Document:

Exhibit 10.4

     Exhibit
      10.4

     

    SECURITIES
      PURCHASE AGREEMENT

     

    THIS
      SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
      August 25, 2006, by and between BLAST ENERGY SERVICES, INC., a California
      corporation (the “Company”), and LAURUS MASTER FUND, LTD., a Cayman Islands
      company (the “Purchaser”).

     

    RECITALS

     

    WHEREAS,
      the Company has authorized the sale to the Purchaser of a Secured Term Note
      in
      the aggregate principal amount of FORTY MILLION SIX HUNDRED THOUSAND DOLLARS
      ($40,600,000) in the form of Exhibit A hereto (as amended, modified and/or
      supplemented from time to time, the “Note”);

     

    WHEREAS,
      the Company wishes to issue to the Purchaser (i) a warrant in the form of
      Exhibit B hereto (as amended, modified and/or supplemented from time to time,
      the “Par Value Warrant”) to purchase up to 6,090,000 shares of the Company’s
      common stock, no par value per share (the “Common Stock”) and (ii) a warrant in
      the form of Exhibit C hereto (as amended, modified and/or supplemented from
      time
      to time, the “Additional Warrant”, and together with the Par Value Warrant, the
“Warrants” and each, a “Warrant”) to purchase up to 6,090,000 shares of the
      Company’s Common Stock (each subject to adjustment as set forth therein) in
      connection with the Purchaser’s purchase of the Note;

     

    WHEREAS,
      the Purchaser desires to purchase the Note and the Warrants on the terms and
      conditions set forth herein; and

     

    WHEREAS,
      the Company desires to issue and sell the Note and Warrants to the Purchaser
      on
      the terms and conditions set forth herein.

     

    AGREEMENT

     

    NOW,
      THEREFORE, in consideration of the foregoing recitals and the mutual promises,
      representations, warranties and covenants hereinafter set forth and for other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereto agree as follows:

     

    1. Agreement
      to Sell and Purchase.
      Pursuant to the terms and conditions set forth in this Agreement, on the Closing
      Date (as defined in Section 3), the Company shall sell to the Purchaser, and
      the
      Purchaser shall purchase from the Company, the Note. The sale of the Note on
      the
      Closing Date shall be known as the “Offering.” The Note will mature on the
      Maturity Date (as defined in the Note). Collectively, the Note and Warrants
      and
      Common Stock issuable upon exercise of the Warrants are referred to as the
      “Securities.”

     

    2. Fees
      and Warrant. On the Closing Date:

     

    (a) The
      Company will issue and deliver to the Purchaser (i) the Par Value Warrant to
      purchase up to 6,090,000 shares of Common Stock and (ii) the
      Additional

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Warrant
      to purchase up to 6,090,000 shares of Common Stock (each subject to adjustment
      as set forth therein) in connection with the Offering, pursuant to Section
      1
      hereof. All the representations, covenants, warranties, undertakings, and
      indemnification, and other rights made or granted to or for the benefit of
      the
      Purchaser by the Company are hereby also made and granted for the benefit of
      the
      holder of the each Warrant and shares of the Company’s Common Stock issuable
      upon exercise of the each Warrant (the “Warrant Shares”).

     

    (b) Subject
      to the terms of Section 2(d) below, the Company shall pay to Laurus Capital
      Management, LLC, the investment manager of the Purchaser (“LCM”), a
      non-refundable payment in an amount equal to three and one half percent (3.50%)
      of the aggregate principal amount of the Note. The foregoing payment is referred
      to herein as the “LCM Payment.” Such payment shall be deemed fully earned on the
      Closing Date and shall not be subject to rebate or proration for any
      reason.

     

    (c) The
      Company shall reimburse the Purchaser for its reasonable expenses (including
      reasonable and customary legal fees and expenses) incurred in connection with
      the entering into this Agreement and the Related Agreements (as hereinafter
      defined). The Company shall reimburse the Purchaser for the expenses incurred
      by
      the Purchaser in connection with the Purchaser’s due diligence review of the
      Company and its Subsidiaries (as defined in Section 4.2) and all related
      matters, and such due diligence reimbursement shall not exceed $30,000 (the
“Due
      Diligence Fee Cap”). Notwithstanding the prior sentence, the Due Diligence Fee
      Cap shall not apply to the cost of any required third-party appraisals or
      extraordinary diligence necessary for the Purchaser to complete its due
      diligence. Amounts required to be paid under this Section 2(c) will be paid
      on
      the Closing Date.

     

    (d) The
      LCM
      Payment and the expenses referred to in the preceding clause (c) (net of
      deposits previously paid by the Company) shall be paid at closing out of funds
      held pursuant to the Escrow Agreement (as defined below) and a disbursement
      letter (the “Disbursement Letter”).

     

    3. Closing,
      Delivery and Payment.

     

    3.1 Closing.
      Subject to the terms and conditions herein, the closing of the transactions
      contemplated hereby (the “Closing”), shall take place on the date hereof, at
      such time or place as the Company and the Purchaser may mutually agree (such
      date is hereinafter referred to as the “Closing Date”).

     

    3.2 Delivery.
      Pursuant to the Escrow Agreement, at the Closing on the Closing Date, the
      Company will deliver to the Purchaser, among other things, the Note and the
      Warrants and the Purchaser will deliver to the Company, among other things,
      the
      amounts set forth in the Disbursement Letter by certified funds or wire
      transfer. The Company hereby acknowledges and agrees that Purchaser’s obligation
      to purchase the Note from the Company on the Closing Date shall be contingent
      upon the satisfaction (or waiver by the Purchaser in its sole

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    discretion)
      of the items and matters set forth in the closing checklist provided by the
      Purchaser to the Company on or prior to the Closing Date.

     

    4. Representations
      and Warranties of the Company.
      The
      Company hereby represents and warrants to the Purchaser as follows:

     

    4.1 Organization,
      Good Standing and Qualification. Each of the Company and each of its
      Subsidiaries is a corporation, partnership or limited liability company, as
      the
      case may be, duly organized, validly existing and in good standing under the
      laws of its jurisdiction of organization. Each of the Company and each of its
      Subsidiaries has the corporate, limited liability company or partnership, as
      the
      case may be, power and authority to own and operate its properties and assets
      and, insofar as it is or shall be a party thereto, to (1) execute and deliver
      (i) this Agreement, (ii) the Note and the Warrants to be issued in connection
      with this Agreement, (iii) the Master Security Agreement dated as of the date
      hereof between the Company, certain Subsidiaries of the Company and the
      Purchaser (as amended, modified and/or supplemented from time to time, the
      “Master Security Agreement”), (iv) the Intellectual Property Security Agreement
      dated as of the date hereof made by the Company in favor of the Purchaser (as
      amended, modified and/or supplemented from time to time, the “IP Security
      Agreement”), (v) the Registration Rights Agreement relating to the Securities
      dated as of the date hereof between the Company and the Purchaser (as amended,
      modified and/or supplemented from time to time, the “Registration Rights
      Agreement”), (vi) the Subsidiary Guaranty dated as of the date hereof made by
      certain Subsidiaries of the Company (as amended, modified and/or supplemented
      from time to time, the “Subsidiary Guaranty”), (vii) the Membership Interest
      Pledge Agreement dated as of the date hereof among the Company, certain
      Subsidiaries of the Company and the Purchaser (as amended, modified and/or
      or
      supplemented from time to time, the “Pledge Agreement”), (viii) the Funds Escrow
      Agreement dated as of the date hereof among the Company, the Purchaser and
      the
      escrow agent referred to therein, substantially in the form of Exhibit D hereto
      (as amended, modified and/or supplemented from time to time, the “Escrow
      Agreement”) and (ix) all other documents, instruments and agreements entered
      into in connection with the transactions contemplated hereby and thereby (the
      preceding clauses (ii) through (ix), collectively, the “Related Agreements”);
      (2) issue and sell the Note; (3) issue and sell the Warrants and the Warrant
      Shares; and (4) carry out the provisions of this Agreement and the Related
      Agreements and to carry on its business as presently conducted. Each of the
      Company and each of its Subsidiaries is duly qualified and is authorized to
      do
      business and is in good standing as a foreign corporation, partnership or
      limited liability company, as the case may be, in all jurisdictions in which
      the
      nature or location of its activities and of its properties (both owned and
      leased) makes such qualification necessary, except for those jurisdictions
      in
      which failure to do so has not, or could not reasonably be expected to have,
      individually or in the aggregate, a material adverse effect on the business,
      assets, liabilities, condition (financial or otherwise), properties, operations
      or prospects of the Company and its Subsidiaries, taken individually and as
      a
      whole (a “Material Adverse Effect”).

     

    4.2 Subsidiaries.
      Each direct and indirect Subsidiary of the Company, the direct owner of such
      Subsidiary and its percentage ownership thereof, is set forth on Schedule 4.2.
      For the purpose of this Agreement, a “Subsidiary” of any person or entity means
      (i) a corporation or other entity whose shares of stock or other ownership
      interests having ordinary

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    voting
      power (other than stock or other ownership interests having such power only
      by
      reason of the happening of a contingency) to elect a majority of the directors
      of such corporation, or other persons or entities performing similar functions
      for such person or entity, are owned, directly or indirectly, by such person
      or
      entity or (ii) a corporation or other entity in which such person or entity
      owns, directly or indirectly, more than 50% of the equity interests at such
      time.

     

    4.3 Capitalization;
      Voting Rights.

     

    (a) The
      authorized capital stock of the Company as of the date hereof consists of
      100,000,000 shares of Common Stock, no par value per share, 45,125,404 shares
      of
      which are issued and outstanding, including 1,150,000 shares reserved for
      settlement of a law suit described in Schedule 4.3. The authorized, issued
      and
      outstanding capital stock of each Subsidiary of the Company is set forth on
      Schedule 4.3.

     

    (b) Except
      as
      disclosed on Schedule 4.3, other than: (i) the shares reserved for issuance
      under the Company’s stock option plans; and (ii) shares which may be granted
      pursuant to this Agreement and the Related Agreements, there are no outstanding
      options, warrants, rights (including conversion or preemptive rights and rights
      of first refusal), proxy or stockholder agreements, or arrangements or
      agreements of any kind for the purchase or acquisition from the Company of
      any
      of its securities. Except as disclosed on Schedule 4.3, neither the offer,
      issuance or sale of any of the Note or either of the Warrants, or the issuance
      of any of the Warrant Shares, nor the consummation of any transaction
      contemplated hereby will result in a change in the price or number of any
      securities of the Company outstanding, under anti-dilution or other similar
      provisions contained in or affecting any such securities.

     

    (c) All
      issued and outstanding shares of the Company’s Common Stock: (i) have been duly
      authorized and validly issued and are fully paid and nonassessable; and (ii)
      were issued in compliance with all applicable state and federal laws concerning
      the issuance of securities.

     

    (d) The
      rights, preferences, privileges and restrictions of the shares of the Common
      Stock are as stated in the Company’s Certificate of Incorporation as amended
      through the date hereof (the “Charter”). The Warrant Shares have been duly and
      validly reserved for issuance. When issued in compliance with the provisions
      of
      this Agreement and the Company’s Charter, the Securities will be validly issued,
      fully paid and nonassessable, and will be free of any liens or encumbrances;
      provided, however, that the Securities may be subject to restrictions on
      transfer under state and/or federal securities laws as set forth herein or
      as
      otherwise required by such laws at the time a transfer is proposed.

     

    4.4 Authorization;
      Binding Obligations. All corporate, partnership or limited liability company,
      as
      the case may be, action on the part of the Company and each of its Subsidiaries
      (including their respective officers and directors) necessary for the
      authorization of this Agreement and the Related Agreements, the performance
      of
      all obligations of the Company

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    and
      its
      Subsidiaries hereunder and under the other Related Agreements at the Closing
      and, the authorization, sale, issuance and delivery of the Note and Warrants
      has
      been taken or will be taken prior to the Closing. This Agreement and the Related
      Agreements, when executed and delivered and to the extent it is a party thereto,
      will be valid and binding obligations of each of the Company and each of its
      Subsidiaries, enforceable against each such person or entity in accordance
      with
      their terms, except:

     

    (a) as
      limited by applicable bankruptcy, insolvency, reorganization, mora-torium or
      other laws of general application affecting enforcement of creditors’ rights;
      and

     

    (b) general
      principles of equity that restrict the availability of equitable or legal
      remedies.

     

    The
      sale
      of the Note is not and will not be subject to any preemptive rights or rights
      of
      first refusal that have not been properly waived or complied with. The issuance
      of the Warrant and the subsequent exercise of the Warrant for Warrant Shares
      are
      not and will not be subject to any preemptive rights or rights of first refusal
      that have not been properly waived or complied with.

     

    4.5 Liabilities;
      Solvency.

     

    (a) Neither
      the Company nor any of its Subsidiaries has any liabilities, except current
      liabilities incurred in the ordinary course of business and liabilities
      disclosed in any of the Company’s filings under the Securities Exchange Act of
      1934 (“Exchange Act”) made prior to the date of this Agreement (collectively,
      the “Exchange Act Filings”), copies of which have been filed on EDGAR or
      otherwise provided to the Purchaser.

     

    (b) Both
      before and after giving effect to (a) the consummation of the transactions
      contemplated hereby (b) the disbursement of the proceeds of, or the assumption
      of the liability in respect of, the Note pursuant to the instructions or
      agreement of the Company and (c) the payment and accrual of all transaction
      costs in connection with the foregoing, the Company and each Subsidiary of
      the
      Company, is and will be, Solvent. For purposes of this Section 4.5(b), “Solvent”
means, with respect to any Person on a particular date, that on such date (a)
      the fair value of the property of such Person is greater than the total amount
      of liabilities, including contingent liabilities, of such Person; (b) the
      present fair salable value of the assets of such Person is not less than the
      amount that will be required to pay the probable liability of such Person on
      its
      debts as they become absolute and matured; (c) such Person does not intend
      to,
      and does not believe that it will, incur debts or liabilities beyond such
      Person’s ability to pay as such debts and liabilities mature; and (d) such
      Person is not engaged in a business or transaction, and is not about to engage
      in a business or transaction, for which such Person’s property would constitute
      and unreasonably small capital. The amount of contingent liabilities (such
      as
      litigation, guaranties and pension plan liabilities) at any time shall be
      computed as the amount that, in light of all the facts and circumstances
      existing at the time, represents the amount that can reasonably be expected
      to
      become an actual or matured liability.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.6 Agreements;
      Action. Except as set forth on Schedule 4.6 or as disclosed in any Exchange
      Act
      Filings:

     

    (a) there
      are
      no agreements, understandings, instruments, contracts, proposed transactions,
      judgments, orders, writs or decrees to which the Company or any of its
      Subsidiaries is a party or by which it is bound which may involve: (i)
      obligations (contingent or otherwise) of, or payments to, the Company or any
      of
      its Subsidiaries in excess of $50,000 (other than obligations of, or payments
      to, the Company or any of its Subsidiaries arising from purchase or sale
      agreements entered into in the ordinary course of business); or (ii) the
      transfer or license of any patent, copyright, trade secret or other proprietary
      right to or from the Company or any of its Subsidiaries (other than licenses
      arising from the purchase of “off the shelf” or other standard products); or
      (iii) provisions restricting the development, manufacture or distribution of
      the
      Company’s or any of its Subsidiaries products or services; or (iv)
      indemnification by the Company or any of its Subsidiaries with respect to
      infringements of proprietary rights.

     

    (b) Since
      June 30, 2006 (the “Balance Sheet Date”), neither the Company nor any of its
      Subsidiaries has: (i) declared or paid any dividends, or authorized or made
      any
      distribution upon or with respect to any class or series of its capital stock
      and/or membership interests; (ii) incurred any indebtedness for money borrowed
      or any other liabilities (other than ordinary course obligations) individually
      in excess of $50,000 or, in the case of indebtedness and/or liabilities
      individually less than $50,000, in excess of $100,000 in the aggregate; (iii)
      made any loans or advances to any person or entity not in excess, individually
      or in the aggregate, of $100,000, other than ordinary course advances for travel
      expenses; or (iv) sold, exchanged or otherwise disposed of any of its assets
      or
      rights, other than the sale of its inventory in the ordinary course of business.
      

     

    (c) For
      the
      purposes of subsections (a) and (b) above, all indebtedness, liabilities,
      agreements, understandings, instruments, contracts and proposed transactions
      involving the same person or entity (including persons or entities the Company
      or any Subsidiary of the Company has reason to believe are affiliated therewith)
      shall be aggregated for the purpose of meeting the individual minimum dollar
      amounts of such subsections.

     

    (d) The
      Company maintains disclosure controls and procedures (“Disclosure Controls”)
      designed to ensure that information required to be disclosed by the Company
      in
      the reports that it files or submits under the Exchange Act is recorded,
      processed, summarized, and reported, within the time periods specified in the
      rules and forms of the Securities and Exchange Commission (“SEC”).

     

    (e) The
      Company makes and keep books, records, and accounts, that, in reasonable detail,
      accurately and fairly reflect the transactions and dispositions of the Company’s
      assets. The Company maintains internal control over financial reporting
      (“Financial Reporting Controls”) designed by, or under the supervision of, the
      Company’s principal executive and principal financial officers, and effected by
      the Company’s board of directors, management, and other personnel, to provide
      reasonable

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    assurance
      regarding the reliability of financial reporting and the preparation of
      financial statements for external purposes in accordance with generally accepted
      accounting principles (“GAAP”), including that:

     

    (i) transactions
      are executed in accordance with management’s general or specific
      authorization;

     

    (ii) unauthorized
      acquisition, use, or disposition of the Company’s assets that could have a
      material effect on the financial statements are prevented or timely
      detected;

     

    (iii) transactions
      are recorded as necessary to permit preparation of financial statements in
      accordance with GAAP, and that the Company’s receipts and expenditures are being
      made only in accordance with authorizations of the Company’s management and
      board of directors;

     

    (iv) transactions
      are recorded as necessary to maintain accountability for assets;
      and

     

    (v) the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals, and appropriate action is taken with respect to any
      differences.

     

    (f) There
      is
      no weakness in any of the Company’s Disclosure Controls or Financial Reporting
      Controls that is required to be disclosed in any of the Exchange Act Filings,
      except as so disclosed.

     

    4.7 Obligations
      to Related Parties. Except as set forth on Schedule 4.7, there are no
      obligations of the Company or any of its Subsidiaries to officers, directors,
      stockholders or employees of the Company or any of its Subsidiaries other
      than:

     

    (a) for
      payment of salary or fees for services rendered and for bonus
      payments;

     

    (b) reimbursement
      for reasonable expenses incurred on behalf of the Company and its
      Subsidiaries;

     

    (c) for
      other
      standard employee benefits made generally available to all employees (including
      stock option agreements outstanding under any stock option plan approved by
      the
      Board of Directors of the Company and each Subsidiary of the Company, as
      applicable); and

     

    (d) obligations
      listed in the Company’s and each of its Subsidiary’s financial statements or
      disclosed in any of the Company’s Exchange Act Filings.

     

    Except
      as
      described above or set forth on Schedule 4.7, none of the officers, directors
      or, to the best of the Company’s knowledge, key employees or stockholders of the
      Company or any of its

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Subsidiaries
      or any members of their immediate families, are indebted to the Company or
      any
      of its Subsidiaries, individually or in the aggregate, in excess of $50,000
      or
      have any direct or indirect ownership interest in any firm or corporation with
      which the Company or any of its Subsidiaries is affiliated or with which the
      Company or any of its Subsidiaries has a business relationship, or any firm
      or
      corporation which competes with the Company or any of its Subsidiaries, other
      than passive investments in publicly traded companies (representing less than
      one percent (1%) of such company) which may compete with the Company or any
      of
      its Subsidiaries. Except as described above, no officer, director or stockholder
      of the Company or any of its Subsidiaries, or any member of their immediate
      families, is, directly or indirectly, interested in any material contract with
      the Company or any of its Subsidiaries and no agreements, understandings or
      proposed transactions are contemplated between the Company or any of its
      Subsidiaries and any such person. Except as set forth on Schedule 4.7, neither
      the Company nor any of its Subsidiaries is a guarantor or indemnitor of any
      indebtedness of any other person or entity.

     

    4.8 Changes.
      Since the Balance Sheet Date, except as disclosed in any Exchange Act Filing
      or
      in any Schedule to this Agreement or to any of the Related Agreements, there
      has
      not been:

     

    (a) any
      change in the business, assets, liabilities, condition (financial or otherwise),
      properties, operations or prospects of the Company or any of its Subsidiaries,
      which individually or in the aggregate has had, or could reasonably be expected
      to have, individually or in the aggregate, a Material Adverse
      Effect;

     

    (b) any
      resignation or termination of any officer, key employee or group of employees
      of
      the Company or any of its Subsidiaries;

     

    (c) any
      material change, except in the ordinary course of business, in the contingent
      obligations of the Company or any of its Subsidiaries by way of guaranty,
      endorsement, indemnity, warranty or otherwise;

     

    (d) any
      damage, destruction or loss, whether or not covered by insurance, which has
      had,
      or could reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect;

     

    (e) any
      waiver by the Company or any of its Subsidiaries of a valuable right or of
      a
      material debt owed to it;

     

    (f) any
      direct or indirect loans made by the Company or any of its Subsidiaries to
      any
      stockholder, employee, officer or director of the Company or any of its
      Subsidiaries, other than advances made in the ordinary course of
      business;

     

    (g) any
      material change in any compensation arrangement or agreement with any employee,
      officer, director or stockholder of the Company or any of its
      Subsidiaries;

     

    (h) any
      declaration or payment of any dividend or other distribution of the assets
      of
      the Company or any of its Subsidiaries;

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (i) any
      labor
      organization activity related to the Company or any of its
      Subsidiaries;

     

    (j) any
      debt,
      obligation or liability incurred, assumed or guaranteed by the Company or any
      of
      its Subsidiaries, except those for immaterial amounts and for current
      liabilities incurred in the ordinary course of business;

     

    (k) any
      sale,
      assignment or transfer of any patents, trademarks, copyrights, trade secrets
      or
      other intangible assets owned by the Company or any of its
      Subsidiaries;

     

    (l) any
      change in any material agreement to which the Company or any of its Subsidiaries
      is a party or by which either the Company or any of its Subsidiaries is bound
      which either individually or in the aggregate has had, or could reasonably
      be
      expected to have, individually or in the aggregate, a Material Adverse
      Effect;

     

    (m) any
      other
      event or condition of any character that, either individually or in the
      aggregate, has had, or could reasonably be expected to have, individually or
      in
      the aggregate, a Material Adverse Effect; or

     

    (n) any
      arrangement or commitment by the Company or any of its Subsidiaries to do any
      of
      the acts described in subsection (a) through (m) above.

     

    4.9 `Title
      to
      Properties and Assets; Liens, Etc. Except as set forth on Schedule 4.9, each
      of
      the Company and each of its Subsidiaries has good and marketable title to its
      properties and assets, and good title to its leasehold interests, in each case
      subject to no mortgage, pledge, lien, lease, encumbrance or charge, other
      than:

     

    (a) those
      resulting from taxes which have not yet become delinquent;

     

    (b) minor
      liens and encumbrances which do not materially detract from the value of the
      property subject thereto or materially impair the operations of the Company
      or
      any of its Subsidiaries, so long as in each such case, such liens and
      encumbrances have no effect on the lien priority of the Purchaser in such
      property; and

     

    (c) those
      that have otherwise arisen in the ordinary course of business, so long as they
      have no effect on the lien priority of the Purchaser therein.

     

    All
      facilities, machinery, equipment, fixtures, vehicles and other properties owned,
      leased or used by the Company and its Subsidiaries are in good operating
      condition and repair and are reasonably fit and usable for the purposes for
      which they are being used. Except as set forth on Schedule 4.9, the Company
      and
      its Subsidiaries are in compliance with all material terms of each lease to
      which it is a party or is otherwise bound.

     

    4.10 Intellectual
      Property.

     

    (a) Each
      of
      the Company and each of its Subsidiaries owns or possesses sufficient legal
      rights to all patents, trademarks, service marks, trade names,
      copyrights,

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    trade
      secrets, licenses, information and other proprietary rights and processes
      necessary for its business as now conducted and, to the Company’s knowledge, as
      presently proposed to be conducted (the “Intellectual Property”), without any
      known infringement of the rights of others. Except as set forth on Schedule
      4.10, there are no outstanding options, licenses or agreements of any kind
      relating to the foregoing proprietary rights, nor is the Company or any of
      its
      Subsidiaries bound by or a party to any options, licenses or agreements of
      any
      kind with respect to the patents, trademarks, service marks, trade names,
      copyrights, trade secrets, licenses, information and other proprietary rights
      and processes of any other person or entity other than such licenses or
      agreements arising from the purchase of “off the shelf” or standard products.

     

    (b) Neither
      the Company nor any of its Subsidiaries has received any communications alleging
      that the Company or any of its Subsidiaries has violated any of the patents,
      trademarks, service marks, trade names, copyrights or trade secrets or other
      proprietary rights of any other person or entity, nor is the Company or any
      of
      its Subsidiaries aware of any basis therefor.

     

    (c) The
      Company does not believe it is or will be necessary to utilize any inventions,
      trade secrets or proprietary information of any of its employees made prior
      to
      their employment by the Company or any of its Subsidiaries, except for
      inventions, trade secrets or proprietary information that have been rightfully
      assigned to the Company or any of its Subsidiaries.

     

    4.11 Compliance
      with Other Instruments. Neither the Company nor any of its Subsidiaries is
      in
      violation or default of (x) any term of its Charter or Bylaws, or (y) any
      provision of any indebtedness, mortgage, indenture, contract, agreement or
      instrument to which it is party or by which it is bound or of any judgment,
      decree, order or writ, which violation or default, in the case of this clause
      (y), has had, or could reasonably be expected to have, either individually
      or in
      the aggregate, a Material Adverse Effect. The execution, delivery and
      performance of and compliance with this Agreement and the Related Agreements
      to
      which it is a party, and the issuance and sale of the Note by the Company and
      the other Securities by the Company each pursuant hereto and thereto, will
      not,
      with or without the passage of time or giving of notice, result in any such
      material violation, or be in conflict with or constitute a default under any
      such term or provision, or result in the creation of any mortgage, pledge,
      lien,
      encumbrance or charge upon any of the properties or assets of the Company or
      any
      of its Subsidiaries or the suspension, revocation, impairment, forfeiture or
      nonrenewal of any permit, license, authorization or approval applicable to
      the
      Company, its business or operations or any of its assets or
      properties.

     

    4.12 Litigation.
      Except as set forth on Schedule 4.12 hereto, there is no action, suit,
      proceeding or investigation pending or, to the Company’s knowledge, currently
      threatened against the Company or any of its Subsidiaries that prevents the
      Company or any of its Subsidiaries from entering into this Agreement or the
      other Related Agreements, or from consummating the transactions contemplated
      hereby or thereby, or which has had, or could reasonably be expected to have,
      either individually or in the aggregate, a Material Adverse Effect or any change
      in the current equity ownership of the Company or any of its Subsidiaries,
      nor
      is

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    the
      Company aware that there is any basis to assert any of the foregoing. Neither
      the Company nor any of its Subsidiaries is a party to or subject to the
      provisions of any order, writ, injunction, judgment or decree of any court
      or
      government agency or instrumentality. There is no action, suit, proceeding
      or
      investigation by the Company or any of its Subsidiaries currently pending or
      which the Company or any of its Subsidiaries intends to initiate.

     

    4.13 Tax
      Returns and Payments. Each of the Company and each of its Subsidiaries has
      timely filed all tax returns (federal, state and local) required to be filed
      by
      it. All taxes shown to be due and payable on such returns, any assessments
      imposed, and all other taxes due and payable by the Company or any of its
      Subsidiaries on or before the Closing, have been paid or will be paid prior
      to
      the time they become delinquent. Except as set forth on Schedule 4.13, neither
      the Company nor any of its Subsidiaries has been advised:

     

    (a) that
      any
      of its returns, federal, state or other, have been or are being audited as
      of
      the date hereof; or

     

    (b) of
      any
      adjustment, deficiency, assessment or court decision in respect of its federal,
      state or other taxes.

     

    The
      Company has no knowledge of any liability for any tax to be imposed upon its
      properties or assets as of the date of this Agreement that is not adequately
      provided for.

     

    4.14 Employees.
      Except as set forth on Schedule 4.14, neither the Company nor any of its
      Subsidiaries has any collective bargaining agreements with any of its employees.
      There is no labor union organizing activity pending or, to the Company’s
      knowledge, threatened with respect to the Company or any of its Subsidiaries.
      Except as disclosed in the Exchange Act Filings or on Schedule 4.14, neither
      the
      Company nor any of its Subsidiaries is a party to or bound by any currently
      effective employment contract, deferred compensation arrangement, bonus plan,
      incentive plan, profit sharing plan, retirement agreement or other employee
      compensation plan or agreement. To the Company’s knowledge, no employee of the
      Company or any of its Subsidiaries, nor any consultant with whom the Company
      or
      any of its Subsidiaries has contracted, is in violation of any term of any
      employment contract, proprietary information agreement or any other agreement
      relating to the right of any such individual to be employed by, or to contract
      with, the Company or any of its Subsidiaries because of the nature of the
      business to be conducted by the Company or any of its Subsidiaries; and to
      the
      Company’s knowledge the continued employment by the Company and its Subsidiaries
      of their present employees, and the performance of the Company’s and its
      Subsidiaries’ contracts with its independent contractors, will not result in any
      such violation. Neither the Company nor any of its Subsidiaries is aware that
      any of its employees is obligated under any contract (including licenses,
      covenants or commitments of any nature) or other agreement, or subject to any
      judgment, decree or order of any court or administrative agency that would
      interfere with their duties to the Company or any of its Subsidiaries. Neither
      the Company nor any of its Subsidiaries has received any notice alleging that
      any such violation has occurred. Except for employees who have a current
      effective employment agreement with the Company or any of its Subsidiaries,
      no
      employee of the Company or any of its Subsidiaries has been granted the right
      to
      continued employment by the Company or any of its Subsidiaries or to any
      material compensation following termination of

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    employment
      with the Company or any of its Subsidiaries. Except as set forth on Schedule
      4.14, the Company is not aware that any officer, key employee or group of
      employees intends to terminate his, her or their employment with the Company
      or
      any of its Subsidiaries, nor does the Company or any of its Subsidiaries have
      a
      present intention to terminate the employment of any officer, key employee
      or
      group of employees.

     

    4.15 Registration
      Rights and Voting Rights. Except as set forth on Schedule 4.15 and except as
      disclosed in Exchange Act Filings, neither the Company nor any of its
      Subsidiaries is presently under any obligation, and neither the Company nor
      any
      of its Subsidiaries has granted any rights, to register any of the Company’s or
      its Subsidiaries’ presently outstanding securities or any of its securities that
      may hereafter be issued. Except as set forth on Schedule 4.15 and except as
      disclosed in Exchange Act Filings, to the Company’s knowledge, no stockholder of
      the Company or any of its Subsidiaries has entered into any agreement with
      respect to the voting of equity securities of the Company or any of its
      Subsidiaries.

     

    4.16 Compliance
      with Laws; Permits. Neither the Company nor any of its Subsidiaries is in
      violation of any provision of the Sarbanes-Oxley Act of 2002 or any SEC related
      regulation or rule or any rule of the Principal Market (as hereafter defined)
      promulgated thereunder or any other applicable statute, rule, regulation, order
      or restriction of any domestic or foreign government or any instrumentality
      or
      agency thereof in respect of the conduct of its business or the ownership of
      its
      properties which has had, or could reasonably be expected to have, either
      individually or in the aggregate, a Material Adverse Effect. No governmental
      orders, permissions, consents, approvals or authorizations are required to
      be
      obtained and no registrations or declarations are required to be filed in
      connection with the execution and delivery of this Agreement or any other
      Related Agreement and the issuance of any of the Securities, except such as
      have
      been duly and validly obtained or filed, or with respect to any filings that
      must be made after the Closing, as will be filed in a timely manner. Each of
      the
      Company and its Subsidiaries has all material franchises, permits, licenses
      and
      any similar authority necessary for the conduct of its business as now being
      conducted by it, the lack of which could, either individually or in the
      aggregate, reasonably be expected to have a Material Adverse
      Effect.

     

    4.17 Environmental
      and Safety Laws. Neither the Company nor any of its Subsidiaries is in violation
      of any applicable statute, law or regulation relating to the environment or
      occupational health and safety, and to its knowledge, no material expenditures
      are or will be required in order to comply with any such existing statute,
      law
      or regulation. Except as set forth on Schedule 4.17, no Hazardous Materials
      (as
      defined below) are used or have been used, stored, or disposed of by the Company
      or any of its Subsidiaries or, to the Company’s knowledge, by any other person
      or entity on any property owned, leased or used by the Company or any of its
      Subsidiaries. For the purposes of the preceding sentence, “Hazardous Materials”
shall mean:

     

    (a) materials
      which are listed or otherwise defined as “hazardous” or “toxic” under any
      applicable local, state, federal and/or foreign laws and regulations that govern
      the existence and/or remedy of contamination on property, the protection of
      the

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    environment
      from contamination, the control of hazardous wastes, or other activities
      involving hazardous substances, including building materials; or

     

    (b) any
      petroleum products (other than crude oil or natural gas) or nuclear
      materials.

     

    4.18 Valid
      Offering. Assuming the accuracy of the representations and warranties of the
      Purchaser contained in this Agreement, the offer, sale and issuance of the
      Securities will be exempt from the registration requirements of the Securities
      Act of 1933, as amended (the “Securities Act”), and will have been registered or
      qualified (or are exempt from registration and qualification) under the
      registration, permit or qualification requirements of all applicable state
      securities laws.

     

    4.19 Full
      Disclosure. Each of the Company and each of its Subsidiaries has provided the
      Purchaser with all information requested by the Purchaser in connection with
      its
      decision to purchase the Note and Warrant, including all information the Company
      and its Subsidiaries believe is reasonably necessary to make such investment
      decision. Neither this Agreement, the Related Agreements, the exhibits and
      schedules hereto and thereto nor any other document delivered by the Company
      or
      any of its Subsidiaries to Purchaser or its attorneys or agents in connection
      herewith or therewith or with the transactions contemplated hereby or thereby,
      contain any untrue statement of a material fact nor omit to state a material
      fact necessary in order to make the statements contained herein or therein,
      in
      light of the circumstances in which they are made, not misleading. Any financial
      projections and other estimates provided to the Purchaser by the Company or
      any
      of its Subsidiaries were based on the Company’s and its Subsidiaries’ experience
      in the industry and on assumptions of fact and opinion as to future events
      which
      the Company or any of its Subsidiaries, at the date of the issuance of such
      projections or estimates, believed to be reasonable.

     

    4.20 Insurance.
      Each of the Company and each of its Subsidiaries has general commercial, product
      liability, fire and casualty insurance policies with coverages which the Company
      believes are customary for companies similarly situated to the Company and
      its
      Subsidiaries in the same or similar business.

     

    4.21 SEC
      Reports. Except as set forth on Schedule 4.21, the Company has filed all proxy
      statements, reports and other documents required to be filed by it under the
      Securities Exchange Act 1934, as amended (the “Exchange Act”). The Company has
      furnished the Purchaser or has made available on EDGAR copies of: (a) its Annual
      Reports on Form 10-KSB for its fiscal years ended December 31, 2005; and (b)
      its
      Quarterly Reports on Form 10-QSB for its fiscal quarter ended March 31, 2006
      and
      June 30, 2006, and the Form 8-K filings which it has made during the fiscal
      year
      2006 to date (collectively, the “SEC Reports”). Except as set forth on Schedule
      4.21, each SEC Report was, at the time of its filing or as subsequently amended,
      in substantial compliance with the requirements of its respective form and
      none
      of the SEC Reports, nor the financial statements (and the notes thereto)
      included in the SEC Reports, as of their respective filing dates, 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.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.22 Listing.
      The Company’s Common Stock is listed or quoted, as applicable, on a Principal
      Market and satisfies and at all times hereafter will satisfy, all requirements
      for the continuation of such listing or quotation, as applicable. The Company
      has not received any notice that its Common Stock will be delisted from, or
      no
      longer quoted on, as applicable, the Principal Market or that its Common Stock
      does not meet all requirements for such listing or quotation, as applicable.
      For
      purposes hereof, the term “Principal Market” means the NASD Over The Counter
      Bulletin Board, NASDAQ Capital Market, NASDAQ National Markets System, American
      Stock Exchange or New York Stock Exchange (whichever of the foregoing is at
      the
      time the principal trading exchange or market for the Common
      Stock).

     

    4.23 No
      Integrated Offering. Neither the Company, nor any of its Subsidiaries or
      affiliates, nor any person acting on its or their behalf, has directly or
      indirectly made any offers or sales of any security or solicited any offers
      to
      buy any security under circumstances that would cause the offering of the
      Securities pursuant to this Agreement or any of the Related Agreements to be
      integrated with prior offerings by the Company for purposes of the Securities
      Act which would prevent the Company from selling the Securities pursuant to
      Rule
      506 under the Securities Act, or any applicable exchange-related stockholder
      approval provisions, nor will the Company or any of its affiliates or
      Subsidiaries take any action or steps that would cause the offering of the
      Securities to be integrated with other offerings in such manner.

     

    4.24 Stop
      Transfer. The Securities are restricted securities as of the date of this
      Agreement. Neither the Company nor any of its Subsidiaries will issue any stop
      transfer order or other order impeding the sale and delivery of any of the
      Securities at such time as the Securities are registered for public sale or
      an
      exemption from registration is available, except as required by state and
      federal securities laws.

     

    4.25 Dilution.
      The Company specifically acknowledges that its obligation to issue the shares
      of
      Common Stock upon exercise of either or both of the Warrants is binding upon
      the
      Company and enforceable regardless of the dilution such issuance may have on
      the
      ownership interests of other shareholders of the Company.

     

    4.26 Patriot
      Act. The Company certifies that, to the best of Company’s knowledge, neither the
      Company nor any of its Subsidiaries has been designated, nor is or shall be
      owned or controlled, by a “suspected terrorist” as defined in Executive Order
      13224. The Company hereby acknowledges that the Purchaser seeks to comply with
      all applicable laws concerning money laundering and related activities. In
      furtherance of those efforts, the Company hereby represents, warrants and
      covenants that: (a) none of the cash or property that the Company or any of
      its
      Subsidiaries will pay or will contribute to the Purchaser has been or shall
      be
      derived from, or related to, any activity that is deemed criminal under United
      States law; and (b) no contribution or payment by the Company or any of its
      Subsidiaries to the Purchaser, to the extent that they are within the Company’s
      and/or its Subsidiaries’ control shall cause the Purchaser to be in violation of
      the United States Bank Secrecy Act, the United States International Money
      Laundering Control Act of 1986 or the United States International Money
      Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Company
      shall
      promptly notify the Purchaser if any of these representations, warranties or
      covenants ceases to be true and accurate regarding the Company or any of its
      Subsidiaries. The Company shall provide the

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Purchaser
      all additional information regarding the Company or any of its Subsidiaries
      that
      the Purchaser deems necessary or convenient to ensure compliance with all
      applicable laws concerning money laundering and similar activities. The Company
      understands and agrees that if at any time it is discovered that any of the
      foregoing representations, warranties or covenants are incorrect, or if
      otherwise required by applicable law or regulation related to money laundering
      or similar activities, the Purchaser may undertake appropriate actions to ensure
      compliance with applicable law or regulation, including but not limited to
      segregation and/or redemption of the Purchaser’s investment in the Company. The
      Company further understands that the Purchaser may release confidential
      information about the Company and its Subsidiaries and, if applicable, any
      underlying beneficial owners, to proper authorities if the Purchaser, in its
      sole discretion, determines that it is in the best interests of the Purchaser
      in
      light of relevant rules and regulations under the laws set forth in subsection
      (b) above.

     

    4.27 ERISA.
      Based upon the Employee Retirement Income Security Act of 1974 (“ERISA”), and
      the regulations and published interpretations thereunder: (a) neither the
      Company nor any of its Subsidiaries has engaged in any Prohibited Transactions
      (as defined in Section 406 of ERISA and Section 4975 of the Internal Revenue
      Code of 1986, as amended (the “Code”)); (b) each of the Company and each of its
      Subsidiaries has met all applicable minimum funding requirements under Section
      302 of ERISA in respect of its plans; (c) neither the Company nor any of its
      Subsidiaries has any knowledge of any event or occurrence which would cause
      the
      Pension Benefit Guaranty Corporation to institute proceedings under Title IV
      of
      ERISA to terminate any employee benefit plan(s); (d) neither the Company nor
      any
      of its Subsidiaries has any fiduciary responsibility for investments with
      respect to any plan existing for the benefit of persons other than the Company’s
      or such Subsidiary’s employees; and (e) neither the Company nor any of its
      Subsidiaries has withdrawn, completely or partially, from any multi-employer
      pension plan so as to incur liability under the Multiemployer Pension Plan
      Amendments Act of 1980.

     

    5. Representations
      and Warranties of the Purchaser.
      The
      Purchaser hereby represents and warrants to the Company as follows (such
      representations and warranties do not lessen or obviate the representations
      and
      warranties of the Company set forth in this Agreement):

     

    5.1 No
      Shorting. The Purchaser or any of its affiliates and investment partners has
      not, will not and will not cause any person or entity, to directly engage in
      “short sales” of the Company’s Common Stock as long as the Note shall be
      outstanding.

     

    5.2 Requisite
      Power and Authority. The Purchaser has all necessary power and authority under
      all applicable provisions of law to execute and deliver this Agreement and
      the
      Related Agreements and to carry out their provisions. All corporate action
      on
      the Purchaser’s part required for the lawful execution and delivery of this
      Agreement and the Related Agreements have been or will be effectively taken
      prior to the Closing. Upon their execution and delivery, this Agreement and
      the
      Related Agreements will be valid and binding obligations of the Purchaser,
      enforceable in accordance with their terms, except:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (a) as
      limited by applicable bankruptcy, insolvency, reorganization, moratorium or
      other laws of general application affecting enforcement of creditors’ rights;
      and

     

    (b) as
      limited by general principles of equity that restrict the availability of
      equitable and legal remedies.

     

    5.3 Investment
      Representations. The Purchaser understands that the Securities are being offered
      and sold pursuant to an exemption from registration contained in the Securities
      Act based in part upon the Purchaser’s representations contained in this
      Agreement, including, without limitation, that the Purchaser is an “accredited
      investor” within the meaning of Regulation D under the Securities Act of 1933,
      as amended (the “Securities Act”). The Purchaser confirms that it has received
      or has had full access to all the information it considers necessary or
      appropriate to make an informed investment decision with respect to the Note
      and
      the Warrant to be purchased by it under this Agreement and the Warrant Shares
      acquired by it upon the exercise of the Warrant, respectively. The Purchaser
      further confirms that it has had an opportunity to ask questions and receive
      answers from the Company regarding the Company’s and its Subsidiaries’ business,
      management and financial affairs and the terms and conditions of the Offering,
      the Note, the Warrant and the Securities and to obtain additional information
      (to the extent the Company possessed such information or could acquire it
      without unreasonable effort or expense) necessary to verify any information
      furnished to the Purchaser or to which the Purchaser had access.

     

    5.4 The
      Purchaser Bears Economic Risk. The Purchaser has substantial experience in
      evaluating and investing in private placement transactions of securities in
      companies similar to the Company so that it is capable of evaluating the merits
      and risks of its investment in the Company and has the capacity to protect
      its
      own interests. The Purchaser must bear the economic risk of this investment
      until the Securities are sold pursuant to: (i) an effective registration
      statement under the Securities Act; or (ii) an exemption from registration
      is
      available with respect to such sale.

     

    5.5 Acquisition
      for Own Account. The Purchaser is acquiring the Note and Warrants and the
      Warrant Shares for the Purchaser’s own account for investment only, and not as a
      nominee or agent and not with a view towards or for resale in connection with
      their distribution.

     

    5.6 The
      Purchaser Can Protect Its Interest. The Purchaser represents that by reason
      of
      its, or of its management’s, business and financial experience, the Purchaser
      has the capacity to evaluate the merits and risks of its investment in the
      Note,
      the Warrants and the Securities and to protect its own interests in connection
      with the transactions contemplated in this Agreement and the Related Agreements.
      Further, the Purchaser is aware of no publication of any advertisement in
      connection with the transactions contemplated in the Agreement or the Related
      Agreements, and the Purchaser is not purchasing the Note due to any general
      solicitation made by the Company.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5.7 Accredited
      Investor. The Purchaser represents that it is an accredited investor within
      the
      meaning of Regulation D under the Securities Act.

     

    5.8 Legends.

     

    (a) The
      Warrant Shares, if not issued by DWAC system (as hereinafter defined), shall
      bear a legend which shall be in substantially the following form until such
      shares are covered by an effective registration statement filed with the
      SEC:

     

    “THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
      THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
      THE
      ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
      APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO BLAST ENERGY SERVICES, INC. THAT SUCH REGISTRATION IS NOT
      REQUIRED.”

     

    (b) Each
      Warrant shall bear substantially the following legend:

     

    “THIS
      WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
      STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
      OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
      IN
      THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
      UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
      LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO BLAST ENERGY SERVICES,
      INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

     

    6. Covenants
      of the Company.
      The
      Company covenants and agrees with the Purchaser as follows:

     

    6.1 Stop-Orders.
      The Company will advise the Purchaser, promptly after it receives notice of
      issuance by the SEC, any state securities commission or any other regulatory
      authority of any stop order or of any order preventing or suspending any
      offering of any securities of the Company, or of the suspension of the
      qualification of the Common Stock of the Company for offering or sale in any
      jurisdiction, or the initiation of any proceeding for any such
      purpose.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    6.2 Listing.
      The Company shall promptly secure the listing or quotation, as applicable,
      of
      the shares of Common Stock issuable upon exercise of either Warrant on the
      Principal Market upon which shares of Common Stock are listed or quoted for
      trading, as applicable (subject to official notice of issuance) and shall
      maintain such listing or quotation, as applicable, so long as any other shares
      of Common Stock shall be so listed or quoted, as applicable. The Company will
      maintain the listing or quotation, as applicable, of its Common Stock on the
      Principal Market, and will comply in all material respects with the Company’s
      reporting, filing and other obligations under the bylaws or rules of the
      National Association of Securities Dealers (“NASD”) and such exchanges, as
      applicable.

     

    6.3 Market
      Regulations. The Company shall notify the SEC, NASD and applicable state
      authorities, in accordance with their requirements, of the transactions
      contemplated by this Agreement, and shall take all other necessary action and
      proceedings as may be required and permitted by applicable law, rule and
      regulation, for the legal and valid issuance of the Securities to the Purchaser
      and promptly provide copies thereof to the Purchaser.

     

    6.4 Reporting
      Requirements. The Company will deliver, or cause to be delivered, to the
      Purchaser each of the following, which shall be in form and detail acceptable
      to
      the Purchaser:

     

    (a) As
      soon
      as available, and in any event within ninety (90) days after the end of each
      fiscal year of the Company, each of the Company’s and each of its Subsidiaries’
audited financial statements with a report of independent certified public
      accountants of recognized standing selected by the Company and acceptable to
      the
      Purchaser (the “Accountants”), which annual financial statements shall be
      without qualification and shall include each of the Company’s and each of its
      Subsidiaries’ balance sheet as at the end of such fiscal year and the related
      statements of each of the Company’s and each of its Subsidiaries’ income,
      retained earnings and cash flows for the fiscal year then ended, prepared on
      a
      consolidating and consolidated basis to include the Company, each Subsidiary
      of
      the Company and each of their respective affiliates, all in reasonable detail
      and prepared in accordance with GAAP, together with (i) if and when available,
      copies of any management letters prepared by the Accountants; and (ii) a
      certificate of the Company’s President, Chief Executive Officer or Chief
      Financial Officer stating whether or not such officer has knowledge of the
      occurrence of any Event of Default (as defined in the Note) and, if so, stating
      in reasonable detail the facts with respect thereto;

     

    (b) As
      soon
      as available and in any event within forty five (45) days after the end of
      each
      fiscal quarter of the Company, an unaudited/internal balance sheet and
      statements of income, retained earnings and cash flows of the Company and each
      of its Subsidiaries as at the end of and for such quarter and for the year
      to
      date period then ended, prepared on a consolidating and consolidated basis
      to
      include all the Company, each Subsidiary of the Company and each of their
      respective affiliates, in reasonable detail and stating in comparative form
      the
      figures for the corresponding date and periods in the previous year, all
      prepared in accordance with GAAP, subject to year-end adjustments and
      accompanied by a certificate of the Company’s President, Chief

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Executive
      Officer or Chief Financial Officer, stating (i) that such financial statements
      have been prepared in accordance with GAAP, subject to year-end audit
      adjustments, and (ii) whether or not such officer has knowledge of the
      occurrence of any Event of Default (as defined in the Note) not theretofore
      reported and remedied and, if so, stating in reasonable detail the facts with
      respect thereto;

     

    (c) As
      soon
      as available and in any event within fifteen (15) days after the end of each
      calendar month, an unaudited/internal statement of cash flows of each of the
      Company and its Subsidiaries as at the end of and for such month and for the
      year to date period then ended, prepared on a consolidating and consolidated
      basis to include the Company, each Subsidiary of the Company and each of their
      respective affiliates, in reasonable detail and stating in comparative form
      the
      figures for the corresponding date and periods in the previous year and
      accompanied by a certificate of the Company’s President, Chief Executive Officer
      or Chief Financial Officer, stating (i) that such statement of cash flows have
      been prepared diligently and (ii) whether or not such officer has knowledge
      of
      the occurrence of any Event of Default (as defined in the Note) not theretofore
      reported and remedied and, if so, stating in reasonable detail the facts with
      respect thereto;

     

    (d) The
      Company shall timely file with the SEC all reports required to be filed pursuant
      to the Exchange Act and refrain from terminating its status as an issuer
      required by the Exchange Act to file reports thereunder even if the Exchange
      Act
      or the rules or regulations thereunder would permit such termination. Promptly
      after (i) the filing thereof, copies of the Company’s most recent registration
      statements and annual, quarterly, monthly or other regular reports which the
      Company files with the SEC, and (ii) the issuance thereof, copies of such
      financial statements, reports and proxy statements as the Company shall send
      to
      its stockholders; and

     

    (e) The
      Company shall deliver, or cause the applicable Subsidiary of the Company to
      deliver, such other information as the Purchaser shall reasonably
      request.

     

    6.5 Use
      of
      Funds. The Company shall use the proceeds of the sale of the Note and the
      Warrants only (a) to acquire 100% of the membership interests of Eagle Domestic
      Drilling Operations LLC pursuant to such documentation as shall be acceptable
      to
      the Purchaser and (b) for general working capital purposes only, or such other
      matters as approved by the Purchaser in writing.

     

    6.6 Access
      to
      Facilities. Each of the Company and each of its Subsidiaries will permit any
      representatives designated by the Purchaser (or any successor of the Purchaser),
      upon reasonable notice and during normal business hours, at such person’s
      expense and accompanied by a representative of the Company or any Subsidiary
      (provided that no such prior notice shall be required to be given and no such
      representative of the Company or any Subsidiary shall be required to accompany
      the Purchaser in the event the Purchaser believes such access is necessary
      to
      preserve or protect the Collateral (as defined in each of the Master Security
      Agreement, the IP Security Agreement, the Pledge Agreement and each other
      security agreement entered into by the Company and/or any of its Subsidiaries
      for the benefit of the Purchaser)

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (hereinafter,
      the “Collateral”) or following the occurrence and during the continuance of an
      Event of Default (as defined in the Note)), to:

     

    (a) visit
      and
      inspect any of the properties of the Company or any of its
      Subsidiaries;

     

    (b) examine
      the corporate and financial records of the Company or any of its Subsidiaries
      (unless such examination is not permitted by federal, state or local law or
      by
      contract) and make copies thereof or extracts therefrom; and

     

    (c) discuss
      the affairs, finances and accounts of the Company or any of its Subsidiaries
      with the directors, officers and independent accountants of the Company or
      any
      of its Subsidiaries.

     

    Notwithstanding
      the foregoing, neither the Company nor any of its Subsidiaries will provide
      any
      material, non-public information to the Purchaser unless the Purchaser signs
      a
      confidentiality agreement and otherwise complies with Regulation FD, under
      the
      federal securities laws.

     

    6.7 Taxes.
      Each of the Company and each of its Subsidiaries will promptly pay and
      discharge, or cause to be paid and discharged, when due and payable, all taxes,
      assessments and governmental charges or levies imposed upon the income, profits,
      property or business of the Company and its Subsidiaries; provided, however,
      that any such tax, assessment, charge or levy need not be paid currently if
      (i)
      the validity thereof shall currently and diligently be contested in good faith
      by appropriate proceedings, (ii) such tax, assessment, charge or levy shall
      have
      no effect on the lien priority of the Purchaser in any property of the Company
      or any of its Subsidiaries and (iii) if the Company and/or such Subsidiary
      shall
      have set aside on its books adequate reserves with respect thereto in accordance
      with GAAP; and provided, further, that the Company and its Subsidiaries will
      pay
      all such taxes, assessments, charges or levies forthwith upon the commencement
      of proceedings to foreclose any lien which may have attached as security
      therefor.

     

    6.8 Insurance.
      (a) The Company shall bear the full risk of loss from any loss of any nature
      whatsoever with respect to the Collateral and the Company, and each of its
      Subsidiaries, will jointly and severally bear the full risk of loss from any
      loss of any nature whatsoever with respect to the assets pledged to the
      Purchaser as security for their respective Obligations (as defined in the Master
      Security Agreement, the Pledge Agreement and the IP Security Agreement).
      Furthermore, the Company and each Subsidiary will insure or cause the Collateral
      to be insured in the Purchaser’s name as an additional insured and lender loss
      payee, with an appropriate lender’s loss payable endorsements in form and
      substance satisfactory to the Purchaser, against loss or damage by fire, flood,
      theft, burglary, pilferage, loss in transit and other risks customarily insured
      against by companies in similar business similarly situated as the Company
      and
      its Subsidiaries including but not limited to product liability, and such other
      hazards as the Purchaser shall reasonably specify in amounts and under insurance
      policies and bonds by insurers reasonably acceptable to the Purchaser and all
      premiums thereon shall be paid by the Company and the Subsidiaries, as
      applicable, and the policies delivered to the Purchaser. If the Company or
      any
      of its Subsidiaries fails to obtain the insurance and in such amounts
      of

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    coverage
      as otherwise required pursuant to this Section 6.8, the Purchaser may procure
      such insurance and the costs thereof shall be promptly reimbursed by the Company
      and shall constitute Obligations (as defined in the Master Security Agreement,
      the Pledge Agreement and the IP Security Agreement).

     

    (i) The
      Company’s insurance coverage shall not be impaired or invalidated by any act or
      neglect of the Company or any of its Subsidiaries and the insurer will provide
      the Purchaser with no less than thirty (30) days notice prior of
      cancellation;

     

    (ii) The
      Purchaser, in connection with its status as a lender loss payee, will be
      assigned at all times to a first lien position until such time as all the
      Purchaser’s Obligations (as defined in the Master Security Agreement, the Pledge
      Agreement and the IP Security Agreement) have been indefeasibly satisfied in
      full, except in the case of worker’s compensation insurance with respect to
      which the Purchaser shall be named as loss payee only to the extent permitted
      under the terms of the policy.

     

    6.9 Intellectual
      Property. Each of the Company and each of its Subsidiaries shall maintain in
      full force and effect its existence, rights and franchises and all licenses
      and
      other rights to use Intellectual Property owned or possessed by it and
      reasonably deemed to be necessary to the conduct of its business.

     

    6.10 Properties.
      Each of the Company and each of its Subsidiaries will keep its properties,
      including, without limitation, the Rig Collateral (as defined in the Master
      Security Agreement), in good repair, working order and condition, protecting
      the
      same from deterioration, reasonable wear and tear excepted, and from time to
      time make all needful and proper repairs, renewals, replacements, additions
      and
      improvements thereto; and each of the Company and each of its Subsidiaries
      will
      at all times comply with each provision of all leases to which it is a party
      or
      under which it occupies property if the breach of such provision could, either
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    6.11 Confidentiality.
      The Company will not, and will not permit any of its Subsidiaries to, disclose,
      and will not include in any public announcement, the name of the Purchaser,
      unless expressly agreed to by the Purchaser or unless and until such disclosure
      is required by law or applicable regulation, and then only to the extent of
      such
      requirement. Notwithstanding the foregoing, the Company may disclose the
      Purchaser’s identity and the terms of this Agreement to its current and
      prospective debt and equity financing sources.

     

    6.12 Required
      Approvals. (I) For so long as twenty-five percent (25%) of the principal amount
      of the Note is outstanding, the Company, without the prior written consent
      of
      the Purchaser, shall not, and shall not permit any of its Subsidiaries
      to:

     

    (a) (i)
      directly or indirectly declare or pay any dividends, other than dividends paid
      to the Company or any of its wholly-owned Subsidiaries, (ii) issue any preferred
      stock that is manditorily redeemable prior to the one year anniversary of the
      Maturity Date (as defined in the Note) or (iii) redeem any of its preferred
      stock or other equity interests;

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) liquidate,
      dissolve or effect a material reorganization (it being understood that in no
      event shall the Company or any of its Subsidiaries dissolve, liquidate or merge
      with any other person or entity (unless, in the case of such a merger, the
      Company or, in the case of merger not involving the Company, such Subsidiary, as
      applicable, is the surviving entity);

     

    (c) become
      subject to (including, without limitation, by way of amendment to or
      modification of) any agreement or instrument which by its terms would (under
      any
      circumstances) restrict the Company’s or any of its Subsidiaries, right to
      perform the provisions of this Agreement, any Related Agreement or any of the
      agreements contemplated hereby or thereby;

     

    (d) materially
      alter or change the scope of the business of the Company and its Subsidiaries
      taken as a whole; or

     

    (e) (i)
      create, incur, assume or suffer to exist any indebtedness (exclusive of trade
      debt and debt incurred to finance the purchase of equipment (not in excess
      of
      five percent (5%) of the fair market value of the Company’s and its
      Subsidiaries’ assets)) whether secured or unsecured other than (x) the Company’s
      obligations owed to the Purchaser, (y) indebtedness set forth on Schedule
      6.12(e) attached hereto and made a part hereof and any refinancings or
      replacements thereof on terms no less favorable to the Purchaser than the
      indebtedness being refinanced or replaced, and (z) any indebtedness incurred
      in
      connection with the purchase of assets (other than equipment) in the ordinary
      course of business, or any refinancings or replacements thereof on terms no
      less
      favorable to the Purchaser than the indebtedness being refinanced or replaced,
      so long as any lien relating thereto shall only encumber the fixed assets so
      purchased and no other assets of the Company or any of its Subsidiaries; (ii)
      cancel any indebtedness owing to it in excess of $50,000 in the aggregate during
      any 12 month period; (iii) assume, guarantee, endorse or otherwise become
      directly or contingently liable in connection with any obligations of any other
      person or entity, except the endorsement of negotiable instruments by the
      Company or any Subsidiary thereof for deposit or collection or similar
      transactions in the ordinary course of business or guarantees of indebtedness
      otherwise permitted to be outstanding pursuant to this clause (e);
      and

     

    (II)
      The
      Company, without the prior written consent of the Purchaser, shall not, and
      shall not permit any of its Subsidiaries to, create or acquire any Subsidiary
      after the date hereof unless (i) such Subsidiary is a wholly-owned Subsidiary
      of
      the Company and (ii) such Subsidiary becomes a party to the Master Security
      Agreement, the IP Security Agreement, the Pledge Agreement and the Subsidiary
      Guaranty (either by executing a counterpart thereof or an assumption or joinder
      agreement in respect thereof) and, to the extent required by the Purchaser,
      satisfies each condition of this Agreement and the Related Agreements as if
      such
      Subsidiary were a Subsidiary on the Closing Date.

     

    6.13 Reissuance
      of Securities. The Company agrees to reissue certificates representing the
      Securities without the legends set forth in Section 5.8 above at such time
      as:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

        (a) the
      holder thereof is permitted to dispose of such Securities pursuant to Rule
      144(k) under the Securities Act; or

     

    (b) upon
      resale subject to an effective registration statement after such Securities
      are
      registered under the Securities Act.

     

    The
      Company agrees to cooperate with the Purchaser in connection with all resales
      pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary
      to
      allow such resales provided the Company and its counsel receive reasonably
      requested representations from the Purchaser and broker, if any.

     

    6.14 Opinion.
      On the Closing Date, the Company will deliver to the Purchaser an opinion
      acceptable to the Purchaser from the Company’s external legal counsel. The
      Company will provide, at the Company’s expense, such other legal opinions in the
      future as are deemed reasonably necessary by the Purchaser (and acceptable
      to
      the Purchaser) in connection with the exercise of the Warrants.

     

    6.15 Margin
      Stock. The Company will not permit any of the proceeds of the Note or either
      of
      the Warrants to be used directly or indirectly to “purchase” or “carry” “margin
      stock” or to repay indebtedness incurred to “purchase” or “carry” “margin stock”
within the respective meanings of each of the quoted terms under Regulation
      U of
      the Board of Governors of the Federal Reserve System as now and from time to
      time hereafter in effect.

     

    6.16 FIRPTA.
      Neither the Company, nor any of its Subsidiaries, is a “United States real
      property holding corporation” as such term is defined in Section 897(c)(2) of
      the Code and Treasury Regulation Section 1.897-2 promulgated thereunder and
      neither the Company nor any of its Subsidiaries shall at any time take any
      action or otherwise acquire any interest in any asset or property to the extent
      the effect of which shall cause the Company and/or such Subsidiary, as the
      case
      may be, to be a “United States real property holding corporation” as such term
      is defined in Section 897(c)(2) of the Code and Treasury Regulation Section
      1.897-2 promulgated thereunder.

     

    6.17 Intentionally
      Omitted.

     

    6.18 Authorization
      and Reservation of Shares. The Company shall at all times have authorized and
      reserved a sufficient number of shares of Common Stock to provide for the
      exercise of each of the Warrants.

     

    6.19 Compliance
      with Laws. The Rig Collateral (as defined in the Master Security Agreement)
      will
      not be maintained, used or operated in violation of an law or any rule,
      regulation or order of any applicable local, state, federal and/or foreign
      laws
      and regulations that govern the existence and/or use of the Rig
      Collateral.

     

    6.20 Intentionally
      Omitted.

     

    6.21 Intentionally
      Omitted.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7. Covenants
      of the Purchaser. The Purchaser covenants and agrees with the Company as
      follows:

     

    7.1 Confidentiality.
      The Purchaser will not disclose, and will not include in any public
      announcement, the name of the Company, unless expressly agreed to by the Company
      or unless and until such disclosure is required by law or applicable regulation,
      and then only to the extent of such requirement.

     

    7.2 Non-Public
      Information. The Purchaser will not effect any sales in the shares of the
      Company’s Common Stock while in possession of material, non-public information
      regarding the Company if such sales would violate applicable securities
      law.

     

    7.3 Limitation
      on Acquisition of Common Stock of the Company. Notwithstanding anything to
      the
      contrary contained in this Agreement, any Related Agreement or any document,
      instrument or agreement entered into in connection with any other transactions
      between the Purchaser and the Company, the Purchaser may not acquire stock
      in
      the Company (including, without limitation, pursuant to a contract to purchase,
      by exercising an option or warrant, by converting any other security or
      instrument, by acquiring or exercising any other right to acquire, shares of
      stock or other security convertible into shares of stock in the Company, or
      otherwise, and such contracts, options, warrants, conversion or other rights
      shall not be enforceable or exercisable) to the extent such stock acquisition
      would cause any interest (including any original issue discount) payable by
      the
      Company to the Purchaser not to qualify as “portfolio interest” within the
      meaning of Section 881(c)(2) of the Code, by reason of Section 881(c)(3) of
      the
      Code, taking into account the constructive ownership rules under Section
      871(h)(3)(C) of the Code (the “Stock Acquisition Limitation”). The Stock
      Acquisition Limitation shall automatically become null and void without any
      notice to the Company upon the earlier to occur of either (a) the Company’s
      delivery to the Purchaser of a Notice of Redemption (as defined in the Note)
      or
      (b) the existence of an Event of Default (as defined in the Note) at a time
      when
      the average closing price of the Company’s common stock as reported by
      Bloomberg, L.P. on the Principal Market for the immediately preceding five
      (5)
      trading days is greater than or equal to 150% of the Exercise Price (as defined
      in each Warrant).

     

    8. Covenants
      of the Company and the Purchaser Regarding Indemnification.

     

    8.1 Company
      Indemnification. The Company agrees to indemnify, hold harmless, reimburse
      and
      defend the Purchaser, each of the Purchaser’s officers, directors, agents,
      affiliates, control persons, and principal shareholders, against all claims,
      costs, expenses, liabilities, obligations, losses or damages (including
      reasonable legal fees) of any nature, incurred by or imposed upon the Purchaser
      which result, arise out of or are based upon: (a) any misrepresentation by
      the
      Company or any of its Subsidiaries or breach of any representation or warranty
      by the Company or any of its Subsidiaries in this Agreement, any other Related
      Agreement or in any exhibits or schedules attached hereto or thereto; or (b)
      any
      breach or default in performance by Company or any of its Subsidiaries of any
      covenant or undertaking to be performed by Company or any of its Subsidiaries
      hereunder, under any other Related Agreement or any other agreement entered
      into
      by the Company and/or any of its Subsidiaries and the Purchaser relating hereto
      or thereto.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    8.2 Purchaser’s
      Indemnification. The Purchaser agrees to indemnify, hold harmless, reimburse
      and
      defend the Company and each of the Company’s officers, directors, agents,
      affiliates, control persons and principal shareholders, at all times against
      any
      claims, costs, expenses, liabilities, obligations, losses or damages (including
      reasonable legal fees) of any nature, incurred by or imposed upon the Company
      which result, arise out of or are based upon: (a) any misrepresentation by
      the
      Purchaser or breach of any representation or warranty by the Purchaser in this
      Agreement or in any exhibits or schedules attached hereto or any Related
      Agreement; or (b) any breach or default in performance by the Purchaser of
      any
      covenant or undertaking to be performed by the Purchaser hereunder, or any
      other
      agreement entered into by the Company and the Purchaser relating
      hereto.

     

    9. Exercise
      of the Warrant.

     

    9.1 Mechanics
      of Exercise.

     

    (a) Provided
      the Purchaser has notified the Company of the Purchaser’s intention to sell the
      Warrant Shares and the Warrant Shares are included in an effective registration
      statement or are otherwise exempt from registration when sold: (i) upon the
      exercise of the Warrant or part thereof, the Company shall, at its own cost
      and
      expense, take all necessary action (including the issuance of an opinion of
      counsel reasonably acceptable to the Purchaser following a request by the
      Purchaser) to assure that the Company’s transfer agent shall issue shares of the
      Company’s Common Stock in the name of the Purchaser (or its nominee) or such
      other persons as designated by the Purchaser in accordance with Section 9.1(b)
      hereof and in such denominations to be specified representing the number of
      Warrant Shares issuable upon such exercise; and (ii) the Company warrants that
      no instructions other than these instructions have been or will be given to
      the
      transfer agent of the Company’s Common Stock and that after the Effectiveness
      Date (as defined in the Registration Rights Agreement) the Warrant Shares issued
      will be freely transferable subject to the prospectus delivery requirements
      of
      the Securities Act and the provisions of this Agreement, and will not contain
      a
      legend restricting the resale or transferability of the Warrant
      Shares.

     

    (b) The
      Purchaser will give notice of its decision to exercise its right to exercise
      each or both of the Warrants or part thereof by telecopying or otherwise
      delivering an executed and completed notice of the number of shares to be
      subscribed to the Company (the “Form of Subscription”). The Purchaser will not
      be required to surrender any Warrant until the Purchaser receives a credit
      to
      the account of the Purchaser’s prime broker through the DWAC system,
      representing the Warrant Shares or until the applicable Warrant has been fully
      exercised. Each date on which a Form of Subscription is telecopied or delivered
      to the Company in accordance with the provisions hereof shall be deemed a
“Exercise Date.” Pursuant to the terms of the Form of Subscription, the Company
      will issue instructions to the transfer agent accompanied by an opinion of
      counsel, if required by such transfer agent, within two (2) business days of
      the
      date of the delivery to the Company of the Form of Subscription and shall cause
      the transfer agent to transmit the certificates representing the Warrant Shares
      set forth in the applicable Form of Subscription to the Holder by crediting
      the
      account of the Purchaser’s

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    prime
      broker with the Depository Trust Company (“DTC”) through its Deposit Withdrawal
      Agent Commission (“DWAC”) system within three (3) business days after receipt by
      the Company of the Form of Subscription (the “Delivery Date”).

     

    (c) The
      Company understands that a delay in the delivery of the Warrant Shares in the
      form required pursuant to Section 9 hereof beyond the Delivery Date could result
      in economic loss to the Purchaser. In the event that the Company fails to direct
      its transfer agent to deliver the Warrant Shares to the Purchaser via the DWAC
      system within the time frame set forth in Section 9.1(b) above and the Warrant
      Shares are not delivered to the Purchaser by the Delivery Date, as compensation
      to the Purchaser for such loss, the Company agrees to pay late payments to
      the
      Purchaser for late issuance of the Warrant Shares in the form required pursuant
      to Section 9 hereof upon exercise of the Warrant in the amount equal to the
      greater of: (i) $500 per business day after the Delivery Date; or (ii) the
      Purchaser’s actual damages from such delayed delivery. The Company shall pay any
      payments incurred under this Section in immediately available funds upon demand
      and, in the case of actual damages, accompanied by reasonable documentation
      of
      the amount of such damages. Such documentation shall show the number of shares
      of Common Stock the Purchaser is forced to purchase (in an open market
      transaction) which the Purchaser anticipated receiving upon such exercise,
      and
      shall be calculated as the amount by which (A) the Purchaser’s total purchase
      price (including customary brokerage commissions, if any) for the shares of
      Common Stock so purchased exceeds (B) the aggregate amount the Exercise Price
      for the applicable Warrant, as the case may be, for which such Form of
      Subscription was not timely honored.

     

    10. Registration
      Rights.

     

    10.1 Registration
      Rights Granted. The Company hereby grants registration rights to the Purchaser
      pursuant to the Registration Rights Agreement.

     

    10.2 Offering
      Restrictions. Except as previously disclosed in the SEC Reports or in the
      Exchange Act Filings, or stock or stock options granted to employees or
      directors of the Company (these exceptions hereinafter referred to as the
“Excepted Issuances”), or as set forth on Schedule 10.2 hereto, neither the
      Company nor any of its Subsidiaries will, prior to the full repayment of the
      Note (together with all accrued and unpaid interest and fees related thereto)
      (x) enter into any equity line of credit agreement or similar agreement or
      (y)
      issue, or enter into any agreement to issue, any securities with a
      variable/floating conversion and/or pricing feature which are or could be (by
      conversion or registration) free-trading securities (i.e. common stock subject
      to a registration statement).

     

    11. Miscellaneous.

     

    11.1 Governing
      Law, Jurisdiction and Waiver of Jury Trial.

     

    (a) THIS
      AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED
      AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
      APPLICABLE

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TO
      CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF
      CONFLICTS OF LAWS.

     

    (b) THE
      COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
      IN
      THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
      TO
      HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
      AND THE PURCHASER, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF
      THE
      RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
      OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT THE PURCHASER AND THE
      COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD
      BY A
      COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER
      PROVIDED, THAT, NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE
      THE PURCHASER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
      JURISDICTION TO COLLECT THE OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY
      AGREEMENT, THE PLEDGE AGREEMENT AND THE IP SECURITY AGREEMENT), TO REALIZE
      ON
      THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS (AS DEFINED IN THE
      MASTER SECURITY AGREEMENT, THE PLEDGE AGREEMENT AND THE IP SECURITY AGREEMENT),
      OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE PURCHASER. THE
      COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
      ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY
      OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
      VENUE OR FORUM NON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF
      THE
      SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
      AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE
      BY
      REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH
      IN SECTION 11.9 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
      EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
      IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

     

    (c) THE
      PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
      APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
      OF
      THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS
      TO
      TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
      WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE PURCHASER AND/OR
      THE
      COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
      RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
      AGREEMENT,

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ANY
      OTHER
      RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

     

    11.2 Severability.
      Wherever possible each provision of this Agreement and the Related Agreements
      shall be interpreted in such manner as to be effective and valid under
      applicable law, but if any provision of this Agreement or any Related Agreement
      shall be prohibited by or invalid or illegal under applicable law such provision
      shall be ineffective to the extent of such prohibition or invalidity or
      illegality, without invalidating the remainder of such provision or the
      remaining provisions thereof which shall not in any way be affected or impaired
      thereby.

     

    11.3 Survival.
      The representations, warranties, covenants and agreements made herein shall
      survive any investigation made by the Purchaser and the closing of the
      transactions contemplated hereby to the extent provided therein. All statements
      as to factual matters contained in any certificate or other instrument delivered
      by or on behalf of the Company pursuant hereto in connection with the
      transactions contemplated hereby shall be deemed to be representations and
      warranties by the Company hereunder solely as of the date of such certificate
      or
      instrument. All indemnities set forth herein shall survive the execution,
      delivery and termination of this Agreement and the Note and the making and
      repayment of the obligations arising hereunder, under the Note and under the
      other Related Agreements.

     

    11.4 Successors.
      Except as otherwise expressly provided herein, the provisions hereof shall
      inure
      to the benefit of, and be binding upon, the successors, heirs, executors and
      administrators of the parties hereto and shall inure to the benefit of and
      be
      enforceable by each person or entity which shall be a holder of the Securities
      from time to time, other than the holders of Common Stock which has been sold
      by
      the Purchaser pursuant to Rule 144 or an effective registration statement.
      The
      Purchaser shall not be permitted to assign its rights hereunder or under any
      Related Agreement to a competitor of the Company unless an Event of Default
      (as
      defined in the Note) has occurred and is continuing.

     

    11.5 Entire
      Agreement; Maximum Interest. This Agreement, the Related Agreements, the
      exhibits and schedules hereto and thereto and the other documents delivered
      pursuant hereto constitute the full and entire understanding and agreement
      between the parties with regard to the subjects hereof and no party shall be
      liable or bound to any other in any manner by any representations, warranties,
      covenants and agreements except as specifically set forth herein and therein.
      Nothing contained in this Agreement, any Related Agreement or in any document
      referred to herein or delivered in connection herewith shall be deemed to
      establish or require the payment of a rate of interest or other charges in
      excess of the maximum rate permitted by applicable law. In the event that the
      rate of interest or dividends required to be paid or other charges hereunder
      exceed the maximum rate permitted by such law, any payments in excess of such
      maximum shall be credited against amounts owed by the Company to the Purchaser
      and thus refunded to the Company.

     

    11.6 Amendment
      and Waiver.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (a) This
      Agreement may be amended or modified only upon the written consent of the
      Company and the Purchaser. 

     

    (b) The
      obligations of the Company and the rights of the Purchaser under this Agreement
      may be waived only with the written consent of the Purchaser.

     

    (c) The
      obligations of the Purchaser and the rights of the Company under this Agreement
      may be waived only with the written consent of the Company.

     

    11.7 Delays
      or
      Omissions. It is agreed that no delay or omission to exercise any right, power
      or remedy accruing to any party, upon any breach, default or noncompliance
      by
      another party under this Agreement or the Related Agreements, shall impair
      any
      such right, power or remedy, nor shall it be construed to be a waiver of any
      such breach, default or noncompliance, or any acquiescence therein, or of or
      in
      any similar breach, default or noncompliance thereafter occurring. All remedies,
      either under this Agreement or the Related Agreements, by law or otherwise
      afforded to any party, shall be cumulative and not alternative.

     

    11.8 Notices.
      All notices required or permitted hereunder shall be in writing and shall be
      deemed effectively given:

     

    (a) upon
      personal delivery to the party to be notified;

     

    (b) when
      sent
      by confirmed facsimile if sent during normal business hours of the recipient,
      if
      not, then on the next business day;

     

    (c) three
      (3)
      business days after having been sent by registered or certified mail, return
      receipt requested, postage prepaid; or

     

    (d) one
      (1)
      day after deposit with a nationally recognized overnight courier, specifying
      next day delivery, with written verification of receipt.

     

    All
      communications shall be sent as follows:

    
      	
              If
                to the Company, to:

            	
              Blast
                Energy Services, Inc.

              14550
                Torrey Chase Boulevard

              Suite
                330

              Houston,
                Texas 77014

              Attention: Chief
                Financial Officer

              Facsimile: 281-453-2899

               

            
	 	
              with
                a copy to:

            
	 	
              Adams
                and Reese LLP

              4400
                One Houston Center

              1221
                McKinney

              Houston,
                Texas 77010

              Facsimile:
                (713) 308-4042

              Attention:
                Michael T. Larkin

               

            
	
              If
                to the Purchaser, to:

            	
              Laurus
                Master Fund, Ltd.

              c/o
                M&C Corporate Services Limited

              P.O.
                Box 309 GT

              Ugland
                House 

              George
                Town

              South
                Church Street

              Grand
                Cayman, Cayman Islands

              Facsimile: 345-949-8080

               

            
	 	
              with
                a copy to:

            
	 	
              John
                E. Tucker, Esq.

              825
                Third Avenue 14th Floor

              New
                York, NY 10022

              Facsimile: 212-541-4434

               

            
	 	
              with
                a copy to:

            
	 	
              Loeb
                & Loeb LLP

              345
                Park Avenue

              New
                York, NY 10154

              Attention: Scott
                J. Giordano, Esq.

              Facsimile: 212-407-4990

            

    

     

    or
      at
      such other address as the Company or the Purchaser may designate by written
      notice to the other parties hereto given in accordance herewith.

     

    11.9 Attorneys’
      Fees. In the event that any suit or action is instituted to enforce any
      provision in this Agreement or any Related Agreement, the prevailing party
      in
      such dispute shall be entitled to recover from the losing party all fees, costs
      and expenses of enforcing any right of such prevailing party under or with
      respect to this Agreement and/or such Related Agreement, including, without
      limitation, such reasonable and customary fees and expenses of attorneys and
      accountants, which shall include, without limitation, all fees, costs and
      expenses of appeals.

     

    11.10 Titles
      and Subtitles. The titles of the sections and subsections of this Agreement
      are
      for convenience of reference only and are not to be considered in construing
      this Agreement.

     

    11.11 Facsimile
      Signatures; Counterparts. This Agreement may be executed by facsimile signatures
      and in any number of counterparts, each of which shall be an original, but
      all
      of which together shall constitute one agreement.

     

    11.12 Broker’s
      Fees. Except as set forth on Schedule 11.12 hereof, each party hereto represents
      and warrants that no agent, broker, investment banker, person or firm acting
      on
      behalf of or under the authority of such party hereto is or will be entitled
      to
      any broker’s or

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    finder’s
      fee or any other commission directly or indirectly in connection with the
      transactions contemplated herein. Each party hereto further agrees to indemnify
      each other party for any claims, losses or expenses incurred by such other
      party
      as a result of the representation in this Section 11.12 being
      untrue.

     

    11.13 Construction.
      Each party acknowledges that its legal counsel participated in the preparation
      of this Agreement and the Related Agreements and, therefore, stipulates that
      the
      rule of construction that ambiguities are to be resolved against the drafting
      party shall not be applied in the interpretation of this Agreement or any
      Related Agreement to favor any party against the other.

     

    11.14 Grant
      of
      Irrevocable Proxy.

     

    For
      good
      and valuable consideration, receipt of which is hereby acknowledged, Purchaser
      hereby appoints Company (the “Proxy Holder”), with a mailing address set forth
      in Section 11.8, with full power of substitution, as proxy, to vote all shares
      of Common Stock of the Company, now or in the future owned by Purchaser, but
      only to the extent issuable upon exercise of the Par Value Warrant and all
      other
      warrants and/or options issued by the Company in favor of the Purchaser with
      an
      exercise price equal to the par value of the Company’s Common Stock
      (collectively, the “Shares”).

     

    This
      proxy is irrevocable and coupled with an interest. Upon the sale or other
      transfer of the Shares, in whole or in part, this proxy shall automatically
      terminate with respect to such sold or transferred Shares at the time of such
      sale and/or transfer without any further action required by any
      Person.

     

    Purchaser
      shall use its best efforts to forward to Proxy Holder within two (2) business
      days following Purchaser’s receipt thereof, at the address for Proxy Holder set
      forth in Section 11.8, copies of all materials received by Purchaser relating,
      in each case, to the solicitation of the vote of shareholders of the
      Company.

     

    This
      proxy shall remain in effect with respect to the Shares of the Company during
      the period commencing on the date hereof and continuing until the earlier of
      (a)
      payment in full of all obligations and liabilities owing by the Company to
      Purchaser (as the same may be amended, restated, extended or modified from
      time
      to time) and (b) the occurrence and continuance of a default or event of default
      under any document, instrument or agreement between any Company and, or made
      by
      any Company in favor of, Purchaser.

     

    [THE
      REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

     

    

    

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE
      AGREEMENT as of the date set forth in the first paragraph hereof.

    
      	
              COMPANY:

            	
              PURCHASER:

            
	
              BLAST
                ENERGY SERVICES, INC.

            	
              LAURUS
                MASTER FUND, LTD.

            
	
              By:
                /s/
                John O’Keefe

            	
              By:
                /s/
                Laurus Master Fund, LTD

            
	
              Name:
                John O’Keefe

            	
              Name:

            
	
              Title:
                EVP, CFO & Co-CEO

            	
              Title:

            

    

    

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

     

    EXHIBIT
      A

     

    

     

    FORM
      OF SECURED TERM NOTE

    

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

     

    EXHIBIT
      B

     

    

     

    FORM
      OF PAR VALUE WARRANT

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

     

    EXHIBIT
      C

     

    

     

    FORM
      OF Additional Warrant

    

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

     

    EXHIBIT
      D

     

    

     

    FORM
      OF OPINION

     

    (e) The
      Company and each of its Subsidiaries is a corporation duly formed, validly
      existing and in good standing under the laws of the jurisdiction of its
      formation and has all requisite corporate and limited liability company power
      and authority to own, operate and lease its properties and to carry on its
      business as it is now being conducted.

     

    (f) Each
      of
      the Company and each of its Subsidiaries has the requisite corporate and limited
      liability company power and authority to execute, deliver and perform its
      obligations under the Agreement and the Related Agreements. All corporate and
      limited liability company action on the part of the Company and each of its
      Subsidiaries and its officers, directors and stockholders and members necessary
      has been taken for: (i) the authorization of the Agreement and the Related
      Agreements and the performance of all obligations of the Company and each of
      its
      Subsidiaries thereunder; and (ii) the authorization, sale, issuance and delivery
      of the Securities pursuant to the Agreement and the Related Agreements. The
      Warrant Shares, when issued pursuant to and in accordance with the terms of
      the
      Agreement and the Related Agreements and upon delivery shall be validly issued
      and outstanding, fully paid and non assessable.

     

    (g) The
      execution, delivery and performance by each of the Company and each of its
      Subsidiaries of the Agreement and the Related Agreements (to which it is a
      party) and the consummation of the transactions on its part contemplated by
      any
      thereof, will not, with or without the giving of notice or the passage of time
      or both:

     

    (a) Violate
      the provisions of their respective Charter, bylaws or operating agreement;
      or

     

    (b) Violate
      any judgment, decree, order or award of any court binding upon the Company
      or
      any of its Subsidiaries; or

     

    (c) Violate
      any New York, California, Texas, Louisiana, Arkansas, Oklahoma or federal
      law.

     

    (h) The
      Agreement and the Related Agreements will constitute, valid and legally binding
      obligations of each of the Company and each of its Subsidiaries (to the extent
      such entity is a party thereto), and are enforceable against each of the Company
      and each of its Subsidiaries party thereto in accordance with their respective
      terms, except:

     

    (a) as
      limited by applicable bankruptcy, insolvency, reorganization, moratorium or
      other laws of general application affecting enforcement of creditors’ rights;
      and

     

    (b) general
      principles of equity that restrict the availability of equitable or legal
      remedies.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (i) To
      such
      counsel’s knowledge, the sale of the Note is not subject to any preemptive
      rights or rights of first refusal that have not been properly waived or complied
      with. To such counsel’s knowledge, the sale of either or both of the Warrants
      and the subsequent exercise of each such Warrant for Warrant Shares are not
      subject to any preemptive rights or, to such counsel’s knowledge, rights of
      first refusal that have not been properly waived or complied with.

     

    (j) Assuming
      the accuracy of the representations and warranties of the Purchaser contained
      in
      the Agreement, the offer, sale and issuance of the Securities on the Closing
      Date will be exempt from the registration requirements of the Securities Act.
      To
      such counsel’s knowledge, neither the Company, nor any of its affiliates, nor
      any person acting on its or their behalf, has directly or indirectly made any
      offers or sales of any security or solicited any offers to buy and security
      under circumstances that would cause the offering of the Securities pursuant
      to
      the Agreement or any Related Agreement to be integrated with prior offerings
      by
      the Company for purposes of the Securities Act which would prevent the Company
      from selling the Securities pursuant to Rule 506 under the Securities Act,
      or
      any applicable exchange-related stockholder approval provisions.

     

    (k) There
      is
      no action, suit, proceeding or investigation pending or, to such counsel’s
      knowledge, currently threatened against the Company or any of its Subsidiaries
      that prevents the right of the Company or any of its Subsidiaries to enter
      into
      this Agreement or any Related Agreement, or to consummate the transactions
      contemplated thereby. To such counsel’s knowledge, the Company is not a party or
      subject to the provisions of any order, writ, injunction, judgment or decree
      of
      any court or government agency or instrumentality; nor is there any action,
      suit, proceeding or investigation by the Company currently pending or which
      the
      Company intends to initiate.

     

    (l) The
      terms
      and provisions of the Master Security Agreement, the IP Security Agreement
      and
      the Pledge Agreement create a valid security interest in favor of the Purchaser,
      in the respective rights, title and interests of the Company and its
      Subsidiaries in and to the Collateral (as defined in each of the Master Security
      Agreement, the Pledge Agreement and the IP Security Agreement). Each UCC-1
      Financing Statement naming the Company or any Subsidiary thereof as debtor
      and
      the Purchaser as secured party are in proper form for filing (the “UCC-1
      Financing Statements”) and assuming that such UCC-1 Financing Statements have
      been filed with the Secretary of State of ___________, the security interest
      created under the Master Security Agreement will constitute a perfected security
      interest under the Uniform Commercial Code in favor of the Purchaser in respect
      of the Collateral that can be perfected by filing a financing statement. A
      security interest in the Rig Collateral (as defined in the Master Security
      Agreement) will be perfected by the filing of each UCC-1 Financing Statement
      with the Secretary of State of _____________. After giving effect to the
      delivery to the Purchaser of the membership certificates representing the
      ownership interests of each Subsidiary of the Company (together with effective
      endorsements) and assuming the continued possession by the Purchaser of such
      stock certificates in the State of New York, the security interest created
      in
      favor of the Purchaser under the Pledge Agreement constitutes a valid and
      enforceable first perfected security interest in such ownership interests (and
      the proceeds thereof) in favor of the Purchaser, subject to no other security
      interest. No filings, registrations or recordings are required in order to
      perfect
      (or maintain the perfection or priority of) the security interest created under
      the Pledge Agreement in respect of such ownership interests.

    

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

     

    EXHIBIT
      E

     

    

     

    FORM
      OF ESCROW AGREEMENTExhibit 10.5

     

    Exhibit
      10.5

     

    BLAST
      ENERGY SERVICES, INC. AND CERTAIN OF ITS SUBSIDIARIES

    MASTER
      SECURITY AGREEMENT

     

    
      	
              To:

            	
              Laurus
                Master Fund, Ltd.

              c/o
                M&C Corporate Services Limited

              P.O.
                Box 309 GT

              Ugland
                House

              South
                Church Street

              George
                Town

              Grand
                Cayman, Cayman Islands

            
	
              Date

            	
              August
                25, 2006

            

    

     

    To
      Whom
      It May Concern:

     

    1.To
      secure
      the payment of all Obligations (as hereafter defined), Blast Energy Services,
      Inc., a California corporation (the “Company”), each of the other undersigned
      parties (other than Laurus Master Fund, Ltd., (“Laurus”)) and each other entity
      that is required to enter into this Master Security Agreement (each an
“Assignor” and, collectively, the “Assignors”) hereby assigns and grants to
      Laurus a continuing security interest in all of the following property now
      owned
      or at any time hereafter acquired by such Assignor, or in which such Assignor
      now has or at any time in the future may acquire any right, title or interest
      (the “Collateral”): all cash, cash equivalents, accounts, accounts receivable,
      deposit accounts, inventory, equipment, goods, fixtures, Rig Collateral (as
      defined below), documents, instruments (including, without limitation,
      promissory notes), contract rights, commercial tort claims set forth on Exhibit
      B to this Master Security Agreement, general intangibles (including, without
      limitation, payment intangibles and an absolute right to license on terms no
      less favorable than those current in effect among such Assignor’s affiliates),
      chattel paper, supporting obligations, investment property (including, without
      limitation, all partnership interests, limited liability company membership
      interests and all other equity interests owned by any Assignor),
      letter-of-credit rights, trademarks, trademark applications, tradestyles,
      patents, patent applications, copyrights, copyright applications and other
      intellectual property in which such Assignor now has or hereafter may acquire
      any right, title or interest, all proceeds and products thereof (including,
      without limitation, proceeds of insurance) and all additions, accessions and
      substitutions thereto or therefor. For the purposes of the foregoing, “Rig
      Collateral” shall mean any equipment, inventory or fixtures consisting of
      drilling rigs of each Assignor, including, without limitation, the drilling
      rigs
      indicated on Exhibit C hereto (collectively, the “Rigs”), together with (a) all
      the Rigs’ substructure, engine, breaking system, drill pipe, drill collars,
      machinery, tools, supplies, parts (including spare parts) and other items and
      types of goods now or hereafter used or acquired in connection with the Rigs,
      (b) all replacements, accessories, additions, accessions, appurtenances and
      substitutions to any of the foregoing, (c) all accounts, general intangibles,
      payment intangibles, chattel paper (including electronic chattel paper),
      commercial tort claims instruments (including promissory notes) and all other
      records relating in any way to the

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    foregoing
      (including, without limitation, any computer software, whether on tape, disk,
      card, strip, cartridge or any other form), (d) supporting obligations relating
      to the Rigs; and (e) all products and products of any of the foregoing
      (including, without limitation, proceeds of insurance). In the event any
      Assignor wishes to finance the acquisition in the ordinary course of business
      of
      any hereafter acquired equipment and has obtained a written commitment from
      an
      unrelated third party financing source to finance such equipment, Laurus shall
      release its security interest on such hereafter acquired equipment so financed
      by such third party financing source. Except as otherwise defined herein, all
      capitalized terms used herein shall have the meanings provided such terms in
      the
      Securities Purchase Agreement referred to below. All items of Collateral which
      are defined in the UCC shall have the meanings set forth in the UCC.  For
      purposes hereof, the term "UCC"  means the Uniform Commercial Code as the
      same may, from time to time, be in effect in the State of New York; provided,
      that in the event that, by reason of mandatory provisions of law, any or all
      of
      the attachment, perfection or priority of, or remedies with respect to, Laurus'
      security interest in any Collateral is governed by the Uniform Commercial Code
      as in effect in a jurisdiction other than the State of New York, the term “UCC”
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
      for purposes of the provisions of this Agreement relating to such attachment,
      perfection, priority or remedies and for purposes of definitions related to
      such
      provisions; provided further, that to the extent that the UCC is used to define
      any term herein and such term is defined differently in different Articles
      or
      Divisions of the UCC, the definition of such term contained in Article or
      Division 9 shall govern.

     

    2.The
      term
“Obligations” as used herein shall mean and include all debts, liabilities and
      obligations owing by each Assignor to Laurus arising under, out of, or in
      connection with: (i) that certain Securities Purchase Agreement dated as of
      the
      date hereof by and between the Company and Laurus (as amended, modified,
      restated or supplemented from time to time, the “Securities Purchase Agreement”)
      and (ii) the Related Agreements referred to in the Securities Purchase Agreement
      (the Securities Purchase Agreement and each Related Agreement as each may be
      amended, modified, restated or supplemented from time to time, collectively,
      the
“Documents”), and in connection with any documents, instruments or agreements
      relating to or executed in connection with the Documents or any documents,
      instruments or agreements referred to therein or otherwise, and in connection
      with any other indebtedness, obligations or liabilities of each such Assignor
      to
      Laurus, whether now existing or hereafter arising, direct or indirect,
      liquidated or unliquidated, absolute or contingent, due or not due and whether
      under, pursuant to or evidenced by a note, agreement, guaranty, instrument
      or
      otherwise, including, without limitation, obligations and liabilities of each
      Assignor for post-petition interest, fees, costs and charges that accrue after
      the commencement of any case by or against such Assignor under any bankruptcy,
      insolvency, reorganization or like proceeding (collectively, the “Debtor Relief
      Laws”) in each case, irrespective of the genuineness, validity, regularity or
      enforceability of such Obligations, or of any instrument evidencing any of
      the
      Obligations or of any collateral therefor or of the existence or extent of
      such
      collateral, and irrespective of the allowability, allowance or disallowance
      of
      any or all of the Obligations in any case commenced by or against any Assignor
      under any Debtor Relief Law.

     

    3.Each
      Assignor hereby jointly and severally represents, warrants and covenants to
      Laurus that:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (a)it
      is a
      corporation, partnership or limited liability company, as the case may be,
      validly existing, in good standing and formed under the respective laws of
      its
      jurisdiction of formation set forth on Schedule A, and each Assignor will
      provide Laurus thirty (30) days’ prior written notice of any change in any of
      its respective jurisdiction of formation;

     

    (b)its
      legal
      name is as set forth in its Certificate of Incorporation or other organizational
      document (as applicable) as amended through the date hereof and as set forth
      on
      Schedule A, and it will provide Laurus thirty (30) days’ prior written notice of
      any change in its legal name;

     

    (c)its
      organizational identification number (if applicable) is as set forth on Schedule
      A hereto, and it will provide Laurus thirty (30) days’ prior written notice of
      any change in its organizational identification number;

     

    (d)it
      is the
      lawful owner of its Collateral and it has the sole right to grant a security
      interest therein and will defend the Collateral against all claims and demands
      of all persons and entities and, in the case of the Rigs, will not maintain,
      use
      or operate any Rig in violation of any local, state or federal law or any rule,
      regulation or order of any governmental agency having jurisdiction
      thereof;

     

    (e)it
      will
      keep its Collateral free and clear of all attachments, levies, taxes, liens,
      security interests and encumbrances of every kind and nature (“Encumbrances”),
      except (i) Encumbrances securing the Obligations and (ii) Encumbrances securing
      indebtedness of each such Assignor not to exceed $200,000 in the aggregate
      for
      all such Assignors so long as all such Encumbrances are removed or otherwise
      released to Laurus’ satisfaction within ten (10) days of the creation
      thereof;

     

    (f)it
      will,
      at its and the other Assignors’ joint and several cost and expense keep the
      Collateral in good state of repair and will protect the same from deterioration
      (ordinary wear and tear excepted) and will not waste or destroy the same or
      any
      part thereof other than ordinary course discarding of items no longer used
      or
      useful in its or such other Assignors’ business;

     

    (g)it
      will
      not, without Laurus’ prior written consent, sell, exchange, lease or otherwise
      dispose of any Collateral, whether by sale, lease or otherwise, except for
      the
      sale of inventory in the ordinary course of business and for the disposition
      or
      transfer in the ordinary course of business during any fiscal year of obsolete
      and worn-out equipment or equipment no longer necessary for its ongoing needs,
      having an aggregate fair market value of not more than $200,000 and only to
      the
      extent that:

     

    the
      proceeds of each such disposition are used to acquire replacement Collateral
      which is subject to Laurus’ first priority perfected security interest, or are
      used to repay the Obligations or to pay general corporate expenses;
      or

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    following
      the occurrence of an Event of Default which continues to exist the proceeds
      of
      which are remitted to Laurus to be held as cash collateral for the
      Obligations;

     

    (h)it
      will
      not take any action in connection with any contract pertaining to a Rig that
      would impair the value of the interest or rights of such Assignor thereunder
      or
      that would materially impair the interest or rights of Laurus;

     

    (i)it
      will
      insure or cause the Collateral to be insured in Laurus’ name (as an additional
      insured and loss payee) in accordance with standard oilfield industry practices
      against loss or damage by fire, theft, burglary, pilferage, loss in transit
      and
      such other hazards as Laurus shall specify in amounts and under policies by
      insurers acceptable to Laurus and all premiums thereon shall be paid by such
      Assignor and the policies delivered to Laurus. If any such Assignor fails to
      do
      so, Laurus may procure such insurance and the cost thereof shall be promptly
      reimbursed by the Assignors, jointly and severally, and shall constitute
      Obligations;

     

    (j)it
      will
      keep its chief place of business and chief executive office and the office
      where
      it keeps its records concerning its account, full and complete copies of its
      contracts pertaining to a Rig and chattel paper at the location specified on
      the
      signature page hereof, or, with the prior written consent of Laurus, at such
      other location as specified by such Assignor from time to time;

     

    (k)it
      will
      at all reasonable times allow Laurus or Laurus’ representatives free access to
      and the right of inspection of the Collateral, including, without limitation,
      the record of all payments received and any credits granted on any of its
      accounts pertaining to a Rig;

     

    (l)such
      Assignor (jointly and severally with each other Assignor) hereby indemnifies
      and
      saves Laurus harmless from all loss, costs, damage, liability and/or expense,
      including reasonable attorneys’ fees, that Laurus may sustain or incur to
      enforce payment, performance or fulfillment of any of the Obligations and/or
      in
      the enforcement of this Master Security Agreement or in the prosecution or
      defense of any action or proceeding either against Laurus or any Assignor
      concerning any matter growing out of or in connection with this Master Security
      Agreement, and/or any of the Obligations and/or any of the Collateral except
      to
      the extent caused by Laurus’ own gross negligence or willful misconduct (as
      determined by a court of competent jurisdiction in a final and nonappealable
      decision); 

     

    (m)all
      commercial tort claims (as defined in the Uniform Commercial Code as in effect
      in the State of New York) held by any Assignor are set forth on Schedule B
      to
      this Master Security Agreement; each Assignor hereby agrees that it shall
      promptly, and in any event within five (5) Business Days after the same is
      acquired by it, notify Laurus of any commercial tort claim acquired by it and
      unless otherwise consented to in writing by Laurus, it shall enter into a
      supplement to this Master Security Agreement granting to Laurus a security
      interest in such commercial tort claim, securing the Obligations;

     

    (n)any
      and
      all Collateral which is tangible, including, without limitation, the Rigs:
      (i)
      is and will remain tangible personal property and is not and shall not
      constitute real property fixtures, (ii) is removable from and is not essential
      to the premises at which the tangible

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Collateral
      is located, (iii) is capable of satisfying its intended business function,
      and
      no additional property is required to be added to the tangible Collateral in
      order to satisfy such business function;

     

    (o)such
      Assignor has assigned to each Rig a specific number, which numbers, as of the
      Closing Date, are set forth on Schedule C hereto and such Assignor shall not
      change the number assignment to such Rig without prior notice to
      Laurus;

     

    (p)the
      physical location of Rig is, as of the Closing Date, set forth on Schedule
      C
      hereto and such Assignor shall not cause or permit any Rig or other Rig
      Collateral to be removed from the United States without the express prior
      written consent of Laurus; and

     

    (q)such
      Assignor shall maintain a sign on each Rig, which sign shall (i) indicate that
      such Rig is the property of such Assignor and (ii) display the number that
      has
      been assigned to such Rig by such Assignor.

     

    4.The
      occurrence of any of the following events or conditions shall constitute an
      “Event of Default” under this Master Security Agreement:

     

    (a)any
      covenant or any other term or condition of this Master Security Agreement is
      breached in any material respect and such breach, to the extent subject to
      cure,
      shall continue without remedy for a period of fifteen (15) days after the
      occurrence thereof;

     

    (b)any
      representation or warranty, or statement made or furnished to Laurus under
      this
      Master Security Agreement by any Assignor or on any Assignor’s behalf should
      prove to any time be false or misleading in any material respect on the date
      as
      of which made or deemed made;

     

    (c)the
      loss,
      theft, substantial damage, destruction, sale or encumbrance to or of any of
      the
      Collateral or the making of any levy, seizure or attachment thereof or thereon
      except to the extent:

     

    such
      loss
      is covered by insurance proceeds which are used to replace the item or repay
      Laurus; or

     

    said
      levy, seizure or attachment does not secure indebtedness in excess of $100,000
      in the aggregate for all Assignors and such levy, seizure or attachment has
      been
      removed or otherwise released within ten (10) days of the creation or the
      assertion thereof;

     

    (d)an
      Event
      of Default shall have occurred under and as defined in any
      Document.

     

    5.Upon
      the
      occurrence of any Event of Default and at any time thereafter, Laurus may
      declare all Obligations immediately due and payable and Laurus shall have the
      remedies of a secured party provided in the UCC as in effect in the State of
      New
      York, this Agreement and other applicable law. Upon the occurrence of any Event
      of Default and at any time thereafter,

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Laurus
      will have the right to take possession of the Collateral and to maintain such
      possession on any Assignor’s premises or to remove the Collateral or any part
      thereof to such other premises as Laurus may desire. Upon Laurus’ request, each
      Assignor shall assemble or cause the Collateral to be assembled and make it
      available to Laurus at a place designated by Laurus. If any notification of
      intended disposition of any Collateral is required by law, such notification,
      if
      mailed, shall be deemed properly and reasonably given if mailed at least ten
      (10) days before such disposition, postage prepaid, addressed to the applicable
      Assignor either at such Assignor’s address shown herein or at any address
      appearing on Laurus’ records for such Assignor. Any proceeds of any disposition
      of any of the Collateral shall be applied by Laurus to the payment of all
      expenses in connection with the sale of the Collateral, including reasonable
      attorneys’ fees and other legal expenses and disbursements and the reasonable
      expenses of retaking, holding, preparing for sale, selling, and the like, and
      any balance of such proceeds may be applied by Laurus toward the payment of
      the
      Obligations in such order of application as Laurus may elect, and each Assignor
      shall be liable for any deficiency. For the avoidance of doubt, following the
      occurrence and during the continuance of an Event of Default, Laurus shall
      have
      the immediate right to withdraw any and all monies contained in any deposit
      account in the name of any Assignor and controlled by Laurus and apply same
      to
      the repayment of the Obligations (in such order of application as Laurus may
      elect). The parties hereto each hereby agree that the exercise by any party
      hereto of any right granted to it or the exercise by any party hereto of any
      remedy available to it (including, without limitation, the issuance of a notice
      of redemption, a borrowing request and/or a notice of default), in
      each case, hereunder, under the Securities Purchase Agreement or under any
      other Related Agreement which has been publicly filed with the SEC
      shall not constitute confidential information and no party
      shall have any duty to the other party to maintain such information as
      confidential.

     

    6.If
      any
      Assignor defaults in the performance or fulfillment of any of the terms,
      conditions, promises, covenants, provisions or warranties on such Assignor’s
      part to be performed or fulfilled under or pursuant to this Master Security
      Agreement, Laurus may, at its option without waiving its right to enforce this
      Master Security Agreement according to its terms, immediately or at any time
      thereafter and without notice to any Assignor, perform or fulfill the same
      or
      cause the performance or fulfillment of the same for each Assignor’s joint and
      several account and at each Assignor’s joint and several cost and expense, and
      the cost and expense thereof (including reasonable attorneys’ fees) shall be
      added to the Obligations and shall be payable on demand with interest thereon
      at
      the highest rate permitted by law, or, at Laurus’ option, debited by Laurus from
      any other deposit accounts in the name of any Assignor and controlled by
      Laurus.

     

    7.Each
      Assignor appoints Laurus, any of Laurus’ officers, employees or any other person
      or entity whom Laurus may designate as such Assignor’s attorney, with power to
      execute such documents on each such Assignor’s behalf, but solely to the extent
      Laurus deems such action necessary in the exercise of its commercially
      reasonable discretion to carry out the terms of this Master Security Agreement,
      and to supply any omitted information and correct patent errors in any documents
      executed by any Assignor or on any Assignor’s behalf; to file financing
      statements against such Assignor covering the Collateral (and, in connection
      with the filing of any such financing statements, describe the Collateral as
      “all assets and all personal property, whether now owned and/or hereafter
      acquired” (or any substantially similar variation thereof));

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    to
      sign
      such Assignor’s name on public records, but solely to the extent Laurus deems
      such action necessary in the exercise of its commercially reasonable discretion
      to carry out the terms of this Master Security Agreement; and to do all other
      things Laurus deems necessary in the exercise of its commercially reasonable
      discretion to carry out the terms of this Master Security Agreement. Each
      Assignor hereby ratifies and approves all acts of the attorney and neither
      Laurus nor the attorney will be liable for any acts of commission or omission,
      nor for any error of judgment or mistake of fact or law other than gross
      negligence or willful misconduct (as determined by a court of competent
      jurisdiction in a final and non-appealable decision). This power being coupled
      with an interest, is irrevocable so long as any Obligations remains
      unpaid.

     

    8.No
      delay
      or failure on Laurus’ part in exercising any right, privilege or option
      hereunder shall operate as a waiver of such or of any other right, privilege,
      remedy or option, and no waiver whatever shall be valid unless in writing,
      signed by Laurus and then only to the extent therein set forth, and no waiver
      by
      Laurus of any default shall operate as a waiver of any other default or of
      the
      same default on a future occasion. Laurus’ books and records containing entries
      with respect to the Obligations shall be admissible in evidence in any action
      or
      proceeding, shall be binding upon each Assignor for the purpose of establishing
      the items therein set forth and shall constitute prima facie proof thereof.
      Laurus shall have the right to enforce any one or more of the remedies available
      to Laurus, successively, alternately or concurrently. Each Assignor agrees
      to
      join with Laurus in executing such documents or other instruments to the extent
      required by the UCC in form satisfactory to Laurus and in executing such other
      documents or instruments as may be required or deemed necessary by Laurus for
      purposes of affecting or continuing Laurus’ security interest in the
      Collateral.

     

    9.The
      Assignors shall jointly and severally pay all of Laurus’ out-of-pocket costs and
      expenses, including reasonable fees and disbursements of in-house or outside
      counsel and appraisers, in connection with the preparation, execution and
      delivery of the Documents, and in connection with the prosecution or defense
      of
      any action, contest, dispute, suit or proceeding concerning any matter in any
      way arising out of, related to or connected with any Document, subject to the
      terms of Section 2(c) of the Securities Purchase Agreement. The Assignors shall
      also jointly and severally pay all of Laurus’ reasonable and customary fees,
      charges, out-of-pocket costs and expenses, including fees and disbursements
      of
      counsel and appraisers, in connection with (a) the preparation, execution and
      delivery of any waiver, any amendment thereto or consent proposed or executed
      in
      connection with the transactions contemplated by the Documents, (b) Laurus’
obtaining performance of the Obligations under the Documents, including, but
      not
      limited to the enforcement or defense of Laurus’ security interests, assignments
      of rights and liens hereunder as valid perfected security interests, (c) any
      attempt to inspect, verify, protect, collect, sell, liquidate or otherwise
      dispose of any Collateral, (d) any appraisals or re-appraisals of any property
      (real or personal) pledged to Laurus by any Assignor as Collateral for, or
      any
      other Person as security for, the Obligations hereunder and (e) any
      consultations in connection with any of the foregoing. The Assignors shall
      also
      jointly and severally pay Laurus’ customary bank charges for all bank services
      (including wire transfers) performed or caused to be performed by Laurus for
      any
      Assignor at any Assignor’s request or in connection with any Assignor’s loan
      account (if any) with Laurus. All such costs and expenses together with all
      filing, recording and search fees, taxes and interest payable by the Assignors
      to Laurus shall be payable on demand and shall be secured by the Collateral.
      If
      any tax by any

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    nation
      or
      government, any state or other political subdivision thereof, and any agency,
      department or other entity exercising executive, legislative, judicial,
      regulatory or administrative functions of or pertaining to government (each,
      a
“Governmental Authority”) is or may be imposed on or as a result of any
      transaction between any Assignor, on the one hand, and Laurus on the other
      hand,
      which Laurus is or may be required to withhold or pay, the Assignors hereby
      jointly and severally indemnify and hold Laurus harmless in respect of such
      taxes, and the Assignors will repay to Laurus the amount of any such taxes
      which
      shall be charged to the Assignors’ account; and until the Assignors shall
      furnish Laurus with indemnity therefor (or supply Laurus with evidence
      satisfactory to it that due provision for the payment thereof has been made),
      Laurus may hold without interest any balance standing to each Assignor’s credit
      (if any) and Laurus shall retain its liens in any and all
      Collateral.

     

    10.THIS
      MASTER SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
      ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
      AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
      All of the rights, remedies, options, privileges and elections given to Laurus
      hereunder shall inure to the benefit of Laurus’ successors and assigns. The term
“Laurus” as herein used shall include Laurus, any parent of Laurus’, any of
      Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent, whether now
      existing or hereafter created or acquired, and all of the terms, conditions,
      promises, covenants, provisions and warranties of this Agreement shall inure
      to
      the benefit of each of the foregoing, and shall bind the representatives,
      successors and assigns of each Assignor.

     

    11.Each
      Assignor hereby consents and agrees that the state of federal courts located
      in
      the County of New York, State of New York shall have exclusive jurisdiction
      to
      hear and determine any claims or disputes between Assignor, on the one hand,
      and
      Laurus, on the other hand, pertaining to this Master Security Agreement or
      to
      any matter arising out of or related to this Master Security Agreement,
      provided, that Laurus and each Assignor acknowledges that any appeals from
      those
      courts may have to be heard by a court located outside of the County of New
      York, State of New York, and further provided, that nothing in this Master
      Security Agreement shall be deemed or operate to preclude Laurus from bringing
      suit or taking other legal action in any other jurisdiction to collect, the
      Obligations, to realize on the Collateral or any other security for the
      Obligations, or to enforce a judgment or other court order in favor of Laurus.
      Each Assignor expressly submits and consents in advance to such jurisdiction
      in
      any action or suit commenced in any such court, and each Assignor hereby waives
      any objection which it may have based upon lack of personal jurisdiction,
      improper venue or forum non conveniens.
      Each
      Assignor hereby waives personal service of the summons, complaint and other
      process issues in any such action or suit and agrees that service of such
      summons, complaint and other process may be made by registered or certified
      mail
      addressed to such assignor at the address set forth on the signature lines
      hereto and that service so made shall be deemed completed upon the earlier
      of
      such Assignor’s actual receipt thereof or three (3) days after deposit in the
      U.S. mails, proper postage prepaid.

     

    The
      parties desire that their disputes be resolved by a judge applying such
      applicable laws. Therefore, to achieve the best combination of the benefits
      of
      the judicial system and of

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    arbitration,
      the parties hereto waive all rights to trial by jury in any action, suite,
      or
      proceeding brought to resolve any dispute, whether arising in contract, tort,
      or
      otherwise between Laurus, and/or any Assignor arising out of, connected with,
      related or incidental to the relationship established between them in connection
      with this Master Security Agreement or the transactions related
      hereto.

     

    12.It
      is
      understood and agreed that any person or entity that desires to become an
      Assignor hereunder, or is required to execute a counterpart of this Master
      Security Agreement after the date hereof pursuant to the requirements of any
      Document, shall become an Assignor hereunder by (x) executing a Joinder
      Agreement in form and substance satisfactory to Laurus, (y) delivering
      supplements to such exhibits and annexes to such Documents as Laurus shall
      reasonably request and (z) taking all actions as specified in this Master
      Security Agreement as would have been taken by such Assignor had it been an
      original party to this Master Security Agreement, in each case with all
      documents required above to be delivered to Laurus and with all documents and
      actions required above to be taken to the reasonable satisfaction of
      Laurus.

     

    [Remainder
      of this page intentionally left blank]

     

    

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

     

    13.All
      notices from Laurus to any Assignor shall be sufficiently given if mailed or
      delivered to such Assignor’s address set forth below.

     

    Very
      truly yours,

     

    

    BLAST
      ENERGY SERVICES, INC.

     

    By:
      /s/
      John O’Keefe    

    Name:
      John O’Keefe

    Title:
      EVP, CFO, and Co-CEO

    Address: 14550
      Torrey Chase Boulevard

    Suite
      330

    Houston,
      TX 77014

    Facsimile:
      No.: 281-453-2899

     

     

    EAGLE
      DOMESTIC DRILLING OPERATIONS LLC

     

    By:
       BLAST
      ENERGY SERVICES, INC.,  its
      sole
      member

     

    By:
      /s/
      David M. Adams   

    Name:
      David M. Adams

    Title:
      President and Co-CEO

    Address: 14550
      Torrey Chase Boulevard

    Suite
      330

    Houston,
      TX 77014

    Facsimile:
      No.: 281-453-2899

     

     

    ACKNOWLEDGED:

     

    LAURUS
      MASTER FUND, LTD.

     

    By:
      /s/
      Laurus Master Fund, LTD.  

    Name:

    Title:

    Address:

     

    

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    SCHEDULE
      A

    
      	
              Entity

            	
              Jurisdiction
                of 

              Formation

            	
              Organization
                Identification Number

            
	
              Blast
                Energy Services, Inc.

            	
              California

            	
              C2263090

            
	
              Eagle
                Domestic Drilling Operations, LLC

            	
              Texas

            	
              800179717

            
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

    

    

     

    

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    SCHEDULE
      B

    COMMERCIAL
      TORT CLAIMS

     

    

     

    None.

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

     

    SCHEDULE
      C

     

    DESCRIPTION
      OF RIGS

     

    

     

    Rig
      #11 -
      Woodruff County, Arkansas

     

    Rig
      #12 -
      White County, Arkansas

     

    Rig
      #16 -
      Bosque County, Texas

     

    Rig
      #14 -
      Work in progress - McClain County, Oklahoma

     

    Rig
      #15 -
      Work in progress - McClain County, Oklahoma

     

    Rig
      #17 -
      Components - McClain County, Oklahoma

     

    

     

    All
      working rigs and rigs that are in the process of being completed are mechanical
      rigs with the capability to drill between 10,000’ - 14,000’ with 4.5” OD drill
      pipe. All rigs are equipped with 1000 HP Triplex mud pumps and new diesel
      engines.

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