Offering,
      including those Shares underlying the Warrant Agreement. The total amount of
      Shares shall be both 1) the amount specified in the Warrant Agreement and 2)
      the
      Face Amount of the Debenture divided by the Fixed Conversion Price. For example,
      if the Fixed Conversion Price is one dollar (1.00) per share, the amount of
      Shares to be registered will be one million five hundred thousand (1,500,000)
      shares. (1,500,000/1.00). In the event the Company cannot register sufficient
      shares of Common Stock, due to the remaining number of authorized shares of
      Common Stock being insufficient, the Company will use its best efforts to
      register the maximum number of shares it can based on the remaining balance
      of
      authorized shares and will use its best efforts to increase the number of its
      authorized shares as soon as reasonably practicable.

    

    

    b. The
      Company shall use its best efforts to have the Registration Statement filed
      with
      the SEC by the Filing Deadline. If the Registration Statement covering the
      Registrable Securities required to be filed by the Company pursuant to Section
      2(a) hereof is not filed by the Filing Deadline,, then the Company shall pay
      the
      Holder the sum of two percent (2%) of the Face Amount of the Debentures,
      outstanding as liquidated damages, and not as a penalty, for each thirty (30)
      calendar day period, pro rata, compounded daily, following the Filing Deadline
      until the Registration Statement is filed. In addition, for each thirty (30)
      calendar period the Registration Statement goes without filing, the Conversion
      Price of the Debentures will decrease by ten percent (10%). For example, in
      the
      event that upon the one (1) day after the Filing Deadline, the Registration
      Statement has not been filed with the SEC, the Conversion Price shall decrease
      by ten cents (.10) per share. (1.00*10%=.10).

    

    Notwithstanding
      the foregoing, the amounts payable by the Company pursuant to this Section
      shall
      not be payable to the extent any delay in the filing of the Registration
      Statement occurs because of an act of, or a failure to act or to act timely
      by
      the Holder. The damages set forth in this Section shall continue until the
      obligation is fulfilled and shall be paid within three (3) business days after
      each thirty (30) day period, or portion thereof, until the Registration
      Statement is filed. Failure of the Company to make payment within said three
      (3)
      business days shall be considered a default.  

    

    The
      Company acknowledges that its failure to have the Registration Statement filed
      by the Filing Deadline will cause the Holder to suffer damages in an amount
      that
      will be difficult to ascertain. Accordingly, the parties agree that it is
      appropriate to include in this Agreement a provision for liquidated damages.
      The
      parties acknowledge and agree that the liquidated damages provision set forth
      in
      this section represents the parties’ good faith effort to quantify such damages
      and, as such, agree that the form and amount of such liquidated damages are
      reasonable and will not constitute a penalty. The payment of liquidated damages
      shall not relieve the Company from its obligations to register the Common Stock
      and deliver the Common Stock pursuant to the terms of this Agreement, the
      Subscription Agreement and the Debenture.

    

    c. The
      Company shall use its best efforts to have the Registration Statement declared
      effective by the SEC within ninety (90) calendar days after the Filing Date.
      If
      the Registration Statement covering the Registrable Securities required to
      be
      filed by the Company pursuant to Section 2(a) hereof has
      not
become
      effective within ninety (90) calendar days following the Filing Date, then
      the
      Company shall pay the Holder the sum of two percent (2%) of the Face Amount
      as
      liquidated damages and not as a penalty for each thirty (30) calendar day
      period, pro rata, compounded daily, following the one ninety (90) calendar
      day
      period until the Registration Statement is declared effective.

    

    If
      the
      Registration Statement covering the Registrable Securities required to be filed
      by the Company pursuant to Section 2(a) hereof has
      become
      effective, but after the effective date the Holder’s right to sell is suspended,
      then the Company shall pay the Holder the sum of two percent (2%) of the Face
      Amount plus interest and penalties due to the Holder for the Registrable
      Securities pursuant to the Subscription Agreement for each thirty (30) calendar
      day period, pro rata, compounded daily, following the suspension until such
      suspension ceases. 

    

      Notwithstanding
      the foregoing, the amounts payable by the Company pursuant to this Section
      shall
      not be payable to the extent any delay in the effectiveness of the Registration
      Statement occurs because of an act of, or a failure to act or to act timely
      by
      the Holder. The damages set forth in this Section shall continue until the
      obligation is fulfilled and shall be paid within three (3) business days after
      each thirty (30) day period, or portion thereof, until the Registration
      Statement is declared effective or such suspension is released. Failure of
      the
      Company to make payment within said three (3) business days shall be considered
      a default.  

    

    The
      Company acknowledges that its failure to have the Registration Statement
become
      effective within said ninety (90) calendar day period or to permit the
      suspension of the effectiveness of the Registration Statement, will cause the
      Holder to suffer damages in an amount that will be difficult to ascertain.
      Accordingly, the parties agree that it is appropriate to include in this
      Agreement a provision for liquidated damages. The parties acknowledge and agree
      that the liquidated damages provision set forth in this section represents
      the
      parties’ good faith effort to quantify such damages and, as such, agree that the
      form and amount of such liquidated damages are reasonable and will not
      constitute a penalty. The payment of liquidated damages shall not relieve the
      Company from its obligations to register the Common Stock and deliver the Common
      Stock pursuant to the terms of this Agreement, the Subscription Agreement and
      the Debenture.

    

    d.
       The
      Company agrees not to include any other securities, in this Registration
      Statement without Holder prior written consent, unless for the
      Holder. Furthermore,
      the Company agrees that it will not file any other Registration Statement,
      including those on Form S-8, for other securities (other than those for existing
      option holders, strategic partners or in connection with a merger or
      acquisition), until three hundred and sixty (360) calendar days after the
      Effective Date unless it has written approval from the Holder. Failure to obtain
      written approval from the Holder will cause the Holder to suffer damages that
      will be difficult to ascertain. Accordingly, the parties agree that it is
      appropriate to include a provision for liquidated damages and the Company agrees
      to pay, the Holder the sum of two percent (2%) of the Face Amount as liquidated
      damages and not as a penalty for each thirty (30) calendar day period, pro
      rata,
      compounded daily, until the unauthorized Registration Statement is
      withdrawn.

    3. RELATED
      OBLIGATIONS.

    

    At
      such
      time as the Company is obligated to prepare and file a Registration Statement
      with the SEC pursuant to Section 2(a), the Company will use its best efforts
      to
      effect the registration of the Registrable Securities in accordance with the
      intended method of disposition thereof and, with respect thereto, the Company
      shall have the following obligations:

     

    
      a.
        The
        Company shall use its best efforts to cause such Registration Statement relating
        to the Registrable Securities to become effective within ninety (90) calendar
        days after the date and shall keep such Registration Statement effective
        pursuant to Rule 415 until the date on which (A) the Holder shall have sold
        all
        the Registrable Securities and (B) the Holder has no right to convert the
        Shares
        it owns into Common Stock under the Subscription Agreement, Debenture Agreement
        or Warrant Agreement, respectively (the "Registration Period"), which
        Registration Statement (including any amendments or supplements thereto and
        prospectuses contained therein) shall not contain any untrue statement of
        a
        material fact or omit to state a material fact required to be stated therein,
        or
        necessary to make the statements therein, in light of the circumstances in
        which
        they were made, not misleading. The Company shall respond to any and all
        SEC
        comments or correspondence, whether written or oral, direct or indirect,
        formal
        or informal ("Comments"), within seven (7) business days of receipt by the
        Company of such Comments. If the Company fails to respond within seven (7)
        business days of receipt of SEC Comments, the Company shall pay to the Holder
        an
        amount equal to two percent (2%) per month, on a pro rata basis, compounded
        daily, of the Face Amount as liquidated damages and not as a penalty;
provided
        that the
        seven (7) business day period provided herein shall be extended as may be
        required by delays caused by Holder's counsel pursuant to paragraph 3g below,
        and, provided
        further, that
        such
        seven (7) business day period shall be extended two (2) business days for
        responses to SEC staff accounting comments. The Company shall cause the
        Registration Statement relating to the Registrable Securities to become
        effective no later than two (2) business days after notice from the SEC that
        the
        Registration Statement has been cleared of all comments. Failure to do so
        will
        result in the Face Amount on the Debentures to be increased by five percent
        (5%)
        per calendar day the Company does not request acceleration from the SEC,
        as
        liquidated damages. 

    

     

    b. The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
      be
      necessary to keep such Registration Statement effective during the Registration
      Period, and, during such period, comply with the provisions of the 1933 Act
      with
      respect to the disposition of all Registrable Securities of the Company covered
      by such Registration Statement until such time as all of such Registrable
      Securities shall have been disposed of in accordance with the intended methods
      of disposition by the Holder thereof as set forth in such Registration
      Statement. In the event the number of shares of Common Stock available under
      a
      Registration Statement filed pursuant to this Agreement is at any time
      insufficient to cover all of the Registrable Securities, the Company shall
      amend
      such Registration Statement, or file a new Registration Statement (on the short
      form available therefor, if applicable), or both, so as to cover all of the
      Registrable Securities, in each case, as soon as practicable, but in any event
      within thirty (30) calendar days after the necessity therefor arises (based
      on
      the then Purchase Price of the Common Stock and other relevant factors on which
      the Company reasonably elects to rely), assuming the Company has sufficient
      authorized shares at that time, and if it does not, within thirty (30) calendar
      days after such shares are authorized. The Company shall use it best efforts
      to
      cause such amendment and/or new Registration Statement to become effective
      as
      soon as practicable following the filing thereof. 

    

    Prior
      to
      conversion of all the Shares, if at any
      time
      the
      conversion of all the Shares outstanding would result in an insufficient number
      of authorized shares of Common Stock being available to cover all the
      conversions, or in the event, that Holder deems that the Shares authorized
      will
      become insufficient, then in such event, the Company will move to call and
      hold
      a shareholder’s meeting within thirty (30) calendar days of such event for the
      sole purpose of authorizing additional shares of Common Stock to facilitate
      the
      conversions. In such an event the Company shall recommend to all shareholders
      and management of the Company to vote their shares in favor of increasing the
      authorized number of shares of Common Stock. The Company represents and warrants
      that under no circumstances will it deny or prevent Holder’s right to convert
      the Shares as permitted under the terms of this Subscription Agreement or this
      Registration Rights Agreement. The Holder retains the right to request
      additional shares upon the determination the company may not be able to
      facilitate conversions in the future.

    

    c The
      Company shall furnish to the Holder whose Registrable Securities are included
      in
      any Registration Statement and its legal counsel without charge (i) promptly
      after the same is prepared and filed with the SEC at least one copy of such
      Registration Statement and any amendment(s) thereto, including financial
      statements and schedules, all documents incorporated therein by reference and
      all exhibits, the prospectus included in such Registration Statement (including
      each preliminary prospectus) and, with regards to such Registration
      Statement(s), any correspondence by or on behalf of the Company to the SEC
      or
      the staff of the SEC and any correspondence from the SEC or the staff of the
      SEC
      to the Company or its representatives, (ii) upon the effectiveness of any
      Registration Statement, a copy of the prospectus included in such Registration
      Statement and all amendments and supplements thereto (or such other number
      of
      copies as the Holder may reasonably request) and (iii) such other documents,
      including copies of any preliminary or final prospectus, as the Holder may
      reasonably request from time to time in order to facilitate the disposition
      of
      the Registrable Securities. The Company filing the documents described in this
      paragraph through EDGAR shall constitute delivery.

     

    d. The
      Company shall use reasonable efforts to (i) register and qualify the Registrable
      Securities covered by a Registration Statement under the applicable securities
      or "blue sky" laws of such states of the United States as specified by the
      Holder, (ii) prepare and file in those jurisdictions, such amendments (including
      post-effective amendments) and supplements to such registrations and
      qualifications as may be necessary to maintain the effectiveness thereof during
      the Registration Period, (iii) take such other actions as may be necessary
      to
      maintain such registrations and qualifications in effect at all times during
      the
      Registration Period, and (iv) take all other actions reasonably necessary or
      advisable to qualify the Registrable Securities for sale in such jurisdictions;
      provided, however, that the Company shall not be required in connection
      therewith or as a condition thereto to (x) qualify to do business in any
      jurisdiction where it would not otherwise be required to qualify but for this
      Section 3(d), (y) subject itself to general taxation in any such jurisdiction,
      or (z) file a general consent to service of process in any such jurisdiction.
      The Company shall promptly notify Holder who holds Registrable Securities of
      the
      receipt by the Company of any notification with respect to the suspension of
      the
      registration or qualification of any of the Registrable Securities for sale
      under the securities or “blue sky” laws of any jurisdiction in the United States
      or its receipt of actual notice of the initiation or threatening of any
      proceeding for such purpose.

    

    e.
      As
      promptly as practicable after becoming aware of such event, the Company shall
      notify Holder in writing of the happening of any event as a result of which
      the
      prospectus included in a Registration Statement, as then in effect, includes
      an
      untrue statement of a material fact or omission to state a material fact
      required to be stated therein or necessary to make the statements therein,
      in
      light of the circumstances under which they were made, not misleading,
      (“Registration Default”) and use all diligent efforts to promptly prepare a
      supplement or amendment to such Registration Statement and take any other
      necessary steps to cure the Registration Default, (which, if such Registration
      Statement is on Form S-3, may consist of a document to be filed by the Company
      with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act
      (as
      defined below) and to be incorporated by reference in the prospectus) to correct
      such untrue statement or omission, and deliver ten (10) copies of such
      supplement or amendment to Holder (or such other number of copies as Holder
      may
      reasonably request). Failure to cure the Registration Default within five (5)
      business days shall result in the Company paying liquidated damages of two
      percent (2%) of the Face Amount for each thirty (30) calendar day period or
      portion thereof, beginning on the date of suspension. The Company shall also
      promptly notify Holder in writing (i) when a prospectus or any prospectus
      supplement or post-effective amendment has been filed, and when a Registration
      Statement or any post-effective amendment has become effective (notification
      of
      such effectiveness shall be delivered to Holder by facsimile on the same day
      of
      such effectiveness and by overnight mail), (ii) of any request by the SEC for
      amendments or supplements to a Registration Statement or related prospectus
      or
      related information, (iii) of the Company's reasonable determination that a
      post-effective amendment to a Registration Statement would be appropriate,
      (iv)
      in the event the Registration Statement is no longer effective or, (v) the
      Registration Statement is stale for a period of more than five (5) Trading
      Days
      as a result of the Company’s failure to timely file its financials.

    

    The
      Company acknowledges that its failure to cure the Registration Default within
      three (3) business days will cause the Holder to suffer damages in an amount
      that will be difficult to ascertain. Accordingly, the parties agree that it
      is
      appropriate to include in this Agreement a provision for liquidated damages.
      The
      parties acknowledge and agree that the liquidated damages provision set forth
      in
      this section represents the parties’ good faith effort to quantify such damages
      and, as such, agree that the form and amount of such liquidated damages are
      reasonable and will not constitute a penalty. 

    

    It
      is the
      intention of the parties that interest payable under any of the terms of this
      Agreement shall not exceed the maximum amount permitted under any applicable
      law. If a law, which applies to this Agreement which sets the maximum interest
      amount, is finally interpreted so that the interest in connection with this
      Agreement exceeds the permitted limits, then: (1) any such interest shall be
      reduced by the amount necessary to reduce the interest to the permitted limit;
      and (2) any sums already collected (if any) from the Company which exceed the
      permitted limits will be refunded to the Company. The Holder may choose to
      make
      this refund by reducing the amount that the Company owes under this Agreement
      or
      by making a direct payment to the Company. If a refund reduces the amount that
      the Company owes the Holder, the reduction will be treated as a partial payment.
      In case any provision of this Agreement is held by a court of competent
      jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
      such provision shall be adjusted rather than voided, if possible, so that it
      is
      enforceable to the maximum extent possible, and the validity and enforceability
      of the remaining provisions of this Agreement will not in any way be affected
      or
      impaired thereby. 

    

    f.
      The
      Company shall use its best efforts to prevent the issuance of any stop order
      or
      other suspension of effectiveness of a Registration Statement, or the suspension
      of the qualification of any of the Registrable Securities for sale in any
      jurisdiction and, if such an order or suspension is issued, to obtain the
      withdrawal of such order or suspension at the earliest possible moment and
      to
      notify Holder who holds Registrable Securities being sold of the issuance of
      such order and the resolution thereof or its receipt of actual notice of the
      initiation or threat of any proceeding for such purpose.

    

    g. The
      Company shall permit Holder and a single firm of counsel, designated as selling
      shareholders' counsel by the Holder who hold a majority of the Registrable
      Securities being sold, to review and comment upon a Registration Statement
      and
      all amendments and supplements thereto at least seven
      (7)
      business days prior to their filing with the SEC, and not file any document
      in a
      form to which such counsel reasonably objects.
      The
      Company shall not submit to the SEC a request for acceleration of the
      effectiveness of a Registration Statement or file with the SEC a Registration
      Statement or any amendment or supplement thereto without the prior approval
      of
      such counsel, which approval shall not be unreasonably withheld.

    

    h. At
      the
      request of any Holder, the Company shall cause to be furnished to Holder, on
      the
      date of the effectiveness of a Registration Statement, an opinion, dated as
      of
      such date, of counsel representing the Company for purposes of such Registration
      Statement, in the form of Exhibit D attached to the Subscription
      Agreement.

    

    i. The
      Company shall make available for inspection by (i) Holder and (ii) one firm
      of
      attorneys and one firm of accountants or other agents retained by the Holder
      (collectively, the "Inspectors") all pertinent financial and other records,
      and
      pertinent corporate documents and properties of the Company (collectively,
      the
“Records”), as shall be reasonably deemed necessary by each Inspector, and cause
      the Company's officers, directors and employees to supply all information which
      any Inspector may reasonably request; provided, however, that each Inspector
      shall hold in strict confidence and shall not make any disclosure (except to
      a
      Holder) or use of any Record or other information which the Company determines
      in good faith to be confidential, and of which determination the Inspectors
      are
      so notified, unless (a) the disclosure of such Records is necessary to avoid
      or
      correct a misstatement or omission in any Registration Statement or is otherwise
      required under the 1933 Act, (b) the release of such Records is ordered pursuant
      to a final, non-appealable subpoena or order from a court or government body
      of
      competent jurisdiction, or (c) the information in such Records has been made
      generally available to the public other than by disclosure in violation of
      this
      or any other agreement of which the Inspector has knowledge. Holder agrees
      that
      it shall, upon learning that disclosure of such Records is sought in or by
      a
      court or governmental body of competent jurisdiction or through other means,
      give prompt notice to the Company and allow the Company, at its expense, to
      undertake appropriate action to prevent disclosure of, or to obtain a protective
      order for, the Records deemed confidential.

    

    j. The
      Company shall hold in confidence and not make any disclosure of information
      concerning a Holder provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws, (ii)
      the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in any Registration Statement, (iii) the release of
      such information is ordered pursuant to a subpoena or other final,
      non-appealable order from a court or governmental body of competent
      jurisdiction, or (iv) such information has been made generally available to
      the
      public other than by disclosure in violation of this Agreement or any other
      agreement. The Company agrees that it shall, upon learning that disclosure
      of
      such information concerning a Holder is sought in or by a court or governmental
      body of competent jurisdiction or through other means, give prompt written
      notice to Holder and allow Holder, at the Holder's expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, such information.

    

    k. The
      Company shall use its best efforts to secure designation and quotation of all
      the Registrable Securities covered by any Registration Statement on the
      Principal Market. If, despite the Company's best efforts, the Company is
      unsuccessful in satisfying the preceding sentence, it shall use its best efforts
      to cause all the Registrable Securities covered by any Registration Statement
      to
      be listed on each other national securities exchange and automated quotation
      system, if any, on which securities of the same class or series issued by the
      Company are then listed, if any, if the listing of such Registrable Securities
      is then permitted under the rules of such exchange or system. If, despite the
      Company's best efforts, the Company is unsuccessful in satisfying the two
      preceding sentences, it will use its best efforts to secure the inclusion for
      quotation with Pink Sheets, LLC. The Company shall pay all fees and expenses
      in
      connection with satisfying its obligation under this Section 3(k).

    

    l. The
      Company shall cooperate with the Holder to facilitate the timely preparation
      and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Holder may reasonably request and registered in such names of the
      Persons who shall acquire such Registrable Securities from the Holder, as the
      Holder may request.

    

    m. The
      Company shall provide a transfer agent for all the Registrable Securities not
      later than the Closing Date of the first Registration Statement filed pursuant
      hereto.

    

    n. If
      requested by the Holder holding a majority of the Registrable Securities, the
      Company shall (i) as soon as reasonably practical incorporate in a prospectus
      supplement or post-effective amendment such information as Holder reasonably
      determines should be included therein relating to the sale and distribution
      of
      Registrable Securities, including, without limitation, information with respect
      to the offering of the Registrable Securities to be sold in such offering;
      (ii)
      make all required filings of such prospectus supplement or post-effective
      amendment as soon as notified of the matters to be incorporated in such
      prospectus supplement or post-effective amendment; and (iii) supplement or
      make
      amendments to any Registration Statement if reasonably requested by
      Holder.

    

    o. The
      Company shall use its best efforts to cause the Registrable Securities covered
      by the applicable Registration Statement to be registered with or approved
      by
      such other governmental agencies or authorities as may be necessary to
      consummate the disposition of such Registrable Securities.

    

    p. Intentionally
      omitted.

    

    q. The
      Company shall otherwise use its best efforts to comply with all applicable
      rules
      and regulations of the SEC in connection with any registration
      hereunder.

    

    r. Within
      one (1) business day after the Registration Statement which includes Registrable
      Securities is declared effective by the SEC, the Company shall deliver, and
      shall cause legal counsel for the Company to deliver, to the transfer agent
      for
      such Registrable Securities, with copies to the Holder, confirmation that such
      Registration Statement has been declared effective by the SEC in the form
      attached hereto as Exhibit A. Failure to do so will result in the Face Amount
      on
      the Debentures to be increased by two percent (2%) per day, as liquidated
      damages.

    

    s. Subsequent
      to the SEC declared the Registration Statement cleared of all comments and
      the
      Company's acceptance of the effectiveness of the Registration Statement, the
      Company shall file a prospectus covering the resale of the Shares ("Prospectus")
      within two (2) trading days. In the event the Company does not file the
      Prospectus within two (2) trading days of the Effective Date, then the Company
      shall pay the Holder the sum of five percent (5%) of the Face Amount due to
      the
      Holder for each two (2) trading day period, pro rata, compounded daily,
      following the two (2) trading day period until the Prospectus is
      filed

    

    t. The
      Company shall take all other reasonable actions necessary to expedite and
      facilitate disposition by the Holder of Registrable Securities pursuant to
      a
      Registration Statement.

    

    4. OBLIGATIONS
      OF THE HOLDER.

    

    a. At
      least
      five (5) calendar days prior to the first anticipated filing date of a
      Registration Statement the Company shall notify Holder in writing of the
      information the Company requires from Holder. It shall be a condition precedent
      to the obligations of the Company to complete the registration pursuant to
      this
      Agreement with respect to the Registrable Securities of the Holder that Holder
      shall furnish in writing to the Company such information regarding itself,
      the
      Registrable Securities held by it and the intended method of disposition of
      the
      Registrable Securities held by it as shall reasonably be required to effect
      the
      registration of such Registrable Securities and shall execute such documents
      in
      connection with such registration as the Company may reasonably request. The
      Holder covenants and agrees that, in connection with any resale of Registrable
      Securities by it pursuant to a Registration Statement, it shall comply with
      the
      "Plan of Distribution" section of the current prospectus relating to such
      Registration Statement.

    

    b. The
      Holder, by Holder's acceptance of the Registrable Securities, agrees to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement
      hereunder.

    

    c. Holder
      agrees that, upon receipt of any notice from the Company of the happening of
      any
      event of the kind described in Section 3(f) or the first sentence of 3(e),
      Holder will immediately discontinue disposition of Registrable Securities
      pursuant to any Registration Statement(s) covering such Registrable Securities
      until Holder's receipt of the copies of the supplemented or amended prospectus
      contemplated by Section 3(f) or the first sentence of 3(e).

    

    5. EXPENSES
      OF REGISTRATION.

    

    All
      reasonable expenses, other than underwriting discounts and commissions, incurred
      in connection with registrations, filings or qualifications pursuant to Sections
      2 and 3, including, without limitation, all registration, listing and
      qualifications fees, printing and accounting fees, and fees and disbursements
      of
      counsel for the Company shall be paid by the Company.

    

    6. INDEMNIFICATION.

    

    In
      the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

    

    

    a.  To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend Holder who holds such Registrable Securities, the
      directors, officers, partners, employees, agents, representatives of, and each
      Person, if any, who controls Holder within the meaning of the 1933 Act or the
      Securities Exchange Act of 1934, as amended (the “1934 Act”), (each, an
“Indemnified Person”), against any losses, claims, damages, liabilities,
      judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid
      in
      settlement or expenses, joint or several (collectively, “Claims”), incurred in
      investigating, preparing or defending any action, claim, suit, inquiry,
      proceeding, investigation or appeal taken from the foregoing by or before any
      court or governmental, administrative or other regulatory agency, body or the
      SEC, whether pending or threatened, whether or not an indemnified party is
      or
      may be a party thereto ("Indemnified Damages"), to which any of them may become
      subject insofar as such Claims (or actions or proceedings, whether commenced
      or
      threatened, in respect thereof) arise out of or are based upon: (i) any untrue
      statement or alleged untrue statement of a material fact in a Registration
      Statement or any post-effective amendment thereto or in any filing made in
      connection with the qualification of the offering under the securities or other
      "blue sky" laws of any jurisdiction in which Registrable Securities are offered
      ("Blue Sky Filing"), or the omission or alleged omission to state a material
      fact required to be stated therein or necessary to make the statements therein,
      in light of the circumstances under which the statements therein were made,
      not
      misleading, (ii) any untrue statement or alleged untrue statement of a material
      fact contained in the final prospectus (as amended or supplemented, if the
      Company files any amendment thereof or supplement thereto with the SEC) or
      the
      omission or alleged omission to state therein any material fact necessary to
      make the statements made therein, in light of the circumstances under which
      the
      statements therein were made, not misleading, or (iii) any violation or alleged
      violation by the Company of the 1933 Act, the 1934 Act, any other law,
      including, without limitation, any state securities law, or any rule or
      regulation thereunder relating to the offer or sale of the Registrable
      Securities pursuant to a Registration Statement (the matters in the foregoing
      clauses (i) through (iii) being, collectively, "Violations"). Subject to the
      restrictions set forth in Section 6(c) with respect to the number of legal
      counsel, the Company shall reimburse the Holder and each such controlling
      person, promptly as such expenses are incurred and are due and payable, for
      any
      reasonable legal fees or other reasonable expenses incurred by them in
      connection with investigating or defending any such Claim. Notwithstanding
      anything to the contrary contained herein, the indemnification agreement
      contained in this Section 6(a): (i) shall not apply to a Claim arising out
      of or
      based upon a Violation which occurs in reliance upon and in conformity with
      information furnished in writing to the Company by any Indemnified Person
      expressly for use in connection with the preparation of the Registration
      Statement or any such amendment thereof or supplement thereto, if such
      prospectus were timely made available by the Company pursuant to Section 3(c);
      (ii) shall not be available to the extent such Claim is based on (a) a failure
      of the Holder to deliver or to cause to be delivered the prospectus made
      available by the Company or (b) the Indemnified Person's use of an incorrect
      prospectus despite being promptly advised in advance by the Company in writing
      not to use such incorrect prospectus; and (iii) shall not apply to amounts
      paid
      in settlement of any Claim if such settlement is effected without the prior
      written consent of the Company, which consent shall not be unreasonably
      withheld. Such indemnity shall remain in full force and effect regardless of
      any
      investigation made by or on behalf of the Indemnified Person and shall survive
      the resale of the Registrable Securities by the Holder pursuant to the
      Registration Statement.

    

    b.  In
      connection with any Registration Statement in which Holder is participating,
      Holder agrees to severally and not jointly indemnify, hold harmless and defend,
      to the same extent and in the same manner as is set forth in Section 6(a),
      the
      Company, each of its directors, each of its officers who signs the Registration
      Statement, each Person, if any, who controls the Company within the meaning
      of
      the 1933 Act or the 1934 Act (collectively and together with an Indemnified
      Person, an "Indemnified Party"), against any Claim or Indemnified Damages to
      which any of them may become subject, under the 1933 Act, the 1934 Act or
      otherwise, insofar as such Claim or Indemnified Damages arise out of or are
      based upon any Violation, in each case to the extent, and only to the extent,
      that such Violation occurs in reliance upon and in conformity with written
      information furnished to the Company by Holder expressly for use in connection
      with such Registration Statement; and, subject to Section 6(c), Holder will
      reimburse any legal or other expenses reasonably incurred by them in connection
      with investigating or defending any such Claim; provided, however, that the
      indemnity agreement contained in this Section 6(b) and the agreement with
      respect to contribution contained in Section 7 shall not apply to amounts paid
      in settlement of any Claim if such settlement is effected without the prior
      written consent of Holder, which consent shall not be unreasonably withheld;
      provided, further, however, that the Holder shall be liable under this Section
      6(b) for only that amount of a Claim or Indemnified Damages as does not exceed
      the net proceeds to Holder as a result of the sale of Registrable Securities
      pursuant to such Registration Statement. Such indemnity shall remain in full
      force and effect regardless of any investigation made by or on behalf of such
      Indemnified Party and shall survive the resale of the Registrable Securities
      by
      the Holder pursuant to the Registration Statement. Notwithstanding anything
      to
      the contrary contained herein, the indemnification agreement contained in this
      Section 6(b) with respect to any preliminary prospectus shall not inure to
      the
      benefit of any Indemnified Party if the untrue statement or omission of material
      fact contained in the preliminary prospectus were corrected on a timely basis
      in
      the prospectus, as then amended or supplemented.

    

    c.  Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, as
      the
      case may be; provided, however, that an Indemnified Person or Indemnified Party
      shall have the right to retain its own counsel with the fees and expenses to
      be
      paid by the indemnifying party, if, in the reasonable opinion of counsel
      retained by the indemnifying party, the representation by such counsel of the
      Indemnified Person or Indemnified Party and the indemnifying party would be
      inappropriate due to actual or potential differing interests between such
      Indemnified Person or Indemnified Party and any other party represented by
      such
      counsel in such proceeding. The indemnifying party shall pay for only one
      separate legal counsel for the Indemnified Persons or the Indemnified Parties,
      as applicable, and such counsel shall be selected by Holder holding a
      majority-in-interest of the Registrable Securities included in the Registration
      Statement to which the Claim relates, if the Holder is entitled to
      indemnification hereunder, or the Company, if the Company is entitled to
      indemnification hereunder, as applicable. The Indemnified Party or Indemnified
      Person shall cooperate fully with the indemnifying party in connection with
      any
      negotiation or defense of any such action or claim by the indemnifying party
      and
      shall furnish to the indemnifying party all information reasonably available
      to
      the Indemnified Party or Indemnified Person which relates to such action or
      claim. The indemnifying party shall keep the Indemnified Party or Indemnified
      Person fully appraised at all times as to the status of the defense or any
      settlement negotiations with respect thereto. No indemnifying party shall be
      liable for any settlement of any action, claim or proceeding effected without
      its written consent, provided, however, that the indemnifying party shall not
      unreasonably withhold, delay or condition its consent. No indemnifying party
      shall, without the consent of the Indemnified Party or Indemnified Person,
      consent to entry of any judgment or enter into any settlement or other
      compromise which does not include as an unconditional term thereof the giving
      by
      the claimant or plaintiff to such Indemnified Party or Indemnified Person of
      a
      release from all liability in respect to such Claim. Following indemnification
      as provided for hereunder, the indemnifying party shall be surrogated to all
      rights of the Indemnified Party or Indemnified Person with respect to all third
      parties, firms or corporations relating to the matter for which indemnification
      has been made. The failure to deliver written notice to the indemnifying party
      within a reasonable time of the commencement of any such action shall not
      relieve such indemnifying party of any liability to the Indemnified Person
      or
      Indemnified Party under this Section 6, except to the extent that the
      indemnifying party is prejudiced in its ability to defend such
      action.

    

    d.  The
      indemnification required by this Section 6 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills are received or Indemnified Damages are incurred.

    

    e.  The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar right of the Indemnified Party or Indemnified Person against
      the indemnifying party or others, and (ii) any liabilities the indemnifying
      party may be subject to pursuant to the law.

    

    7. CONTRIBUTION.

    

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 6 to the
      fullest extent permitted by law; provided, however, that: (i) no contribution
      shall be made under circumstances where the maker would not have been liable
      for
      indemnification under the fault standards set forth in Section 6; (ii) no seller
      of Registrable Securities guilty of fraudulent misrepresentation (within the
      meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
      from
      any seller of Registrable Securities who was not guilty of fraudulent
      misrepresentation; and (iii) contribution by any seller of Registrable
      Securities shall be limited in amount to the net amount of proceeds received
      by
      such seller from the sale of such Registrable Securities.

     

    8. 8.
      REPORTS UNDER THE EXHANGE ACT. 

     

     

    With
      a
      view to making available to the Investors the benefits of Rule 144 promulgated
      under the Securities Act or any similar rule or regulation of the SEC that
      may
      at any time permit the Investors to sell securities of the Company to the public
      without registration ("Rule 144") the Company agrees to: 

     

     

    (a)
      make
      and keep public information available, as those terms are understood and defined
      in Rule 144; 

     

     

    (b)
      file
      with the SEC in a timely manner all reports and other documents required of
      the
      Company under the Securities Act and the Exchange Act so long as the Company
      remains subject to such requirements (it being understood that nothing herein
      shall limit the Company's obligations under Section 4(c) of the Securities
      Purchase Agreement) and the filing of such reports and other documents as are
      required by the applicable provisions of Rule 144; and 

     

    (c)
      furnish to each Investor so long as such Investor owns Registrable Securities,
      promptly upon request, (i) a written statement by the Company that it has
      complied with the reporting requirements of Rule 144, the Securities Act and
      the
      Exchange Act, (ii) a copy of the most recent annual or quarterly report of
      the
      Company and such other reports and documents so filed by the Company, and (iii)
      such other information as may be reasonably requested to permit the Investors
      to
      sell such securities pursuant to Rule 144 without registration. 

    

    9. NO
      ASSIGNMENT OF REGISTRATION RIGHTS.

    

    The
      rights under this Agreement shall not be assignable. 

    

    10. AMENDMENT
      OF REGISTRATION RIGHTS.

    

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and Holder of
      the
      Registrable Securities. Any amendment or waiver effected in accordance with
      this
      Section 10 shall be binding upon Holder and the Company. No such amendment
      shall
      be effective to the extent that it applies to less than all of the Holders
      of
      the Registrable Securities. No consideration shall be offered or paid to any
      Person to amend or consent to a waiver or modification of any provision of
      any
      of this Agreement unless the same consideration also is offered to all of the
      parties to this Agreement.

    

    11. MISCELLANEOUS.

    

    a. A
      Person
      is deemed to be a Holder of Registrable Securities whenever such Person owns
      of
      record such Registrable Securities. If the Company receives conflicting
      instructions, notices or elections from two or more Persons with respect to
      the
      same Registrable Securities, the Company shall act upon the basis of
      instructions, notice or election received from the registered owner of such
      Registrable Securities.

    

    b. Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided a confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) day after deposit with a nationally recognized overnight
      delivery service, in each case properly addressed to the party to receive the
      same. The addresses and facsimile numbers for such communications shall
      be:

    

    If
      to the
      Company:

    Kent
      Watts

    Hyperdynamics
      Corp.

    9700
      Bissonnet, Suite 1700

    Houston,
      Texas 77036

    Telephone:
      (713) 353-9400

    Facsimile:
      (713) 353-9421

    

    If
      to the
      Holder:

    

    At
      the
      address listed in the Questionnaire.

    

    Each
      party shall provide five (5) business days prior notice to the other party
      of
      any change in address, phone number or facsimile number.

    

    c.
       Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

    

    d.
       All
      disputes arising under this agreement shall be governed by and interpreted
      in
      accordance with the laws of the Commonwealth of Massachusetts, without regard
      to
      principles of conflict of laws. The parties to this agreement will submit all
      disputes arising under this agreement to arbitration in Boston, Massachusetts
      before a single arbitrator of the American Arbitration Association (“AAA”). The
      arbitrator shall be selected by application of the rules of the AAA, or by
      mutual agreement of the parties, except that such arbitrator shall be an
      attorney admitted to practice law in the Commonwealth of Massachusetts. No
      party
      to this agreement will challenge the jurisdiction or venue provisions as
      provided in this section. 

    

    e.
       This
      Agreement and the Transaction Documents (as
      defined in the Subscription Agreement)
      constitute the entire agreement among the parties hereto with respect to the
      subject matter hereof and thereof. There are no restrictions, promises,
      warranties or undertakings, other than those set forth or referred to herein
      and
      therein.

    

    f. This
      Agreement and the Transaction Documents supersede all prior agreements and
      understandings among the parties hereto with respect to the subject matter
      hereof and thereof.

    

    g. The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

    

    h.
       This
      Agreement may be executed in two or more counterparts, all of which taken
      together shall constitute one instrument. Execution and delivery of this
      Agreement by exchange of facsimile copies bearing the facsimile signature of
      a
      party shall constitute a valid and binding execution and delivery of this
      Agreement by such party. Such facsimile copies shall constitute enforceable
      original documents.

    

    i. Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

    

    j. All
      consents and other determinations to be made by the Holder pursuant to this
      Agreement shall be made, unless otherwise specified in this Agreement, by Holder
      holding a majority of the Registrable Securities.

    

    k. The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party.

    12.
      Waiver

    

    The
      Holder's delay or failure at any time or times hereafter to require strict
      performance by Company of any undertakings, agreements or covenants shall not
      waiver, affect, or diminish any right of the Holder under this Agreement to
      demand strict compliance and performance herewith. Any waiver by the Holder
      of
      any Event of Default shall not waive or affect any other Event of Default,
      whether such Event of Default is prior or subsequent thereto and whether of
      the
      same or a different type. None of the undertakings, agreements and covenants
      of
      the Company contained in this Agreement, and no Event of Default, shall be
      deemed to have been waived by the Holder, nor may this Agreement be amended,
      changed or modified, unless such waiver, amendment, change or modification
      is
      evidenced by an instrument in writing specifying such waiver, amendment, change
      or modification and signed by the Holder. 

    

    13.
      Payment of Penalties

    

    Any
      accrued penalties incurred herein by the Company for failure to act in a timely
      manner, as described in this Agreement, shall be charged to the Face Amount
      of
      the Debenture (as defined in the Debenture), unless specifically noted
      otherwise.

    

    14.
      Waiver of Jury Trial. 

    

    AS
      A
      MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE
      PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
      RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
      ASSOCIATED WITH THIS TRANSACTION. 

    

    *
      *
      *

    

    IN
      WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
      to
      be duly executed as of the day and year first above written. Duly authorized
      to
      sign on behalf of:

    

    HYPERDYNAMICS
      CORP.

    

    

    By: ____________________________________

    Name:
      Kent Watts

    Title: Chief
      Executive Officer

    

    DUTCHESS
      PRIVATE EQUITIES FUND, II, L.P.

    BY
      ITS
      GENERAL PARTNER DUTCHESS 

    CAPITAL
      MANAGEMENT, LLC 

    

    By:__________________________________        Name:
      Douglas H. Leighton

    Title:
      A
      Managing Member 

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    EXHIBIT
      A

    

    FORM
      OF
      NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

    

    Date:
      __________

    [TRANSFER
      AGENT]

    

    Re: Hyperdynamics
      Corp.

    

    Ladies
      and Gentlemen:

    

    We
      are
      counsel to Hyperdynamics
      Corp.,
      a
      Delaware corporation (the "Company"), and have represented the Company in
      connection with that certain Subscription Agreement (the "Subscription
      Agreement") entered into by and among the Company and _________________________
      (the "Holder") pursuant to which the Company has agreed to issue to the Holder
      shares of the Company's common stock, $.001 par value per share (the "Common
      Stock") on the terms and conditions set forth in the Subscription Agreement.
      Pursuant to the Subscription Agreement, the Company also has entered into a
      Registration Rights Agreement with the Holder (the "Registration Rights
      Agreement") pursuant to which the Company agreed, among other things, to
      register the Registrable Securities (as defined in the Registration Rights
      Agreement), including the shares of Common Stock issued or issuable under the
      Subscription Agreement under the Securities Act of 1933, as amended (the "1933
      Act"). In connection with the Company's obligations under the Registration
      Rights Agreement, on ____________ ___, 2005, the Company filed a Registration
      Statement on Form S- ___ (File No. 333-________) (the "Registration Statement")
      with the Securities and Exchange Commission (the "SEC") relating to the
      Registrable Securities which names the Holder as a selling shareholder
      thereunder.

    

    In
      connection with the foregoing, we advise you that [a
      member
      of the SEC's staff has advised us by telephone that the SEC has entered an
      order
      declaring the Registration Statement effective]
      [the
      Registration Statement has become effective]
      under
      the 1933 Act at [enter
      the time of effectiveness]
      on
      [enter
      the date of effectiveness]
      and to
      the best of our knowledge, after telephonic inquiry of a member of the SEC’s
      staff, no stop order suspending its effectiveness has been issued and no
      proceedings for that purpose are pending before, or threatened by, the SEC
      and
      the Registrable Securities are available for resale under the 1933 Act pursuant
      to the Registration Statement.

    

    Very
      truly yours,

    

    [Company
      Counsel]

    

    By: ____________________

    
      	
              cc:

            	
              [Holder]Exhibit 10.4

    Exhibit
      10.4

    

    

    ____________________

    

    Hyperdynamics
      Corp.

    ____________________

    

    

    

    

    

    This
      offering consists of $1,500,000 of the Company’s 5 Year Convertible

    Debentures
      convertible into the

    Company’s
      Common Stock.

    

    

    

    ____________________

    

    

    

    SUBSCRIPTION
      AGREEMENT

    

    

    

    ___________________

     

    
      
         

         

      

      
         

        
          

        

      

      
         

      

    

    THIS
      AMENDMENT IS DATED JANUARY 9, 2006 TO THE ORIGINAL AGREEMENT DATED AUGUST 12,
      2005, BELOW. 

    

    SUBSCRIPTION
      PROCEDURES

    

    

    Convertible
      Debentures of Hyperdynamics
      Corp. and it's subsidiaries (the
      “Company”) are being offered (the “Debentures”). This offering is being made in
      accordance with the exemptions from registration provided for under Section
      4(2)
      of the Securities Act of 1933, as amended (the “1933 Act”) and Rule 506 of
      Regulation D promulgated under the 1933 Act. 

    

    In
      order
      to purchase Debentures, each subscriber must complete and execute a
      questionnaire (the “Questionnaire”) and a subscription agreement (the
“Subscription Agreement”). In addition, the subscriber must make a payment
      pursuant to the Funds Authorization Distribution Agreement, for the amount
      being
      purchased or directly to the Holder. All subscriptions are subject to acceptance
      by the Company, which shall not occur until the Company has returned the signed
      Company Signature Page. 

    

    The
      Questionnaire is designed to enable the Holder to demonstrate the minimum legal
      requirements under federal and state securities laws to purchase the Debentures.
      The Signature Page for the Questionnaire and the Subscription Agreement contain
      representations relating to the subscription and should be reviewed carefully
      by
      each subscriber.

    

    If
      you
      are a foreign person or foreign entity, you may be subject to a withholding
      tax
      equal to thirty percent (30%) of any dividends paid by the Company. In order
      to
      eliminate or reduce such withholding tax you must submit a properly executed
      I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
      Connected with the Conduct of a Trade or Business in the United States) or
      I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
      exemption from withholding or eligibility for treaty benefits in the form of
      a
      lower rate of withholding tax on interest or dividends.

    

    Payment
      must be made by wire transfer by Dutchess Private Equities Fund, II, LP (the
      “Holder”) per the wire instructions that will be established. In the event of a
      termination of the offering or the rejection of a subscription, subscription
      funds will be returned by the Company without interest or charges. 

    

    THE
      SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
      OF
      1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
      IN
      RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
      SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
      NOT
      BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
      REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED
      OR
      DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
      AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED
      THE
      MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
      ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

    

    

    SUBSCRIPTION
      AGREEMENT

    

    

    To: Hyperdynamics
      Corp.

    

    This
      Subscription Agreement is made between Hyperdynamics
      Corp.,
      a
      Delaware corporation, (the “Company”), and the undersigned prospective Holder
      (“Holder”) who is subscribing hereby for the Company’s convertible debentures
      (the “Debentures”) on August 12, 2005. This subscription is submitted to you in
      accordance with and subject to the terms and conditions described in this
      Subscription Agreement, together with any Exhibits thereto, relating to an
      offering (the “Offering”) of One Million Five Hundred Thousand dollars
      ($1,500,000) of Debentures. The Offering is limited to accredited Investors
      and
      is made in accordance with the exemptions from registration provided for under
      Section 4(2) of the 1933 Act and Rule 506 of Regulation D promulgated under
      the
      1933 Act (“Regulation D”).

    

    Whereas,
      contemporaneously with the execution and delivery of this Agreement, the
      partiers hereto are executing and delivering a Debenture Registration Rights
      Agreement, the Debenture Agreement, Security Agreement, the Irrevocable Transfer
      Agent Agreement, and Warrant Agreement (collectively, the "Transaction
      Documents").

    

    1. SUBSCRIPTION.

    

    (a) The
      closing shall be deemed to have occurred on the date in the preamble of this
      document (the “Closing Date” or a “Closing”). The Company shall pay ten percent
      (10%) annual coupon on the unpaid principal amount of this Debenture (the
“Debenture”) at such times and in such amounts as outlined in the Debenture
      Agreement. 

    

    (b) Upon
      receipt by the Company of the requisite payment for the Debentures being
      purchased, the Debentures so purchased will be forwarded by the Company to
      the
      Holder or its broker, as listed on the signature page, and the name of such
      Holder will be registered on the Debenture transfer books of the Company as
      the
      record owner of such Debentures. 

    

    (c) As
      long
      as the Holder owns the Debenture, the Holder shall have the right to change
      the
      terms for the balance of the Debenture it then holds, to match the terms of
      any
      other offering of securities made by the Company.

     

    (d)
      The
      Holders shall fund one million dollars ($1,000,000) upon the initial closing
      and
      an additional five hundred thousand dollars ($500,000) simultaneously on the
      date the registration statement covering this Offering is filed with the United
      States Securities and Exchange Commission ("SEC"),.

    

     

    2. REPRESENTATIONS
      AND WARRANTIES OF THE HOLDER.

     

    The
      Holder hereby represents and warrants to, and agrees with, the Company as
      follows:

     

    

    (a) The
      Holder has been furnished with, and has carefully read the applicable form
      of
      Debenture Registration Rights Agreement, and the Debenture Agreement
and
      is
      familiar with and understands the terms of the Offering. With respect to tax
      and
      other economic considerations involved in his investment, the Holder is not
      relying on the Company. The Holder has carefully considered and has, to the
      extent the Holder believes such discussion necessary, discussed with the Holder
      's professional legal, tax, accounting and financial advisors the suitability
      of
      an investment in the Company, by purchasing the Debentures, for the Holder
      's
      particular tax and financial situation and has determined that the investment
      being made by the Holder is a suitable investment for the Holder.

    

    (b) The
      Holder acknowledges that all documents, records, and books pertaining to this
      investment which the Holder has requested have been made available for
      inspection or the Holder has had access thereto.

    

    (c) The
      Holder has had a reasonable opportunity to ask questions of and receive answers
      from a person or persons acting on behalf of the Company concerning the Offering
      and if such opportunity was taken then all such questions have been answered
      to
      the full satisfaction of the Holder.

    

    (d) The
      Holder will not sell, or otherwise dispose of the Debentures or the Common
      Stock
      issued upon conversion of the Debentures without registration under the 1933
      Act
      or applicable state securities laws or compliance with an exemption therefrom
      including but not limited to: Rule 144A, 144 (k) (herein after referred to
      as an
      "Exemption"). The Debentures have not been registered under the 1933 Act or
      under the securities laws of any state. Resales of the Common Stock underlying
      the Debentures or issued in payment of accrued interest on the Debentures are
      to
      be registered by the Company pursuant to the terms of the Debenture Registration
      Rights Agreement incorporated herein and made a part hereof. 

    

    (e) The
      Holder recognizes that an investment in the Debentures involves substantial
      risks, including loss of the entire amount of such investment. Further, the
      Holder has carefully read and considered the schedule entitled Litigation
      matters attached hereto as Schedule 3(h).

    

    (f)
       The
      Holder acknowledges that each certificate representing the Debentures (and
      the
      shares of Common Stock issued upon conversion of the Debentures, unless
      registered or with an Exemption) or in payment of dividends on the Debentures
      shall be stamped or otherwise imprinted with a legend substantially in the
      following form:

    

    THE
      SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD,
      TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT
      TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT
      (OR
      ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
      OR
      (iii) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH
      ACT.

    

    If
      Holder
      sends a Notice of Conversion (See Exhibit A attached hereto), and provided
      a
      registration statement under the Securities Act of 1933 that is in effect as
      to
      the sale, then in such event the Company shall have its transfer agent send
      Holder the appropriate number of shares of Common Stock without restrictive
      legends and the Company is not subject to stop transfer instructions.

    

    (g) If
      this
      Subscription Agreement is executed and delivered on behalf of a corporation:
      (i)
      such corporation has the full legal right and power and all authority and
      approval required (a) to execute and deliver, or authorize execution and
      delivery of this Subscription Agreement and all other instruments (including,
      without limitation, the Debenture Registration Rights Agreement, Irrevocable
      Transfer Agent Agreement, Security Agreement, Warrant Agreement and Debenture
      Agreements) executed and delivered by or on behalf of such corporation in
      connection with the purchase of the Debentures and (b) to purchase and hold
      the
      Debentures; and (ii) the signature of the party signing on behalf of such
      corporation is binding upon such corporation. 

    

    (h) The
      Holder is not subscribing for the Debentures as a result of, or pursuant to,
      any
      advertisement, article, notice or other communication published in any
      newspaper, magazine or similar media or broadcast over television or radio
      or
      presented at any seminar or meeting.

    

    (i) The
      Holder is purchasing the Debentures for its own account for investment, and
      not
      with a view toward the resale or distribution thereof, except pursuant to sales
      registered or exempted from registration under the 1933 Act. The Holder has
      not
      offered or sold any portion of the Debentures being acquired nor does the Holder
      have any present intention of dividing the Debentures with others or of selling,
      distributing or otherwise disposing of any portion of the Debentures either
      currently or after the passage of a fixed or determinable period of time or
      upon
      the occurrence or non-occurrence of any predetermined event or circumstance
      in
      violation of the 1933 Act provided, however, that by making the representations
      herein, Holder does not agree to hold any of the Debentures for any minimum
      or
      other specific term and reserves the right to dispose of the Debentures at
      any
      time in accordance with or pursuant to a registration statement or an exemption
      under the 1933 Act. Holder is neither an underwriter of, nor a dealer in, the
      Debentures or the Common Stock issuable upon conversion thereof or upon the
      payment of dividends thereon and is not participating in the distribution or
      resale of the Debentures or the Common Stock issuable upon conversion or
      exercise thereof. 

    

    (j) The
      Holder or the Holder's representatives, as the case may be, has such knowledge
      and experience in financial, tax and business matters so as to enable the Holder
      to utilize the information made available to the Holder in connection with
      the
      Offering to evaluate the merits and risks of an investment in the Debentures
      and
      to make an informed investment decision with respect thereto. 

    

    3. REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

    

    Except
      as
      set forth in the Schedules attached hereto, the Company represents and warrants
      to the Holder that:

    

    a.
       Organization
      and Qualification.
      The
      Company and its “SUBSIDIARIES” (which for purposes of this Subscription
      Agreement means any entity in which the Company, directly or indirectly, owns
      capital stock or holds an equity or similar interest) (a complete list of which
      is set forth in Schedule 3(a)) are corporations duly organized and validly
      existing in good standing under the laws of the respective jurisdictions of
      their incorporation, and have the requisite corporate power and authorization
      to
      own their properties and to carry on their business as now being conducted.
      Both
      the Company and its Subsidiaries are duly qualified to do business and are
      in
      good standing in every jurisdiction in which their ownership of property or
      the
      nature of the business conducted by them makes such qualification necessary,
      except to the extent that the failure to be so qualified or be in good standing
      would not have a Material Adverse Effect. As used in this Subscription
      Agreement, “MATERIAL ADVERSE EFFECT” means any material adverse effect on the
      business, properties, assets, operations, results of operations, financial
      condition or prospects of the Company and its Subsidiaries, if any, taken as
      a
      whole, or on the transactions contemplated hereby or by the agreements and
      instruments to be entered into in connection herewith, or on the authority
      or
      ability of the Company to perform its obligations under the Transaction
      Documents (as defined in Section 3(b)below).

    

    b.
       Authorization;
      Enforcement; Compliance with Other Instruments.
      (i) The
      Company has the requisite corporate power and authority to enter into and
      perform this Subscription Agreement, the Debenture Registration Rights
      Agreement, Warrant Agreement, Security Agreement, Stock Transfer Agent Agreement
      and the Debenture Agreement, and each of the other agreements entered into
      by
      the parties hereto in connection with the transactions contemplated by this
      Subscription Agreement (collectively, the “TRANSACTION DOCUMENTS”), and to issue
      the Debentures in accordance with the terms hereof and thereof, (ii) the
      execution and delivery of the Transaction Documents by the Company and the
      consummation by it of the transactions contemplated hereby and thereby,
      including without limitation the reservation for issuance and the issuance
      of
      the Debentures pursuant to this Subscription Agreement, have been duly and
      validly authorized by the Company's Board of Directors and no further consent
      or
      authorization is required by the Company, its Board of Directors, or its
      shareholders, (iii) the Transaction Documents have been duly and validly
      executed and delivered by the Company, and (iv) the Transaction Documents
      constitute the valid and binding obligations of the Company enforceable against
      the Company in accordance with their terms, except as such enforceability may
      be
      limited by general principles of equity or applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally, the enforcement of creditors' rights and
      remedies.

    

    c.
       Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of
      250,000,000 shares of Common Stock authorized, of which as of the date hereof,
      approximately 42,059,683 shares are issued and outstanding, All of such
      outstanding shares have been, or upon issuance will be, validly issued and
      are
      fully paid and nonassessable. Except as disclosed in Schedule 3(c) which is
      attached hereto and made a part hereof, (i) no shares of the Company's capital
      stock are subject to preemptive rights or any other similar rights or any liens
      or encumbrances suffered or permitted by the Company, (ii) there are no
      outstanding debt securities, (iii) there are no outstanding shares of capital
      stock, options, warrants, scrip, rights to subscribe to, calls or commitments
      of
      any character whatsoever relating to, or securities or rights convertible into,
      any shares of capital stock of the Company or any of its Subsidiaries, or
      contracts, commitments, understandings or arrangements by which the Company
      or
      any of its Subsidiaries is or may become bound to issue additional shares of
      capital stock of the Company or any of its Subsidiaries or options, warrants,
      scrip, rights to subscribe to, calls or commitments of any character whatsoever
      relating to, or securities or rights convertible into, any shares of capital
      stock of the Company or any of its Subsidiaries, (iv) there are no agreements
      or
      arrangements under which the Company or any of its Subsidiaries is obligated
      to
      register the sale of any of their securities under the 1933 Act (except the
      Debenture Registration Rights Agreement), (v) there are no outstanding
      securities of the Company or any of its Subsidiaries which contain any
      redemption or similar provisions, and there are no contracts, commitments,
      understandings or arrangements by which the Company or any of its Subsidiaries
      is or may become bound to redeem a security of the Company or any of its
      Subsidiaries, (vi) there are no securities or instruments containing
      anti-dilution or similar provisions that will be triggered by the issuance
      of
      the Securities as described in this Subscription Agreement, (vii) the Company
      does not have any stock appreciation rights or "phantom stock" plans or
      agreements or any similar plan or agreement and (viii) there is no dispute
      as to
      the class of any shares of the Company's capital stock. The Company has
      furnished to the Holder, or the Holder has had access through EDGAR to, true
      and
      correct copies of the Company's Articles of Incorporation, as in effect on
      the
      date hereof (the “ARTICLES OF INCORPORATION”), and the Company's By-laws, as in
      effect on the date hereof (the “BY-LAWS ‘), and the terms of all securities
      convertible into or exercisable for Common Stock and the material rights of
      the
      Holder thereof in respect thereto.

    

    d. Issuance
      of Debentures. A
      sufficient number of Debentures issuable pursuant to this Subscription
      Agreement, but not more than 4.99% of the shares of Common Stock outstanding
      as
      of the date hereof (if the Company becomes listed on Nasdaq or the American
      Stock Exchange), has been duly authorized and reserved for issuance pursuant
      to
      this Subscription Agreement. Upon issuance in accordance with this Subscription
      Agreement, the Debentures will be validly issued, fully paid and nonassessable
      and free from all taxes, liens and charges with respect to the issue thereof.
      In
      the event the Company cannot register a sufficient number of shares of Common
      Stock, due to the remaining number of authorized shares of Common Stock being
      insufficient, the Company will use its best efforts to register the maximum
      number of shares it can based on the remaining balance of authorized shares
      and
      will use its best efforts to increase the number of its authorized shares as
      soon as reasonably practicable.

    

    e.
       No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby will not (i) result in a violation of the Articles of Incorporation,
      any
      Certificate of Designations, Preferences and Rights of any outstanding series
      of
      preferred stock of the Company or the By-laws or (ii) conflict with, or
      constitute a material default (or an event which with notice or lapse of time
      or
      both would become a material default) under, or give to others any rights of
      termination, amendment, acceleration or cancellation of, any material agreement,
      contract, indenture mortgage, indebtedness or instrument to which the Company
      or
      any of its Subsidiaries is a party, or result in a violation of any law, rule,
      regulation, order, judgment or decree, including United States federal and
      state
      securities laws and regulations and the rules and regulations of the principal
      securities exchange or trading market on which the Common Stock is traded or
      listed (the “Principal Market”), applicable to the Company or any of its
      Subsidiaries or by which any property or asset of the Company or any of its
      Subsidiaries is bound or affected. Except as disclosed in Schedule 3(e), neither
      the Company nor its Subsidiaries is in violation of any term of, or in default
      under, the Articles of Incorporation, any Certificate of Designations,
      Preferences and Rights of any outstanding series of preferred stock of the
      Company or the By-laws or their organizational charter or by-laws, respectively,
      or any contract, agreement, mortgage, indebtedness, indenture, instrument,
      judgment, decree or order or any statute, rule or regulation applicable to
      the
      Company or its Subsidiaries, except for possible conflicts, defaults,
      terminations, amendments, accelerations, cancellations and violations that
      would
      not individually or in the aggregate have a Material Adverse Effect. The
      business of the Company and its Subsidiaries is not being conducted, and shall
      not be conducted, in violation of any law, statute, ordinance, rule, order
      or
      regulation of any governmental authority or agency, regulatory or
      self-regulatory agency, or court, except for possible violations the sanctions
      for which either individually or in the aggregate would not have a Material
      Adverse Effect. Except as specifically contemplated by this Subscription
      Agreement and as required under the 1933 Act, the Company is not required to
      obtain any consent, authorization, permit or order of, or make any filing or
      registration (except the filing of a registration statement) with, any court,
      governmental authority or agency, regulatory or self-regulatory agency or other
      third party in order for it to execute, deliver or perform any of its
      obligations under, or contemplated by, the Transaction Documents in accordance
      with the terms hereof or thereof. All consents, authorizations, permits, orders,
      filings and registrations which the Company is required to obtain pursuant
      to
      the preceding sentence have been obtained or effected on or prior to the date
      hereof and are in full force and effect as of the date hereof. Except as
      disclosed in Schedule 3(e), the Company and its Subsidiaries are unaware of
      any
      facts or circumstances which might give rise to any of the foregoing. The
      Company is not, and will not be, in violation of the listing requirements of
      the
      Principal Market as in effect on the date hereof and on each of the Closing
      Dates and is not aware of any facts which would reasonably lead to delisting
      of
      the Common Stock by the Principal Market in the foreseeable future.

    

    f.
       SEC
      Documents; Financial Statements.
      Since
      the date hereof, the Company has filed all reports, schedules, forms, statements
      and other documents required to be filed by it with the Securities and Exchange
      Commission (“SEC”) pursuant to the reporting requirements of the Securities and
      Exchange Act of 1934 (“1934 Act”) (all of the foregoing filed prior to the date
      hereof and all exhibits included therein and financial statements and schedules
      thereto and documents incorporated by reference therein being hereinafter
      referred to as the "SEC DOCUMENTS"). The Company has delivered to the Holder
      or
      its representatives, or they have had access through EDGAR, to true and complete
      copies of the SEC Documents. As of their respective dates, the SEC Documents
      complied in all material respects with the requirements of the 1934 Act and
      the
      rules and regulations of the SEC promulgated thereunder applicable to the SEC
      Documents, and none of the SEC Documents, at the time they were filed with
      the
      SEC, contained any untrue statement of a material fact or omitted to state
      a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading. As of their respective dates, the financial statements of the
      Company included in the SEC Documents complied as to form in all material
      respects with applicable accounting requirements and the published rules and
      regulations of the SEC with respect thereto. Such financial statements have
      been
      prepared in accordance with generally accepted accounting principles,
      consistently applied, during the periods involved (except (i) as may be
      otherwise indicated in such financial statements or the notes thereto, or (ii)
      in the case of unaudited interim statements, to the extent they may exclude
      footnotes or may be condensed or summary statements) and fairly present in
      all
      material respects the financial position of the Company as of the dates thereof
      and the results of its operations and cash flows for the periods then ended
      (subject, in the case of unaudited statements, to normal year-end audit
      adjustments). No other written information provided by or on behalf of the
      Company to the Holder which is not included in the SEC Documents, including,
      without limitation, information referred to in Section 3(d) of this Subscription
      Agreement, contains any untrue statement of a material fact or omits to state
      any material fact necessary to make the statements therein, in the light of
      the
      circumstance under which they are or were made, not misleading.

    

    g.
       Absence
      of Certain Changes.
      Except
      as disclosed in Schedule 3(g) or the SEC Documents filed at least five (5)
      days
      prior to the date hereof, there has been no change or development in the
      business, properties, assets, operations, financial condition, results of
      operations or prospects of the Company or its Subsidiaries which has had or
      reasonably could have a Material Adverse Effect, except
      as
      to litigation in connection with USOil, and events unfolding in the Republic
      of
      Guinea elated to the Production Sharing Agreement between Guinea and USOil.
      The
      Company has not taken any steps, and does not currently expect to take any
      steps, to seek protection pursuant to any bankruptcy law nor does the Company
      or
      its Subsidiaries have any knowledge or reason to believe that its creditors
      intend to initiate involuntary bankruptcy proceedings

     

    h.
       Absence
      of Litigation.
      Except
      as set forth in the Company’s SEC filings, there is no action, suit, proceeding,
      inquiry or investigation before or by any court, public board, government
      agency, self-regulatory organization or body pending or, to the knowledge of
      the
      executive officers of Company or any of its Subsidiaries, threatened against
      or
      affecting the Company, the Common Stock or any of the Company's Subsidiaries
      or
      any of the Company's or the Company's Subsidiaries' officers or directors in
      their capacities as such, in which an adverse decision could have a Material
      Adverse Effect, except
      litigation in connection with USOil, and possible legal proceedings regarding
      events unfolding in the Republic of Guinea related to the Production and Sharing
      Agreement between Guinea and USOil.

     

    

    

    i.
       Acknowledgment
      Regarding the Purchase of Debentures.
      The
      Company acknowledges and agrees that the Holder is acting solely in the capacity
      of an arm's length investor with respect to the Transaction Documents and the
      transactions contemplated hereby and thereby. The Company further acknowledges
      that the Holder is not acting as a financial advisor or fiduciary of the Company
      (or in any similar capacity) with respect to the Transaction Documents and
      the
      transactions contemplated hereby and thereby and any advice given by the Holder
      or any of its respective representatives or agents in connection with the
      Transaction Documents and the transactions contemplated hereby and thereby
      is
      merely incidental to the Holder's purchase of the Debentures. The Company
      further represents to the Holder that the Company's decision to enter into
      the
      Transaction Documents has been based solely on the independent evaluation by
      the
      Company and its representatives.

    

    j. Intentionally
      omitted.

    

    k.
       Employee
      Relations.
      Neither
      the Company nor any of its Subsidiaries is involved in any union labor dispute
      nor, to the knowledge of the Company or any of its Subsidiaries, is any such
      dispute threatened. Neither the Company nor any of its Subsidiaries is a party
      to a collective bargaining agreement, and the Company and its Subsidiaries
      believe that relations with their employees are good. No executive officer
      (as
      defined in Rule 501(f) of the 1933 Act) has notified the Company that such
      officer intends to leave the Company's employ or otherwise terminate such
      officer's employment with the Company.

    

    l.
       Intellectual
      Property Rights.
      All
      patents, patent applications, trademark registrations and applications for
      trademark registration held by the Company are owned free and clear of all
      mortgages, liens, charges or encumbrances whatsoever. No licenses have been
      granted with respect to these items and the Company and its Subsidiaries do
      not
      have any knowledge of any infringement by the Company or its Subsidiaries of
      trademark, trade name rights, patents, patent rights, copyrights, inventions,
      licenses, service names, service marks, service mark registrations, trade secret
      or other similar rights of others, and, except as set forth on Schedule 3(l),
      there is no claim, action or proceeding being made or brought against, or to
      the
      Company's knowledge, being threatened against, the Company or its Subsidiaries
      regarding trademark, trade name, patents, patent rights, invention, copyright,
      license, service names, service marks, service mark registrations, trade secret
      or other infringement; and the Company and its Subsidiaries are unaware of
      any
      facts or circumstances which might give rise to any of the foregoing. The
      Company and its Subsidiaries have taken reasonable security measures to protect
      the secrecy, confidentiality and value of all of their intellectual
      properties.

    

    m.
       Environmental
      Laws.
      The
      Company and its Subsidiaries (i) are in compliance with any and all applicable
      foreign, federal, state and local laws and regulations relating to the
      protection of human health and safety, the environment or hazardous or toxic
      substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii)
      have received all permits, licenses or other approvals required of them under
      applicable Environmental Laws to conduct their respective businesses and (iii)
      are in compliance with all terms and conditions of any such permit, license
      or
      approval where, in each of the three foregoing cases, the failure to so comply
      would have, individually or in the aggregate, a Material Adverse
      Effect.

    

    n.
       Title.
      The
      Company and its Subsidiaries have good and marketable title in fee simple to
      all
      real property and good and marketable title to all personal property owned
      by
      them which is material to the business of the Company and its Subsidiaries,
      in
      each case free and clear of all liens, encumbrances and defects except such
      as
      are described in Schedule 3(n) or such as do not materially affect the value
      of
      such property and do not interfere with the use made and proposed to be made
      of
      such property by the Company or any of its Subsidiaries. Any real property
      and
      facilities held under lease by the Company or any of its Subsidiaries are held
      by them under valid, subsisting and enforceable leases with such exceptions
      as
      are not material and do not interfere with the use made and proposed to be
      made
      of such property and buildings by the Company and its Subsidiaries.

    

    o.
       Insurance.
      The
      Company and each of its Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its Subsidiaries are engaged. Neither the Company
      nor
      any such Subsidiary has been refused any insurance coverage sought or applied
      for and neither the Company nor any such Subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar insurers as
      may
      be necessary to continue its business at a cost that would not have a Material
      Adverse Effect.

    

    p.
       Regulatory
      Permits.
      The
      Company and its Subsidiaries have in full force and effect all certificates,
      approvals, authorizations and permits from the appropriate federal, state,
      local
      or foreign regulatory authorities and comparable foreign regulatory agencies,
      necessary to own, lease or operate their respective properties and assets and
      conduct their respective businesses, and neither the Company nor any such
      Subsidiary has received any notice of proceedings relating to the revocation
      or
      modification of any such certificate, approval, authorization or permit, except
      for such certificates, approvals, authorizations or permits which if not
      obtained, or such revocations or modifications which, would not have a Material
      Adverse Effect.

    

    q.
       Internal
      Accounting Controls.
      The
      Company and each of its Subsidiaries maintain a system of internal accounting
      controls sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with management's general or specific authorizations,
      (ii) transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles and
      to
      maintain asset accountability, (iii) access to assets is permitted only in
      accordance with management's general or specific authorization and (iv) the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals and appropriate action is taken with respect to any
      differences.

    

    r.
       No
      Materially Adverse Contracts, Etc.
      Neither
      the Company nor any of its Subsidiaries is subject to any charter, corporate
      or
      other legal restriction, or any judgment, decree, order, rule or regulation
      which in the judgment of the Company's officers has or is expected in the future
      to have a Material Adverse Effect. Neither the Company nor any of its
      Subsidiaries is a party to any contract or agreement which in the judgment
      of
      the Company's officers has or is expected to have a Material Adverse
      Effect.

    

    s.
       Tax
      Status.
      The
      Company’s consolidated 2004 federal income tax return, the Company and each of
      its Subsidiaries has made or filed all United States federal and state income
      and all other tax returns, reports and declarations required by any jurisdiction
      to which it is subject (unless and only to the extent that the Company and
      each
      of its Subsidiaries has set aside on its books provisions reasonably adequate
      for the payment of all unpaid and unreported taxes) and has paid all taxes
      and
      other governmental assessments and charges that are material in amount, shown
      or
      determined to be due on such returns, reports and declarations, except those
      being contested in good faith and has set aside on its books provision
      reasonably adequate for the payment of all taxes for periods subsequent to
      the
      periods to which such returns, reports or declarations apply. There are no
      unpaid taxes in any material amount claimed to be due by the taxing authority
      of
      any jurisdiction, and the officers of the Company know of no basis for any
      such
      claim.

    

    t.
       Certain
      Transactions.
      Except
      as set forth in the SEC Documents filed at least ten days prior to the date
      hereof and except for arm's length transactions pursuant to which the Company
      makes payments in the ordinary course of business upon terms no less favorable
      than the Company could obtain from third parties and other than the grant of
      stock options disclosed on Schedule 3(c), none of the officers, directors,
      or
      employees of the Company is presently a party to any transaction with the
      Company or any of its Subsidiaries (other than for services as employees,
      officers and directors), including any contract, agreement or other arrangement
      providing for the furnishing of services to or by, providing for rental of
      real
      or personal property to or from, or otherwise requiring payments to or from
      any
      officer, director or such employee or, to the knowledge of the Company, any
      corporation, partnership, trust or other entity in which any officer, director,
      or any such employee has a substantial interest or is an officer, director,
      trustee or partner.

    

    u.
       Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of shares of Common Stock
      issuable upon purchases pursuant to this Subscription Agreement will increase
      in
      certain circumstances including, but not necessarily limited to, the
      circumstance wherein the trading price of the Common Stock declines following
      the effective date of the registration statement covering the Common Stock
      underlying the Debentures (the “Effective Date”). The Company’s executive
      officers and directors have studied and fully understand the nature of the
      transactions contemplated by this Subscription Agreement and recognize that
      they
      have a potential dilutive effect. The board of directors of the Company has
      concluded, in its good faith business judgment that such issuance is in the
      best
      interests of the Company. The Company specifically acknowledges that, subject
      to
      such limitations as are expressly set forth in the Transaction Documents, its
      obligation to issue shares of Common Stock upon purchases pursuant to this
      Subscription Agreement is absolute and unconditional regardless of the dilutive
      effect that such issuance may have on the ownership interests of other
      shareholders of the Company.

    

    

    4. COVENANTS
      OF THE COMPANY

    

    a.
       Best
      Efforts.
      The
      Company shall use its best efforts timely to satisfy each of the conditions
      to
      be satisfied by it as provided in this Subscription Agreement.

     

    b.
       Blue
      Sky.
      The
      Company shall, at its sole cost and expense, make all filings and reports
      relating to the offer and sale of the Debentures and the Common Stock underlying
      the Debentures as required under the applicable securities or “Blue Sky” laws of
      such states of the United States as specified by the Holder.

    

    c.
       Reporting
      Status.
      Until
      the earlier of (i) the date that the Holder may sell all of the Common Stock
      underlying the shares acquired pursuant to this Subscription Agreement without
      restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
      thereto), or (ii) the date on which the Holder shall have sold all the Common
      Stock underlying the Debentures, the Company shall file all reports required
      to
      be filed with the SEC pursuant to the 1934 Act, and the Company shall not
      terminate its status as a reporting company under the 1934 Act.

    

    d. Use
      of
      Proceeds.
       The
      Company shall use the entire proceeds from this Debenture exclusively to further
      the growth and interest of the Company, specifically for the development of
      a)
      Oil production and drilling in the United States of America or b) the Oil,
      Gas
      and Mineral leases including but not limited to the Company’s interest in the
      following collateralized leases dated October 1st, 2004 with: Katherine Breland
      Kelly of Jena, Louisiana for Section 8, Township 6 North, Range 3 East, the
      north one-half of the Northwest quarter less four acres, comprising of sixteen
      (16) acres, more or less and
      the
      development of the Oil, Gas and Mineral lease dated October 13, 2004 with
      Willard J. Norris and Shirley L Norris of Jena, Louisiana for Section 8,
      Township 6 North, Range 3 East, the southeast quarter of the northwest quarter
      including Lot 23B, and 23A; . Any other use of the funds contemplated herein,
      shall be considered a breach of contract and an event of Default. 

    

    e. Conditions
      to Closing, The
      Company shall sign the Transaction Documents with Dutchess Private Equities
      Fund, II, L.P. 

    

    f.
       Financial
      Information.
      The
      Company agrees to make available to the Holder via EDGAR or other electronic
      means the following: (i) within five (5) business days after the filing thereof
      with the SEC, a copy of its Annual Reports on Form 10-KSB, its Quarterly Reports
      on Form 10-QSB, any Current Reports on Form 8-K and any Registration Statements
      or amendments filed pursuant to the 1933 Act; (ii) on the same day as the
      release thereof, facsimile copies of all press releases issued by the Company
      or
      any of its Subsidiaries, (iii) copies of any notices and other information
      made
      available or given to the shareholders of the Company generally,
      contemporaneously with the making available or giving thereof to the
      shareholders and (iv) within two (2) calendar days of filing or delivery
      thereof, copies of all documents filed with, and all correspondence sent to,
      the
      Principal Market, any securities exchange or market, or the National Association
      of Securities Dealers, Inc. 

    

    g. Reservation
      of Common Stock.
      Subject
      to the following sentence, the Company shall take all action necessary to at
      all
      times have authorized, and reserved for the purpose of issuance, a sufficient
      number of shares of Common Stock to provide for the issuance of the Common
      Stock
      underlying the Debentures. In the event that the Company determines that it
      does
      not have a sufficient number of authorized shares of Common Stock to reserve
      and
      keep available for issuance, the Company shall use its best efforts to increase
      the number of authorized shares of Common Stock by seeking shareholder approval
      for the authorization of such additional shares. The Holder shall have the
      right
      to determine the amount of shares to be re-registered to satisfy the terms
      of
      the Agreement. Such amount must be usual or customary.

    

    h.
       Listing.
      The
      Company shall promptly secure the listing of all of the Common Stock underlying
      the Debentures upon the Principal Market and each other national securities
      exchange and automated quotation system, if any, upon which shares of Common
      Stock are then listed (subject to official notice of issuance) and shall
      maintain, such listing. The Company shall maintain the Common Stock's
      authorization for quotation on the Principal Market, unless the Holder and
      the
      Company agree otherwise. Neither the Company nor any of its Subsidiaries shall
      take any action which would be reasonably expected to result in the delisting
      or
      suspension of the Common Stock on the Principal Market (excluding suspensions
      of
      not more than one trading day resulting from business announcements by the
      Company). The Company shall promptly provide to the Holder copies of any notices
      it receives from the Principal Market regarding the continued eligibility of
      the
      Common Stock for listing on such automated quotation system or securities
      exchange. The Company shall pay all fees and expenses in connection with
      satisfying its obligations under this Section.

     

    i. Transactions
      With Affiliates.
      The
      Company shall not, and shall cause each of its Subsidiaries not to, enter into,
      amend, modify or supplement, or permit any Subsidiary to enter into, amend,
      modify or supplement, any agreement, transaction, commitment or arrangement
      with
      any of its or any Subsidiary's officers, directors, persons who were officers
      or
      directors at any time during the previous two years, shareholders who
      beneficially own five percent (5%) or more of the Common Stock, or affiliates
      or
      with any individual related by blood, marriage or adoption to any such
      individual or with any entity in which any such entity or individual owns a
      five
      percent (5%) or more beneficial interest (each a “RELATED PARTY”) during the
      Lock Up Period; except for (i) customary employment arrangements and benefit
      programs on reasonable terms (including changes currently under discussion
      with
      the Company's Board of Directors concerning the compensation, to be payable
      in
      stock, of the Chairman of the Board), (ii) any agreement, transaction,
      commitment or arrangement on an arms-length basis on terms no less favorable
      than terms which would have been obtainable from a person other than such
      Related Party, or (iii) any agreement, transaction, commitment or arrangement
      which is approved by a majority of the disinterested directors of the Company.
      For purposes hereof, any director who is also an officer of the Company or
      any
      Subsidiary of the Company shall not be a disinterested director with respect
      to
      any such agreement, transaction, commitment or arrangement. “AFFILIATE” for
      purposes hereof means, with respect to any person or entity, another person
      or
      entity that, directly or indirectly, (i) has a five percent (5%) or more equity
      interest in that person or entity, (ii) has five percent (5%) or more common
      ownership with that person or entity, (iii) Controls that person or entity,
      or
      (iv) shares common control with that person or entity. “CONTROL” or "CONTROLS"
      for purposes hereof means that a person or entity has the power, direct or
      indirect, to conduct or govern the policies of another person or
      entity.

    

    j.
       Corporate
      Existence.
      The
      Company shall use its commercially reasonable best efforts to preserve and
      continue the corporate existence of the Company.

    

    k. Notice
      of Certain Events Affecting Registration.
      The
      Company shall promptly notify Holder upon the occurrence of any of the following
      events in respect of a registration statement or related prospectus covering
      the
      Common Stock underlying the Debentures: (i) receipt of any request for
      additional information by the SEC or any other federal or state governmental
      authority during the period of effectiveness of the registration statement
      for
      amendments or supplements to the registration statement or related prospectus;
      (ii) the issuance by the SEC or any other federal or state governmental
      authority of any stop order suspending the effectiveness of any registration
      statement or the initiation of any proceedings for that purpose; (iii) receipt
      of any notification with respect to the suspension of the qualification or
      exemption from qualification of any of the Common Stock underlying the
      Debentures for sale in any jurisdiction or the initiation or threatening of
      any
      proceeding for such purpose; (iv) the happening of any event that makes any
      statement made in such registration statement or related prospectus or any
      document incorporated or deemed to be incorporated therein by reference untrue
      in any material respect or that requires the making of any changes in the
      registration statement, related prospectus or documents so that, in the case
      of
      a registration statement, it will not contain any untrue statement of a material
      fact or omit to state any material fact required to be stated therein or
      necessary to make the statements therein not misleading, and that in the case
      of
      the related prospectus, it will not contain any untrue statement of a material
      fact or omit to state any material fact required to be stated therein or
      necessary to make the statements therein, in the light of the circumstances
      under which they were made, not misleading; and (v) the Company's reasonable
      determination that a post-effective amendment to the registration statement
      would be appropriate, and the Company shall promptly make available to Holder
      any such supplement or amendment to the related prospectus. 

    

    l.
      Indemnification.
      In
      consideration of the Holder’s execution and delivery of the this Agreement and
      the Debenture Registration Rights Agreement and acquiring the Debentures
      hereunder and in addition to all of the Company's other obligations under the
      Transaction Documents, the Company shall defend, protect, indemnify and hold
      harmless the Holder and all of their shareholders, officers, directors,
      employees and direct or indirect investors and any of the foregoing person's
      agents or other representatives (including, without limitation, those retained
      in connection with the transactions contemplated by this Agreement)
      (collectively, the "Indemnitees") from and against any and all actions, causes
      of action, suits, claims, losses, costs, penalties, fees, liabilities and
      damages, and expenses in connection therewith (irrespective of whether any
      such
      Indemnitee is a party to the action for which indemnification hereunder is
      sought), and including reasonable attorneys' fees and disbursements (the
“Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
      arising out of, or relating to (i) any misrepresentation or breach of any
      representation or warranty made by the Company in the Transaction Documents
      or
      any other certificate, instrument or document contemplated hereby or thereby,
      (ii) any breach of any covenant, agreement or obligation of the Company
      contained in the Transaction Documents or any other certificate, instrument
      or
      document contemplated hereby or thereby, (iii) any cause of action, suit or
      claim brought or made against such Indemnitee by a third party and arising
      out
      of or resulting from the execution, delivery, performance or enforcement of
      the
      Transaction Documents or any other certificate, instrument or document
      contemplated hereby or thereby, (iv) any transaction financed or to be financed
      in whole or in part, directly or indirectly, with the proceeds of the issuance
      of the Debentures or (v) the status of the Holder as an investor in the Company,
      except insofar as any such untrue statement, alleged untrue statement, omission
      or alleged omission is made in reliance upon and in conformity with written
      information furnished to the Company by the Holder which is specifically
      intended by the Holder for use in the preparation of any such Registration
      Statement, preliminary prospectus or prospectus. To the extent that the
      foregoing undertaking by the Company may be unenforceable for any reason, the
      Company shall make the maximum contribution to the payment and satisfaction
      of
      each of the Indemnified Liabilities which is permissible under applicable law.
      The indemnity provisions contained herein shall be in addition to any cause
      of
      action or similar rights the Holder may have, and any liabilities to which
      the
      Holder may be subject.

    

    m. Reimbursement.
      If (i)
      Holder, other than by reason of its gross negligence or willful misconduct,
      becomes involved in any capacity in any action, proceeding or investigation
      brought by any shareholder of the Company, in connection with or as a result
      of
      the consummation of the transactions contemplated by the Transaction Documents,
      or if Holder is impleaded in any such action, proceeding or investigation by
      any
      person, or (ii) Holder, other than by reason of its gross negligence or willful
      misconduct or by reason of its trading of the Common Stock in a manner that
      is
      illegal under the federal securities laws, becomes involved in any capacity
      in
      any action, proceeding or investigation brought by the SEC against or involving
      the Company or in connection with or as a result of the consummation of the
      transactions contemplated by the Transaction Documents, or if Holder is
      impleaded in any such action, proceeding or investigation by any person, then
      in
      any such case, the Company will reimburse Holder for its reasonable legal and
      other expenses (including the cost of any investigation and preparation)
      incurred in connection therewith, as such expenses are incurred. In addition,
      other than with respect to any matter in which Holder is a named party, the
      Company will pay to Holder the charges, as reasonably determined by Holder,
      for
      the time of any officers or employees of Holder devoted to appearing and
      preparing to appear as witnesses, assisting in preparation for hearings, trials
      or pretrial matters, or otherwise with respect to inquiries, hearing, trials,
      and other proceedings relating to the subject matter of this Subscription
      Agreement. The reimbursement obligations of the Company under this section
      shall
      be in addition to any liability which the Company may otherwise have, shall
      extend upon the same terms and conditions to any affiliates of Holder that
      are
      actually named in such action, proceeding or investigation, and partners,
      directors, agents, employees, attorneys, accountants, auditors and controlling
      persons (if any), as the case may be, of Holder and any such affiliate, and
      shall be binding upon and inure to the benefit of any successors of the Company,
      Holder and any such affiliate and any such person.

    

    n.
      Transfer Agent. The Company covenants and agrees that, in the event that the
      Company's agency relationship with the transfer agent should be terminated
      for
      any reason prior to the Maturity Date (as defined in the Debenture Agreement),
      the Company shall immediately appoint a new transfer agent. and shall require
      that the new transfer agent execute and agree to be bound by the terms of the
      Irrevocable Transfer Agent Instructions (as defined herein). The Company shall
      be up to date with all payments to the transfer agent. , and continue to pay
      transfer agent as outlined in the Irrevocable Transfer Agent
      Agreement.

    

    5. OPINION
      LETTER/BOARD RESOLUTION

    

    Prior
      to
      or on the Closing Date the Company shall deliver to the Holder an opinion letter
      signed by counsel for the Company in the form attached hereto as Exhibit D.
      

    

    Prior
      to
      or on the Closing Date the Company shall deliver to the Holder a signed Board
      Resolution authorizing this Offering, which shall be attached hereto as Exhibit
      E.

    

    a.
      144
      Opinions

    

    If
      the
      Company’s counsel fails to provide a Rule 144 opinion letter in a timely manner,
      then the Company shall: (a) pay the Investor’s counsel to write said Rule 144
      opinion letter; and (b) instruct the designated transfer agent to accept same
      Rule 144 Opinion letter. 

    

    

    6. DELIVERY
      INSTRUCTIONS; FEES  

    

    The
      Debentures being purchased hereunder shall be delivered to Dutchess Private
      Equities Fund, L.P., II, on the Closing Date at which time funds will be wired
      to the Company and the Debentures will be delivered to the Holder, per the
      Holder’s instructions.

     

    7. UNDERSTANDINGS.

    

    The
      undersigned understands, acknowledges and agrees with the Company as
      follows:

    

    FOR
      ALL
      SUBSCRIBERS:

    

    a. This
      Subscription may be rejected, in whole or in part, by the Company in its sole
      and absolute discretion at any time before the date set for Closing unless
      the
      Company has given notice of acceptance of the undersigned’s subscription by
      signing this Subscription Agreement and delivering it to Holder.

    

    b. No
      U.S.
      federal or state agency or any agency of any other jurisdiction has made any
      finding or determination as to the fairness of the terms of the Offering for
      investment nor any recommendation or endorsement of the Debentures or the
      Company.

    

    c. The
      representations, warranties and agreements of the undersigned and the Company
      contained herein shall be true and correct in all material respects on and
      as of
      the date of the sale of the Debentures as if made on and as of such date and
      shall survive the execution and delivery of this Subscription Agreement and
      the
      purchase of the Debentures.

    

    d. In
      making
      an investment decision, Holders must rely on their own examination of the
      Company and the terms of the Offering, including the merits and risks involved.
      The shares have not been recommended by any federal or state securities
      commission or regulatory authority. Furthermore, the foregoing authorities
      have
      not confirmed the accuracy or determined the adequacy of this document. Any
      representation to the contrary is a criminal offense.

    

    e. The
      Offering is intended to be exempt from registration by virtue of Section 4(2)
      of
      the 1933 Act and the provisions of Regulation D thereunder, which is in part
      dependent upon the truth, completeness and accuracy of the statements made
      by
      the undersigned herein and in the Questionnaire.

    

    f. It
      is
      understood that in order not to jeopardize the Offering’s exempt status under
      Section 4(2) of the 1933 Act and Regulation D, any Holder may, at a minimum,
      be
      required to fulfill the investor suitability requirements
      thereunder.

    

    g. The
      shares may not be resold except as permitted under the securities act and
      applicable state securities laws, pursuant to registration or exemption
      therefrom. Holder should be aware that they will be required to bear the
      financial risks of this investment for an indefinite period of
      time.

    

    
      	
              8.

            	
              DISPUTES
                SUBJECT TO ARBITRATION GOVERNED BY MASSACHUSETTS
                LAW

            

    

    

    a.
       All
      disputes arising under this agreement shall be governed by and interpreted
      in
      accordance with the laws of the Commonwealth of Massachusetts, without regard
      to
      principles of conflict of laws. The parties to this agreement will submit all
      disputes arising under this agreement to arbitration in Boston, Massachusetts
      before a single arbitrator of the American Arbitration Association (“AAA”). The
      arbitrator shall be selected by application of the rules of the AAA, or by
      mutual agreement of the parties, except that such arbitrator shall be an
      attorney admitted to practice law in the Commonwealth of Massachusetts. No
      party
      to this agreement will challenge the jurisdiction or venue provisions as
      provided in this section. 

    

    9. MISCELLANEOUS.

    

    a. Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Subscription Agreement must be in writing and
      will
      be deemed to have been delivered (i) upon receipt, when delivered personally;
      (ii) upon receipt, when sent by facsimile (provided a confirmation of
      transmission is mechanically or electronically generated and kept on file by
      the
      sending party); or (iii) one (1) day after deposit with a nationally recognized
      overnight delivery service, in each case properly addressed to the party to
      receive the same. The addresses and facsimile numbers for such communications
      shall be:

    

    If
      to the
      Company:

     

    Hyderdynamics
      Corporation

    9700
      Bissonnet

    Suite
      1700

    Houston,
      TX 77036

    Telephone:
      713-353-9400

    Facsimile:
      713-353-9421

    

    If
      to the
      Holder:

    

    At
      the
      address listed in the Questionnaire.

    

    Each
      party shall provide five (5) business days prior notice to the other party
      of
      any change in address, phone number or facsimile number.

    

    b. All
      pronouns and any variations thereof used herein shall be deemed to refer to
      the
      masculine, feminine, impersonal, singular or plural, as the identity of the
      person or persons may require.

    

    c. Neither
      this Subscription Agreement nor any provision hereof shall be waived, modified,
      changed, discharged, terminated, revoked or canceled, except by an instrument
      in
      writing signed by the party effecting the same against whom any change,
      discharge or termination is sought.

    

    d. Notices
      required or permitted to be given hereunder shall be in writing and shall be
      deemed to be sufficiently given when personally delivered or sent by facsimile
      transmission: (i) if to the Company, at it’s executive offices or (ii) if to the
      Holder, at the address for correspondence set forth in the Questionnaire, or
      at
      such other address as may have been specified by written notice given in
      accordance with this paragraph.

    

    e. This
      Subscription Agreement shall be enforced, governed and construed in all respects
      in accordance with the laws of the Commonwealth of Massachusetts, as such laws
      are applied by Massachusetts courts to agreements entered into, and to be
      performed in, Massachusetts by and between residents of Massachusetts, and
      shall
      be binding upon the undersigned, the undersigned's heirs, estate and legal
      representatives and shall inure to the benefit of the Company and its
      successors. If any provision of this Subscription Agreement is invalid or
      unenforceable under any applicable statue or rule of law, then such provisions
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any
      provision hereof that may prove invalid or unenforceable under any law shall
      not
      affect the validity or enforceability of any other provision
      hereof.

    

    f. This
      Agreement shall not be assignable.

    

    g. This
      Subscription Agreement, together with Exhibits A, B, C, D and E attached hereto
      and made a part hereof, constitute the entire agreement between the parties
      hereto with respect to the subject matter hereof and may be amended only by
      a
      writing executed by both parties hereto.

    

    h. This
      Subscription Agreement may be executed in two or more counterparts, all of
      which
      taken together shall constitute one instrument. Execution and delivery of this
      Subscription Agreement by exchange of facsimile copies bearing the facsimile
      signature of a party shall constitute a valid and binding execution and delivery
      of this Subscription Agreement by such party. Such facsimile copies shall
      constitute enforceable original documents.

     

    

    10.
      Transfer Agent Instructions

    

    The
      Company shall issue the Irrevocable Transfer Agent Instructions to its transfer
      agent irrevocably appointing Dutchess Capital Management, LLC and its managing
      members ("DCM"), as its agent for purpose of having certificates issued,
      registered in the name of the Holder or its respective nominee(s), for the
      issuance of Shares representing such amounts from the respective for conversions
      or warrants, as specified from time to time by the Holder to the Company upon
      the Conversion Date (as defined in the Debenture Agreement), and for any and
      all
      Liquidated Damages, if any (as this term is defined in the Debenture
      Registration Rights Agreement). DCM shall be paid a cash fee of Fifty Dollars
      ($50) for every occasion they act pursuant to the Irrevocable Transfer Agent
      Instructions. The Company shall not change its transfer agent without the
      express written consent of the Holder, which may be withheld by the Holder
      in
      its sole discretion. The Company warrants that no instruction other than the
      Irrevocable Transfer Agent Instructions referred to in this Section 10, will
      be
      given by the Company to its transfer agent and that the issuance of Shares
      shall
      otherwise be freely transferable on the books and records of the Company as
      and
      to the extent provided in this Agreement and the Debenture Registration Rights
      Agreement. Nothing in this Section 10 shall affect in any way the Holder's
      obligations and agreement to comply with all applicable securities laws upon
      resale of Shares. If the Holder provides the Company with an opinion of counsel,
      in form, scope and substance customary for opinions of counsel in comparable
      transactions to the effect that registration of a resale by the Holder of any
      of
      the Conversion Shares is not required under the 1933 Act, the Company shall
      within two (2) business days instruct its transfer agent to issue one or more
      certificates in such name and in such denominations as specified by the Holder.
      The Company acknowledges that a breach by it of its obligations hereunder will
      cause irreparable harm to the Holder by vitiating the intent and purpose of
      the
      transaction contemplated hereby. Accordingly, the Company acknowledges that
      the
      remedy at law for a breach of its obligations under this Section 10 will be
      inadequate and agrees, in the event of a breach or threatened breach by the
      Company of the provisions of this Section 10, that the Holder shall be entitled,
      in addition to all other available remedies, to an injunction restraining any
      breach and requiring immediate issuance and transfer, without the necessity
      of
      showing economic loss and without any bond or other security being required.
      

    

    11.
      Waiver:

    

    The
      Holder's delay or failure at any time or times hereafter to require strict
      performance by Company of any undertakings, agreements or covenants shall not
      waiver, affect, or diminish any right of the Holder under this Agreement to
      demand strict compliance and performance herewith. Any waiver by the Holder
      of
      any Event of Default shall not waive or affect any other Event of Default,
      whether such Event of Default is prior or subsequent thereto and whether of
      the
      same or a different type. None of the undertakings, agreements and covenants
      of
      the Company contained in this Agreement, and no Event of Default, shall be
      deemed to have been waived by the Holder, nor may this Agreement be amended,
      changed or modified, unless such waiver, amendment, change or modification
      is
      evidenced by an instrument in writing specifying such waiver, amendment, change
      or modification and signed by the Holder. 

    

    12.
      Waiver of Jury Trial. 

    

    AS
      A
      MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE
      PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
      RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
      ASSOCIATED WITH THIS TRANSACTION. 

    

    

    [BALANCE
      OF PAGE INTENTIONALLY LEFT BLANK)

    

    
      
         

         

      

      
         

        
          

        

      

      
         

      

    

    Hyperdynamics
      Corp.

    

    QUESTIONNAIRE

    

    

    The
      information contained in this Questionnaire is being furnished in order to
      determine whether the undersigned’s subscription to purchase the Debentures
      described in the Subscription Agreement may be accepted.

    

    ALL
      INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY.
      The
      undersigned understands, however, that the Company may present this
      Questionnaire to such parties as it deems appropriate if called upon to
      establish that the proposed offer and sale of the Securities is exempt from
      registration under the 1933 Act, as amended. Further, the undersigned
      understands that the offering is required to be reported to the Securities
      and
      Exchange Commission, NASDAQ and to various state securities and “blue sky”
regulators.

    

    IN
      ADDITION TO SIGNING THE SIGNATURE PAGE, IF REQUESTED BY THE COMPANY, THE
      UNDERSIGNED MUST COMPLETE FORM W-9.

    

    I. PLEASE
      CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES.

    

    1. The
      undersigned: (a) has total assets in excess of $5,000,000; (b) was not formed
      for the specific purpose of acquiring the securities and (c) has its principal
      place of business in ___________.

     

    
      	 	
              2.

            	
              The
                undersigned is a natural person whose individual net worth* or joint
                net
                worth with his or her spouse exceeds
                $1,000,000.

            

    

    

    
      	 	
              3.

            	
              The
                undersigned is a natural person who had an individual income* in
                excess of
                $200,000 in each of the two most recent years and who reasonably
                expects
                an individual income in excess of $200,000 in the current year. Such
                income is solely that of the undersigned and excludes the income
                of the
                undersigned’s spouse.

            

    

    

    
      	 	
              4.

            	
              The
                undersigned is a natural person who, together with his or her spouse,
                has
                had a joint income* in excess of $300,000 in each of the two most
                recent
                years and who reasonably expects a joint income in excess of $300,000
                in
                the current year.

            

    

    

    * For
      purposes of this Questionnaire, the term “net worth” means the excess of total
      assets over total liabilities. In determining “income”, an investor should add
      to his or her adjusted gross income any amounts attributable to tax-exempt
      income received, losses claimed as a limited partner in any limited partnership,
      deductions claimed for depletion, contributions to IRA or Keogh retirement
      plan,
      alimony payments and any amount by which income from long-term capital gains
      has
      been reduced in arriving at adjusted gross income.

    

    

    5. The
      undersigned is:

    

    (a) a
      bank as
      defined in Section 3(a)(2) of the 1933 Act; or

    

    (b) a
      savings
      and loan association or other institution as defined in Section 3(a)(5)(A)
      of
      the 1933 Act whether acting in its individual or fiduciary capacity;
      or

    

    (c) a
      broker
      or dealer registered pursuant to Section 15 of the 1934 Act; or

    

    (d) an
      insurance company as defined in Section 2(13) of the 1933 Act; or

    

    (e) An
      investment company registered under the Investment Company Act of 1940 or a
      business development company as defined in Section 2(a)(48) of the Investment
      Company Act of 1940; or 

    

    (f) a
      small
      business investment company licensed by the U.S. Small Business Administration
      under Section 301 (c) or (d) of the Small Business Investment Act of 1958;
      or

    

    
      	
              X

            	
              6.

            	
              The
                undersigned is an entity in which all of the equity owners are accredited
                investors.

            

    

    
      
        
 

         

      

      
         

        
          

        

      

      
         

      

    

    II. HOLDER
      INFORMATION.

    

    Name
      of
      Entity ___Dutchess
      Private Equities Fund, II, L.P._

    

    Person’s
      Name Douglas
      Leighton
      Title:_Managing
      Member

    

    State
      of
      Organization ____Delaware___________________
      

    

    Principal
      Business Address ___312
      Stuart St, Third Floor__
      

    

    City,
      State, Zip Code ______Boston,
      MA 02116__________
      

    

    Taxpayer
      Identification Number _____________________ 

    

    - Phone
      __617-960-3570________
      Fax ___617-249-0947___
      

    

    Send
      Correspondence to:

    _______________________________________________
      

    _______________________________________________
      

    _______________________________________________
      

    

    

    
      
        HDY.SUB.AUGUST.2005.FINAL.JANUARY.2006.REVISION

         

        

         

      

      
         

        
          

        

      

      
         

      

    

    Hyperdynamics
      Corp.

    SIGNATURE
      PAGE

    

    Your
      signature on this Signature Page evidences your agreement to be bound by the
      Questionnaire, Subscription Agreement and Debenture Registration Rights
      Agreement. 

    

    1. The
      undersigned hereby represents that (a) the information contained in the
      Questionnaire is complete and accurate and (b) the undersigned will
      notify
      Company
      immediately if any material change in any of the information occurs prior to
      the
      acceptance of the undersigned’s subscription and will promptly send Company
      written
      confirmation of such change.

    

    2. The
      undersigned signatory hereby certifies that he/she has read and understands
      the
      Subscription Agreement and Questionnaire, and the representations made by the
      undersigned in the Subscription Agreement and Questionnaire are true and
      accurate.

    

     

    

    $1,500,000     August
      12, 2005

    ______________________________  ________________________
      

    Amount
      of
      Debentures being purchased    Date

    

     

    By:
      _________________________________ 

    (Signature)

    

    Name:
       Douglas
      Leighton 

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

    (Please
      Type or Print)

    

    Title:
      Managing Member,

    Dutchess
      Capital Management, LLC;

    General
      Partner to:

    Dutchess
      Private Equities Fund II, LP

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

    (Please
      Type or Print)

    

    

    

    

    

    
      
         

         

      

      
         

        
          

        

      

      
         

      

    

    

    COMPANY
      ACCEPTANCE PAGE

    

    

    This
      Subscription Agreement accepted and agreed as amended on January 9, 2006 to
      the
      original Subscription Agreement 12th day of August, 2005.

    

    

    By
      Hyperdynamics Corp.
      and duly
      authorized to sign on behalf of the Company:

    

    

    By__________________________________
      

    Kent
      Watts, CEO

     

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    LIST
      OF
      EXHIBITS

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

    

    EXHIBIT
      A  Notice
      of
      Conversion (INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005 BETWEEN
      THE
      COMPANY AND THE INVESTOR)

    EXHIBIT
      B  Debenture
      Registration Rights Agreement(INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST
      12, 2005 BETWEEN THE COMPANY AND THE INVESTOR)

    EXHIBIT
      C  Debenture
      Agreement(INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005 BETWEEN
      THE
      COMPANY AND THE INVESTOR)

    EXHIBIT
      D  Opinion
      of Company's Counsel(INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005
      BETWEEN THE COMPANY AND THE INVESTOR)

    EXHIBIT
      E  Board
      Resolution(INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005 BETWEEN
      THE
      COMPANY AND THE INVESTOR)

    

    LIST
      OF
      SCHEDULES

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

    

    Schedule
      3(a)  Subsidiaries
      (INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005 BETWEEN THE COMPANY
      AND THE INVESTOR)

    Schedule
      3(c)  Capitalization
      (INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005 BETWEEN THE COMPANY
      AND THE INVESTOR)

    Schedule
      3(e)  Conflicts
      (INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005 BETWEEN THE COMPANY
      AND THE INVESTOR)

    Schedule
      3(g)  Material
      Changes (INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005 BETWEEN THE
      COMPANY AND THE INVESTOR)

    Schedule
      3(h)  Litigation
      (INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005 BETWEEN THE COMPANY
      AND THE INVESTOR)

    Schedule
      3(l)  Intellectual
      Property(INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005 BETWEEN THE
      COMPANY AND THE INVESTOR)

    Schedule
      3(n)  Liens
      (INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005 BETWEEN THE COMPANY
      AND THE INVESTOR)

    Schedule
      3(t)  Certain
      Transactions (INCLUDED IN SUBSCRIPTION AGREEMENT DATED AUGUST 12, 2005 BETWEEN
      THE COMPANY AND THE INVESTOR)

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