Document:

exh10-1_agreement.htm

     

    
      

      

    

     

     

     

     

     

     

     

    EXHIBIT 10.1

     

    PURCHASE AND SALE AGREEMENT BETWEEN

    PETROHUNTER ENERGY CORPORATION AND SWEETPEA
PETROLEUM PTY LTD.

    AND FALCON OIL & GAS LTD. AND FALCON OIL
& GAS AUSTRALIA PTY LTD.

    DATED AUGUST 22, 2008

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    PURCHASE
AND SALE AGREEMENT

     

    

     

    B
E T W E E N:

     

    

     

    PETROHUNTER
ENERGY CORPORATION

     

    

     

    -
and -

     

    

     

    SWEETPEA
PETROLEUM PTY LTD.

     

    

     

    -
and -

     

    

     

    FALCON
OIL & GAS LTD.

     

    

     

    -
and -

     

    

     

    FALCON
OIL & GAS AUSTRALIA PTY LTD

     

    

     

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    TABLE OF CONTENTS

    Page

    
      	
              ARTICLE
      1 INTERPRETATION AND GENERAL

            	
              1

            
	 
      	
              1.1

            	
              Defined
      Terms

            	
              1

            
	 
      	
              1.2

            	
              General

            	
              6

            
	 
      	
              1.3

            	
              Governing
      Law

            	
              6

            
	 
      	 
      
	
              ARTICLE
      2 PURCHASE AND SALE

            	
              6

            
	 
      	
              2.1

            	
              Transaction

            	
              6

            
	 
      	
              2.2

            	
              Satisfaction
      of the Purchase Price

            	
              6

            
	 
      	
              2.3

            	
              Convertible
      Securities

            	
              7

            
	 
      	
              2.4

            	
              Adjustments

            	
              7

            
	 
      	
              2.5

            	
              Earnest
      Money Security

            	
              8

            
	 
      	 
      
	
              ARTICLE
      3 REPRESENTATIONS AND WARRANTIES

            	
              9

            
	 
      	
              3.1

            	
              Representations
      and Warranties by Sellers

            	
              9

            
	 
      	
              3.2

            	
              Representations
      and Warranties of Falcon

            	
              13

            
	 
      	
              3.3

            	
              Representations
      and Warranties of Purchaser

            	
              14

            
	 
      	 
      
	
              ARTICLE
      4 WARRANTY CLAIMS

            	
              15

            
	 
      	
              4.1

            	
              Survival
      of Warranties

            	
              15

            
	 
      	
              4.2

            	
              Limitations
      on Warranty Claims

            	
              15

            
	 
      	 
      
	
              ARTICLE
      5 CLOSING

            	
              16

            
	 
      	
              5.1

            	
              Closing
      or Termination

            	
              16

            
	 
      	
              5.2

            	
              Conditions
      for the Benefit of Falcon and Purchaser

            	
              16

            
	 
      	
              5.3

            	
              Conditions
      for Benefit of Sellers

            	
              16

            
	 
      	
              5.4

            	
              Sellers’
      Deliveries on Closing

            	
              17

            
	 
      	
              5.5

            	
              Falcon
      Deliveries on Closing

            	
              19

            
	 
      	
              5.6

            	
              Purchaser
      Deliveries on Closing

            	
              20

            
	 
      	
              5.7

            	
              Approvals

            	
              21

            
	 
      	 
      
	
              ARTICLE
      6 RESOLUTION OF DISPUTES

            	
              21

            
	 
      	
              6.1

            	
              Arbitration
      – If Not Principally Related to Convertible Securities
    Issues

            	
              21

            
	 
      	
              6.2

            	
              Arbitration
      – If Principally Related to Convertible Securities Issues

            	
              22

            
	 
      	
              6.3

            	
              Arbitration—Mixed
      Issues

            	
              24

            
	 
      	 
      
	
              ARTICLE
      7 GENERAL

            	
              24

            
	 
      	
              7.1

            	
              Taxes
      and Fees

            	
              24

            
	 
      	
              7.2

            	
              Complete
      Closings

            	
              24

            
	 
      	
              7.3

            	
              Status
      of the Agreement

            	
              24

            
	 
      	
              7.4

            	
              Tender

            	
              24

            
	 
      	
              7.5

            	
              Specific
      Performance and other Remedies

            	
              24

            
	 
      	
              7.6

            	
              Obligations
      as Covenants

            	
              25

            
	 
      	
              7.7

            	
              Amendment
      of Agreement

            	
              25

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      TABLE OF CONTENTS

      (continued)

      Page

    

    
      	 
      	
              7.8

            	
              Further
      Assurances

            	
              25

            
	 
      	
              7.9

            	
              Waiver

            	
              25

            
	 
      	
              7.10

            	
              Time

            	
              25

            
	 
      	
              7.11

            	
              Entire
      Agreement

            	
              25

            
	 
      	
              7.12

            	
              Severability

            	
              26

            
	 
      	
              7.13

            	
              Counterparts
      and Facsimile

            	
              26

            
	 
      	
              7.14

            	
              Notices

            	
              26

            
	 
      	
              7.15

            	
              Confidentiality

            	
              27

            
	 
      	
              7.16

            	
              Successors
      and Assigns

            	
              27

            
	 
      	
              7.17

            	
              Enurement

            	
              28

            
	 
      	
              7.18

            	
              Language

            	
              28

            

    

     

    SCHEDULE
“A” THE PERMITS

    

    SCHEDULE
“B” THE WELL

    

    SCHEDULE
“C” MATERIAL AGREEMENTS

    

    SCHEDULE
“D” PART 1 PERMIT TRANSFER INSTRUMENT

    

    SCHEDULE
“D” PART 2 ASSIGNMENT AND BILL OF SALE

    

    SCHEDULE
“E” ESCROW AGREEMENT

    

    SCHEDULE
“F” INITIAL BUCKSKIN MESA ESCROW AGREEMENT

    

    SCHEDULE
“G” BEETALOO JOINT OPERATING AGREEMENT

    

    SCHEDULE
“H” MORTGAGE

    

    SCHEDULE
“I” DISCLOSURE SCHEDULE

    

    
      
        
          
            	 
      	
                    -ii-

                  	 
      

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    PURCHASE
AND SALE AGREEMENT

     

    THIS
PURCHASE AND SALE AGREEMENT (“Agreement”) is made and entered into August 22,
2008, by and between PetroHunter Energy Corporation (“PetroHunter Energy”),
Sweetpea Petroleum Pty Ltd (“Sweetpea”), Falcon Oil & Gas Ltd. (“Falcon”),
and Falcon Oil & Gas Australia Pty Ltd (“Purchaser”).  PetroHunter
Energy, Sweetpea, Falcon and Purchaser may sometimes be referred to herein
individually as a “Party” and collectively as the “Parties.”  This
Agreement is based on the following premises:

     

    WHEREAS Sweetpea is the owner
of the Beetaloo Basin Project (as hereinafter defined); and

     

    WHEREAS Seller (as hereinafter
defined) has agreed to sell an undivided 50% interest in the Beetaloo Basin
Project to Purchaser on the terms and conditions set out in this
Agreement;

     

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

     

    ARTICLE
1

     

    INTERPRETATION
AND GENERAL

     

    
      	
              1.1  

            	
              Defined
      Terms

            

    

     

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

     

    “Acceptance Date” means the
last to occur of:

     

    
      	
              (a)    
        

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

            

    

     

    
      	
              (b)    
        

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

            

    

     

    “Acquisition Shares” means the
Common Shares issuable upon the exercise of the Convertible
Securities.

     

    “Adjustment Amount” has the
meaning attributed to it in Section 2.4(b).

     

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

     

    “Allowable Discount” means the
Announcement Price less the following allowable discounts, if the Prospectus
Price is less than the Announcement Price:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -2-

     

    
      	
              Announcement
      Price

            	
              Discount

            
	
              Up
      to $0.50

            	
              25%

            
	
              $0.51
      to $2.00

            	
              20%

            
	
              Above
      $2.00

            	
              15%

            

    

    

    “Announcement Price” means the
price of Common Shares on the TSXV at the close of trading on the day
immediately prior to the announcement of the entering into this
Agreement.

    

    “Applicable Laws” means all
laws, statutes, decrees, acts, treaties, orders, judgments, regulations and
directives of any Government Authority, to the extent the same are publicly
available, have been duly adopted in accordance with the proper procedures, and
are valid and effective at the relevant time.

    

    “Approvals” means all required
material consents, waivers, permits, orders and approvals of any Governmental
Authority or other persons, the TSXV, directors and shareholders, in connection
with, or required to permit, the consummation of the Transaction.

    

    “Assets” means the undivided
50% interest in the Beetaloo Basin Project that will be subject to the
assignment delivered by Seller to Falcon or Purchaser at the
Closing.

    

    “Bayless Override” means the
overriding royalty interest on production from lands covered by the Permits that
was created by Robert L. Bayless Estate and the other sellers under the terms of
the Stock Acquisition and Exploration Agreement with MAB Resources LLC dated
November 9, 2005.

    

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

    

    “Beetaloo JOA” means the joint
operating agreement between Falcon and Seller dated the Closing Date in the form
attached hereto as Schedule “G.”

     

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

     

    “Breaching Party” has the
meaning ascribed thereto in Section 7.5.

     

    “Buckskin Mesa Purchase
Agreement” means the Purchase and Sale Agreement of even date herewith
among Falcon, PetroHunter and other parties related to certain properties in the
State of Colorado.

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -3-

       

    

    “Canadian Securities Laws”
means the applicable securities laws of the Province of Ontario and the
respective regulations made and forms prescribed thereunder, together with all
applicable published policy statements and blanket orders and rulings of the
Ontario Securities Commission.

     

    “Closing” means the transfer of
the Assets and the completion of all other matters contemplated by this
Agreement at the offices of Seller or Sellers’ Counsel on the Closing
Date.

     

    “Closing Date” means 11:00 a.m.
(Denver time) five Business Days after the first to occur of the
following:

     

    
      	
              (a)    
        

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

            

    

     

    
      	
              (b)    
        

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

            

    

     

    
      	
              (c)    
        

            	
              the
      final decision by the Purchaser not to seek the approval of the Treasurer
      of the Commonwealth of Australia.

            

    

     

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

     

    “Convertible Securities” means
the securities of Falcon with the characteristics described in Section
2.3.

     

    “Counsel” means Falcon’s
Counsel, Purchaser’s Counsel and/or Sellers’ Counsel, as the context may
require.

     

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

     

    “Earnest Money Payment” has
the meaning ascribed thereto in Section 2.2(a).

     

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

    

    “Escrow Agent” means Patton
Boggs LLP, in its capacity as the escrow agent under the Escrow
Agreement.

     

    “Escrow Agreement” means the
escrow agreement among, the Escrow Agent, Falcon and Sellers dated the Closing
Date in the form of escrow agreement attached hereto as Schedule “E” to this
Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -4-

       

    

    “Exercise Price” means the
deemed exercise price of the Convertible Securities which shall be equal to the
Announcement Price less the Allowable Discount.

     

    “Falcon’s Counsel” means,
together, Aird & Berlis LLP, Gadens Lawyers, and Lohf Shaiman Jacobs Hyman
& Feiger PC.

     

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

     

    “Initial Buckskin Mesa Escrow
Agreement” means the escrow agreement entered into between Falcon and
PetroHunter dated the date hereof and attached hereto as Schedule
“F”.

     

    “Material Agreements” means the
contracts identified on Schedule “C”.

     

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

     

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

     

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

     

    “Notice” has the meaning
attributed to it in Section 7.14.

     

    “Permits” means Petroleum
Exploration Permits 76, 98, 99 and 117, together with any renewals or extensions
thereof as more fully described on Schedule “A”.

     

    “Permitted Encumbrances”
means:

     

    
      	
              (a)    
        

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

            

    

     

    
      	
              (b)    
        

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

            

    

     

    
      	
              (c)    
        

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

            

    

     

    
      	
              (d)    
        

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

            

    

     

    
      	
              (e)    
        

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -5-

       

    

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

     

    “Prospectus” means a short form
prospectus issued by Falcon, qualifying the distribution of the Common Shares
underlying the Convertible Securities.

     

    “Prospectus Price” means the
price of the Common Shares on the TSXV at the close of trading on the day
immediately prior to the day that Falcon receives a receipt for a (final)
Prospectus from one or more of the securities regulatory authorities in
Canada.

     

    “Purchase Price” has the
meaning ascribed thereto in Section 2.2.

     

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

     

    “Purchaser’s Counsel” means,
together, Aird & Berlis LLP, Gadens Lawyers, and Lohf Shaiman Jacobs Hyman
& Feiger PC.

     

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

     

    “Securities Payment” has the
meaning ascribed thereto in Section 2.2(b).

     

    “Seller” means either of
PetroHunter or Sweetpea, as the context may require.

     

    “Sellers” means, together,
PetroHunter and Sweetpea.

     

    “Sellers’ Counsel” means,
together, Dill Dill Carr Stonbraker & Hutchings, PC and Davis Graham &
Stubbs LLP.

     

    “Transaction” has the meaning
ascribed thereto in Section 2.1.

     

    “Transaction Agreements” mean,
together, this Agreement, the Beetaloo JOA and the Escrow
Agreement.

     

    “Trigger Price” means that
number which is 70 percent of the Announcement Price.

     

    “TSXV” means the TSX Venture
Exchange.

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -6-

       

    

    “Warranty Claim” means a claim
made by a Party based on or with respect to the inaccuracy or non-performance or
non-fulfilment or breach of any representation, warranty or covenant made or
given by another Party contained in the Transaction Agreements or contained in
any document or certificate given in order to carry out the Transaction;
provided, however, that claims based on or with respect to the covenant and
indemnity set forth in Section 2.6 are not Warranty Claims.

     

    “Well” means the Shenandoah #1
well, as more fully described on Schedule “B.”

     

    
      	
              1.2  

            	
              General

            

    

     

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

     

    
      	
              1.3  

            	
              Governing
      Law

            

    

     

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

     

    ARTICLE
2

    PURCHASE
AND SALE

     

    
      	
              2.1  

            	
              Transaction

            

    

     

    Seller
shall sell to Purchaser, and Purchaser shall purchase from Seller, the Assets on
and subject to the terms and conditions of this Agreement (the “Transaction”).

     

    
      	
              2.2  

            	
              Satisfaction
      of the Purchase Price

            

    

     

    Falcon
shall:

     

    
      	
              (a)    
        

            	
              within
      two Business Days after the Acceptance Date (subject to possible extension
      under Section 2.5), pay US$5,000,000 to Seller by wire transfer to an
      account designated by Seller (the “Earnest Money Payment”)
      as earnest money, which shall be refunded to Falcon if Falcon seeks, but
      does not obtain, approval of the Transaction by the Treasurer of the
      Commonwealth of Australia; and

            

    

     

    
      	
              (b)    
        

            	
              at
      the Closing, deposit into escrow pursuant to the terms of the Escrow
      Agreement one or more certificates representing the Convertible Securities
      registered in the name of PetroHunter (the “Securities Payment” and
      together with the Earnest Money Payment, the “Purchase
      Price”).

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -7-

     

    
      	
              2.3  

            	
              Convertible
      Securities

            

    

     

    The
Convertible Securities shall have the following characteristics:

     

    
      	
              (a)    
        

            	
              the
      number of Convertible Securities to be issued to PetroHunter shall be
      equal to the quotient resulting from dividing US$20,000,000 by the
      Exercise Price;

            

    

     

    
      	
              (b)    
        

            	
              such
      securities shall be subject to the following legending
      requirements:

            

    

     

    “UNLESS
PERMITTED UNDER SECURITIES LEGISLATION THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE [insert date 4
months and one day after the distribution date].”

     

    “WITHOUT
PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE AND COMPLIANCE WITH ALL
APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR
THROUGH THE FACILITIES OF THE TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO
OR FOR THE BENEFIT OF CANADIAN RESIDENT UNTIL [insert
date 4 months and one
day from the day of issue].”

     

    "THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT").  THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, OR OTHERWISE TRANSFERRED IN THE UNITED STATES EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION
OF THE CORPORATION."

     

    
      	
              (c)    
        

            	
              a
      term of 12 months following the Closing
Date;

            

    

     

    
      	
              (d)    
        

            	
              non-transferable;
      and

            

    

     

    
      	
              (e)    
        

            	
              non-exercisable
      until: (i) a receipt for the (final) Prospectus has been received by
      Falcon from one or more of the securities regulatory authorities in
      Canada; and (ii) the Acquisition Shares have been admitted for trading on
      the TSXV, at which time the Convertible Securities will be immediately
      exercised in accordance with the terms set forth in Section
      2.3(a).

            

    

     

    
      	
              2.4  

            	
              Adjustments

            

    

     

    
      	
              (a)    
        

            	
              Except
      as provided for in Section 2.4(b), no adjustments shall be made to the
      Purchase Price for operating expenses, insurance premiums, realty taxes,
      local improvements rates and charges, utilities, or any items for which
      Sellers will continue to be responsible after Closing in accordance with
      the terms of this Agreement.

            

    

    
       

      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -8-

       

       

    

    
      	
              (b)    
        

            	
              In
      the event that the Prospectus Price is lower than the Trigger Price, the
      Purchase Price will be adjusted to provide for a cash payment by Purchaser
      to PetroHunter (the “Adjustment Amount”) and
      be equal to that amount of dollars that is arrived at using the following
      formula (dollar amounts in the following formula are US
      dollars):

            

    

     

    

    

    The
Adjustment Amount shall not exceed US$7,000,000.

     

    
      	
              (c)    
        

            	
              If
      the Adjustment Amount is due prior to the Initial Closing Date (as such
      term is defined in the Buckskin Mesa Purchase Agreement), such Adjustment
      Amount shall be deposited into escrow, pursuant to the terms of the Escrow
      Agreement, within four business days of determining the Adjustment
      Amount.  If the Adjustment Amount is due after the Initial
      Closing Date, such Adjustment Amount shall be paid in accordance with
      Section 2.9(b) of the Buckskin Mesa Purchase
  Agreement.

            

    

     

    
      	
              2.5  

            	
              Earnest
      Money Security

            

    

     

    The
Earnest Money shall be secured by a mortgage in favor of Falcon in the form
attached hereto as Schedule “H” covering certain oil and gas wellbores and
leasehold interests in the State of Colorado, United States of
America.  PetroHunter, as the owner of 100% of all of the outstanding
common stock of PetroHunter Operating Company, represents and warrants for the
benefit of Falcon and Purchaser, (i) that PetroHunter Operating Company
substantially benefits from PetroHunter’s entry into this Agreement and
Sweetpea’s receipt of the Earnest Money and (ii) that the lien of the deed of
trust will be a first priority lien.  PetroHunter will cause both this
deed of trust and executed and acknowledged subordinations (satisfactory to
Purchaser in form and substance) of the liens of existing deeds of trust to be
delivered to Falcon before the Earnest Money is due from Falcon.  If
such items are not timely received, the payment date for the Earnest Money shall
be extended until Falcon receives such items.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -9-

       

    

    
      	
              2.6  

            	
              Bayless
      AMI

            

    

     

    PetroHunter
and Seller hereby promise, covenant and guarantee that neither Falcon nor
Purchaser will have any benefits or obligations whatsoever under or in
connection with the area of mutual interest established by Section 19 of the
Stock Acquisition and Exploration Agreement dated November 9, 2005, between MAB
Resources LLC, on the one hand, and the Robert L. Bayless Estate and the other
sellers, on the other.  PetroHunter and Seller each jointly and
severally indemnify and agree to hold Falcon and Purchaser harmless against any
claim (including without limitation any claim for an overriding royalty
interest) at any time by the Robert L. Bayless Estate or any other seller, or
their respective successors and assigns, arising out of the acquisition of any
interest in any lands within that area of mutual interest.

     

    ARTICLE
3

    REPRESENTATIONS
AND WARRANTIES

     

    
      	
              3.1  

            	
              Representations
      and Warranties by Sellers

            

    

     

    PetroHunter
and Sweetpea jointly and severally guarantee, represent and warrant to Falcon
and Purchaser that as of the Closing Date:

     

    
      	
              (a)    
        

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

            

    

     

    
      	
              (b)    
        

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

            

    

     

    
      	
              (c)       

            	
              the
      Transaction Agreements and the obligations of Sellers under the
      Transaction Agreements and the documents and transaction contemplated
      thereby have been duly and validly authorized by all requisite corporate
      proceedings and constitute, legal, valid and binding obligations of each
      of Sellers, enforceable against each of Sellers in accordance with their
      terms, subject to the limitations with respect to enforcement imposed by
      applicable laws in connection with bankruptcy, insolvency, liquidation,
      reorganization or other laws affecting the enforcement of creditors’
      rights generally and subject to the availability of equitable remedies
      such as specific performance and injunction which are only available in
      the discretion of the court from which they are
  sought;

            

    

     

    
      	
              (d)    
        

            	
              neither
      the entering into nor the delivery of the Transaction Agreements nor the
      completion by each of Sellers of the Transaction contemplated thereby will
      conflict with, or constitute a material default under, or result in a
      material violation of: (i) any of the provisions of the entity formation
      documents or by-laws of either of Sellers; or (ii) any applicable
      laws;

            

    

     

    
      	
              (e)    
        

            	
              each
      of Sellers: (i) has not made an assignment in favor of its creditors or a
      proposal in bankruptcy to its creditors or any class thereof; (ii) has not
      had any 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -10-

       

    

    
      	 	petition
      for a receiving order presented in respect of it; and (iii) has not
      initiated proceedings with respect to a compromise or arrangement with its
      creditors or for its winding up, liquidation or
  dissolution;

    

     

    
      	
              (f)    
        

            	
              except
      as set forth on Schedule “I”, neither of Sellers is under any obligation,
      contractual or otherwise, to request or obtain the consent of any person,
      and no permits, licences, certifications, authorizations or approvals of,
      or notifications to, any federal, state, municipal or local government or
      governmental agency, board, commission or authority are required to be
      obtained by either of Sellers in connection with the Transaction as
      contemplated herein, except for consents that must be obtained from the
      Minister for Mines and Energy of the Northern Territory of Australia and
      the Local Aboriginal Groups acting through their
      representative;

            

    

     

    
      	
              (g)    
        

            	
              each
      of Sellers is aware that the Acquisition Shares have not been and will not
      be registered under the U.S. Securities Act or the securities laws of any
      state and that these securities may not be issued, offered or sold in the
      United States without registration under the U.S. Securities Act or
      compliance with requirements of an exemption from registration and the
      applicable laws of all applicable states and acknowledges that Falcon has
      no present intention of filing a registration statement under the U.S.
      Securities Act in respect of the Acquisition
  Shares;

            

    

     

    
      	
              (h)    
        

            	
              PetroHunter
      is a U.S. Resident as defined under the U.S. Securities Act. and Sweetpea
      is not a U.S. Resident as defined under the U.S. Securities
      Act.  Each is an “accredited investor” as that term is defined
      in Section 501(a) of Regulation D promulgated under the Securities Act of
      1933.  Neither of Sellers will offer or sell the Acquisition
      Shares in the United States unless such securities are registered under
      the U.S. Securities Act and the securities laws of all applicable states
      of the United States or an exemption from such registration requirements
      is available, and further that it will not resell the Acquisition Shares,
      except in accordance with the provisions of applicable securities
      legislation, regulations, rules, policies and orders and stock exchange
      rules;

            

    

     

    
      	
              (i)    
        

            	
              each
      of Sellers acknowledges that there are restrictions on Sellers ability to
      resell the Acquisition Shares and it is the responsibility of each of
      Sellers to find out what those restrictions are and to comply with them
      before selling the Acquisition
Shares;

            

    

     

    
      	
              (j)    
        

            	
              each
      of Sellers acknowledges that the Convertible Securities and Acquisition
      Shares, if applicable, will be subject to resale restrictions under
      applicable Canadian Securities Laws and the TSXV Policies.  Each
      of Sellers acknowledges that all certificates issued representing the
      Convertible Securities and the Acquisition Shares, as well as all
      certificates issued in exchange for or in substitution therefore, will
      bear legends to the following
effect:

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -11-

       

       

    

    “UNLESS
PERMITTED UNDER SECURITIES LEGISLATION THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE [insert date 4
months and one day after the distribution date].”

     

    “WITHOUT
PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE AND COMPLIANCE WITH ALL
APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR
THROUGH THE FACILITIES OF THE TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO
OR FOR THE BENEFIT OF CANADIAN RESIDENT UNTIL [insert date 4
months and one day from the day of issue].”

     

    “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”).  THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD OR OTHERWISE TRANSFERRED IN THE UNITED STATES EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION
OF THE CORPORATION.”

     

    
      	
              (k)    
        

            	
              each
      of Sellers acknowledges that any securities of Falcon held by either of
      Sellers including the Convertible Securities and Acquisition Shares issued
      to PetroHunter will be subject to the TSXV providing its final acceptance
      to the Transaction;

            

    

     

    
      	
              (l)    
        

            	
              all
      Data has been made available to Falcon and Falcon’s
    Counsel;

            

    

     

    
      	
              (m)    
        

            	
              each
      of Sellers has not filed all tax returns that it was required to file, but
      each has no reason to believe that it has any significant liability for
      taxes due, including interest and
penalties;

            

    

     

    
      	
              (n)    
        

            	
              to
      the best knowledge of Sellers, all of the contracts, agreements and
      instruments set forth on Schedule “C” are valid, binding and enforceable
      in accordance with their respective terms, except when such enforceability
      may be limited by applicable bankruptcy, insolvency, moratorium,
      reorganization or similar laws from time to time in effect which effect
      the enforcement of creditors’ rights generally and shall be in full force
      and effect without penalty in accordance with their terms upon
      consummation of the transactions contemplated
  hereby;

            

    

     

    
      	
              (o)    
        

            	
              except
      as set forth on Schedule “I”, each Seller has performed all material
      obligations which are required to be performed by it under the Material
      Agreements and it is not in default under or in breach of or in receipt of
      any claim of default or breach under any Material Agreement, and no event
      has occurred which, with the passage of time or the giving of notice or
      both, would result in a 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -12-

       

       

    

    
      	 	default,
      breach or event of noncompliance by a Seller under any Material
      Agreement;

    

     

    
      	
              (p)    
        

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

            

    

     

    
      	
              (q)    
        

            	
              no
      Seller is a party to any oral contract, agreement, or other arrangement
      which, if reduced to written form, would be required to be listed in
      Schedule “C;”

            

    

     

    
      	
              (r)    
        

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

            

    

     

    
      	
              (s)    
        

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

            

    

     

    
      	
              (t)    
        

            	
              all
      minimum work and expenditures required to be performed up to the Closing
      Date have been satisfied in relation to each
  Permit;

            

    

     

    
      	
              (u)    
        

            	
              all
      taxes, stamp duties and government charges in relation to the Northern
      Land Council Exploration Agreements have been
  paid;

            

    

     

    
      	
              (v)    
        

            	
              all
      of the Assets are free and clear of all liens, writs, charges and
      encumbrances, except liens for taxes arising in Sweetpea’s ordinary course
      of business that are not yet due and payable, and except for Permitted
      Encumbrances;

            

    

     

    
      	
              (w)    
        

            	
              neither
      of Sellers have received nor delivered any written notices of violation or
      alleged violation of any provisions of any Applicable Law (including
      without limitation laws relating to public health, safety, and protection
      of the environment), and, to the best knowledge of Sellers, there exists
      no basis upon which any such charge, complaint, action, suit, proceeding,
      hearing, or investigation may be brought or threatened against Seller by
      any Governmental Authority;

            

    

     

    
      	
              (x)    
        

            	
              except
      as set forth on Schedule “I”, there is no material uninsured litigation,
      claim or proceeding, including appeals and applications for review, in
      progress, pending or, to the best of the knowledge of each of Sellers,
      threatened against either of Sellers or relating to the Beetaloo Basin
      Project before any Governmental Authority or arbitration panel, and there
      is not presently outstanding against either of Sellers or in respect of
      the Beetaloo Basin Project, any judgment, decree, injunction, rule or
      order of any Governmental Authority or arbitrator which would have
      material adverse affect on the Beetaloo Basin Project, including, without
      limitation, the value thereof;

            

    

     

    
      	
              (y)    
        

            	
              neither
      Seller nor any director, officer, agent, employee or other person
      associated with or acting on behalf of either Seller (i) has used any
      corporate funds of such Seller for any unlawful contributions, gift,
      entertainment or other unlawful expense relating to political activity;
      (ii) made any direct or indirect unlawful

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -13-

       

       

    

    
      	 	
              payment
      to any governmental official or employee from corporate funds of either
      Seller; (iii) has violated or is in violation of any provision of the
      United States Foreign Corrupt Practice Act, the OECD Convention on
      Combating Bribery in International Business Transactions, or any national
      legislation promulgated thereunder; or (iv) made any bribe, unlawful
      rebate, payoff, influence payment, kickback or other unlawful payment in
      connection with the business of either
Seller;

            

    

     

    
      	
              (z)    
        

            	
              Sellers
      have paid all amounts due to date under the various creditor repayment
      schedules summarized in a document entitled “Sweetpea Petroleum Payout
      Program June 2008” and delivered to Falcon before the Acceptance Date,
      except the last payment due thereon, which will be paid by Sellers no
      later than August 31, 2008, and Sellers will make all future payments on a
      timely basis; and

            

    

     

    
      	
              (aa)   
        

            	
              to
      the best of Seller’s knowledge, all material outstanding trade payables of
      Sweetpea in respect of the Beetaloo Basin Project at the Agreement Date
      are set forth in the document entitled “Sweetpea Petroleum Payout Program
      June 2008”.

            

    

     

    
      	
              3.2  

            	
              Representations
      and Warranties of Falcon

            

    

     

    Falcon
hereby guarantees, represents and warrants to each of Sellers that as of the
Closing Date:

     

    
      	
              (a)    
        

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

            

    

     

    
      	
              (b)    
        

            	
              Falcon
      is a corporation duly incorporated, organized and validly existing and in
      good standing under the laws of the Province of British
      Columbia;

            

    

     

    
      	
              (c)    
        

            	
              the
      Transaction Agreements and the obligations of Falcon thereunder and the
      documents and transaction contemplated therein have been duly and validly
      authorized by all requisite corporate proceedings and constitute, legal,
      valid and binding obligations of Falcon, enforceable against Falcon in
      accordance with their terms, subject to the limitations with respect to
      enforcement imposed by applicable laws in connection with bankruptcy,
      insolvency, liquidation, reorganization or other laws affecting the
      enforcement of creditors’ rights generally and subject to the availability
      of equitable remedies such as specific performance and injunction which
      are only available in the discretion of the court from which they are
      sought;

            

    

     

    
      	
              (d)    
        

            	
              neither
      the entering into nor the delivery of the Transaction Agreements nor the
      completion by Falcon of the Transaction will conflict with, or constitute
      a material default under, or result in a material violation of (i) any of
      the provisions of the entity formation documents or by-laws of Falcon, or
      (ii) any applicable laws;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -14-

       

       

    

    
      	
              (e)    
        

            	
              Falcon
      (i) is not an insolvent person within the meaning of the Bankruptcy and Insolvency
      Act (Canada), the Companies Creditors
      Arrangement Act (Canada) or the Winding-up and Restructuring
      Act (Canada), (ii) has not made an assignment in favor of its
      creditors or a proposal in bankruptcy to its creditors or any class
      thereof, (iii) has not had any petition for a receiving order presented in
      respect of it, and (iv) has not initiated proceedings with respect to a
      compromise or arrangement with its creditors or for its winding up,
      liquidation or dissolution;

            

    

     

    
      	
              (f)    
        

            	
              to
      the best of the knowledge of Falcon, there is no outstanding suit, action,
      litigation, claim or legal proceeding, including appeals and applications
      for review, in progress relating to Falcon before any court, commission,
      board or arbitration panel which, if determined adversely to Falcon,
      would:

            

    

     

    
      	
              (i)    
        

            	
              prevent
      Falcon from satisfying the Purchase Price;
or

            

    

     

    
      	
              (ii)   
        

            	
              prevent
      Falcon from fulfilling in any material respect its obligations contained
      in the Transaction Agreements or arising from the Transaction
      Agreements.

            

    

     

    
      	
              (g)    
        

            	
              the
      Convertible Securities shall have the characteristics described in Section
      2.3;

            

    

     

    
      	
              (h)    
        

            	
              the
      Acquisition Shares when issued shall be duly and validly issued as fully
      paid and non-assessable Common
Shares;

            

    

     

    
      	
              (i)    
        

            	
              Falcon
      shall use its commercially reasonable best efforts to have the
      distribution of the Acquisition Shares qualified as “free trading” Common
      Shares by any Prospectus issued;
and

            

    

     

    
      	
              (j)    
        

            	
              Falcon
      shall use its commercially reasonable best efforts to have the preliminary
      Prospectus filed within 20 Business Days from the Closing
      Date.

            

    

     

    
      	
              3.3  

            	
              Representations
      and Warranties of Purchaser

            

    

     

    Purchaser
hereby guarantees, represents and warrants to each of Sellers that as of the
Closing Date:

     

    
      	
              (a)    
        

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

            

    

     

    
      	
              (b)    
        

            	
              Purchaser
      is a corporation duly incorporated, organized and validly existing and in
      good standing under the laws of
Australia;

            

    

     

    
      	
              (c)    
        

            	
              the
      Transaction Agreements and the obligations of Purchaser thereunder and the
      documents and transaction contemplated therein have been duly and validly
      authorized by all requisite corporate proceedings and constitute, legal,
      valid and 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -15-

       

       

    

    
      	 	
              binding
      obligations of Purchaser, enforceable against Purchaser in accordance with
      their terms, subject to the limitations with respect to enforcement
      imposed by applicable laws in connection with bankruptcy, insolvency,
      liquidation, reorganization or other laws affecting the enforcement of
      creditors’ rights generally and subject to the availability of equitable
      remedies such as specific performance and injunction which are only
      available in the discretion of the court from which they are
      sought;  and

            

    

     

    
      	
              (d)    
        

            	
              neither
      the entering into nor the delivery of the Transaction Agreements nor the
      completion by Purchaser or the Transaction will conflict with, or
      constitute a material default under, or result in a material violation of
      (i) any of the provisions of the entity formation documents or by-laws of
      Purchaser, or (ii) any applicable
laws.

            

    

     

    ARTICLE
4

    WARRANTY
CLAIMS

     

    
      	
              4.1  

            	
              Survival
      of Warranties

            

    

     

    
      	
              (a)    
        

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

            

    

     

    
      	
              (i)    
        

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

            

    

     

    
      	
              (ii)   
        

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

            

    

     

    
      	
              (b)    
        

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

            

    

     

    
      	
              4.2  

            	
              Limitations
      on Warranty Claims

            

    

     

    
      	
              (a)    
        

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -16-

       

       

    

    
      	 	the
      Transaction hereunder notwithstanding such inaccuracy, non-performance,
      non-fulfilment or breach.

    

     

    
      	
              (b)    
        

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

            

    

     

    
      	
              (c)    
        

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

            

    

     

    ARTICLE
5

    CLOSING

     

    
      	
              5.1  

            	
              Closing
      or Termination

            

    

     

    
      	
              (a)    
        

            	
              The
      Transaction contemplated by this Agreement shall be completed on the
      Closing Date, if the Closing Date falls on or before February 5,
      2009.

            

    

     

    
      	
              (b)    
        

            	
              If
      the Transaction has not been completed by February 5, 2009, the Earnest
      Money shall be refunded by Seller to Purchaser no later than February 10,
      2009, and, following this refund, the Agreement shall be terminated, with
      no Party having any further obligation to any other Party under or in
      connection with the Agreement.  If the refund is not timely
      made, Falcon may proceed against the security provided under Section
      2.5.

            

    

     

    
      	
              5.2  

            	
              Conditions
      for the Benefit of Falcon and
Purchaser

            

    

     

    The
obligation of Falcon to complete the Transaction is subject to the satisfaction
on or before the Closing Date, for the exclusive benefit of Falcon, of the
following condition:

     

    
      	
               
      

            	
              (a)

            	
              all
      representations of Sellers contained in Section 3.1 must be true in all
      material respects at and as of the Closing
Date.

            

    

     

    
      	
              5.3  

            	
              Conditions
      for Benefit of Sellers

            

    

     

    The
obligation of Sellers to complete the Transaction is subject to the satisfaction
on or before the Closing Date, for the exclusive benefit of Sellers, of each of
the following conditions:

     

    
      	
               
      

            	
              (a)

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

            

    

     

    
      	
               
      

            	
              (b)

            	
              Falcon
      will have made the payments outlined in Section 2.2;
  and

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -17-

       

       

    

    
      	
               
      

            	
              (c)

            	
              Sellers
      shall have received confirmation satisfactory to Sellers that the delivery
      of the Convertible Securities and the Acquisition Shares have received all
      requisite approvals (other than in respect of the
      Prospectus)  or that such approvals are not
      required.

            

    

     

    
      	
              5.4  

            	
              Sellers’
      Deliveries on Closing

            

    

     

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

     

    
      	
              (a)    
        

            	
              an
      executed copy of the Transaction
Agreements;

            

    

     

    
      	
              (b)    
        

            	
              a
      legal opinion, satisfactory to the TSXV and Purchaser’s Counsel, relating
      to the status of each Seller, the Permits, and other matters as TSXV
      requires;

            

    

     

    
      	
              (c)    
        

            	
              a
      permit transfer instrument conveying an undivided 50% interest in the
      Permits, substantially in the form attached as Schedule “D”, Part
      1;

            

    

     

    
      	
              (d)    
        

            	
              an
      assignment and bill of sale substantially in the form attached as Schedule
      “D”, Part 2, assigning and selling an undivided 50% interest in the Well;
      Data; Material Contracts; all related licenses, permits, access rights,
      and other rights and privileges; and all rights, titles and interests of
      Sellers, whether derived under the Permits, the Material Contracts, or
      otherwise, in and to all equipment, fixtures and personal property located
      on lands covered by the Permits or used in connection with the exploration
      and development of such lands.,

            

    

     

    
      	
              (e)    
        

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

            

    

     

    
      	
              (f)    
        

            	
              a
      technical report with respect to the Beetaloo Basin Project as required by
      TSXV prepared in accordance with National Instrument 51-101 Standards of Disclosure for
      Oil and Gas Activities, published by Canadian Governmental
      Authorities, if required;

            

    

     

    
      	
              (g)    
        

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

            

    

     

    
      	
              (h)    
        

            	
              all
      material Approvals, acceptances, authorizations, exemptions, waivers or
      consents, including approvals by Governmental Authorities, regulatory
      authorities, lenders, lessors and other third parties and judicial
      approvals and orders legally required for the consummation of the
      Agreement and the Transaction contemplated by this
    Agreement;

            

    

     

    
      	
              (i)    
        

            	
              confirmation
      satisfactory to Falcon that the purchase of the Assets and the Transaction
      contemplated by this Agreement have received all requisite approvals or
      that such approvals are not
required;

            

    

     

    
      	
              (j)    
        

            	
              confirmation
      satisfactory to Falcon that Falcon is not required to prepare and file a
      prospectus or similar document or to register the Convertible Securities
      or the 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -18-

       

       

    

    
      	 	
              Acquisition
      Shares or make any filings or seek any approvals of any nature whatsoever
      from any governmental or regulatory authority of any kind whatsoever in
      the United States, Australia or any other non Canadian jurisdiction in
      connection with the issue and sale or resale of the Convertible Securities
      and/or the Acquisition Shares;

            

    

     

    
      	
              (k)    
        

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

            

    

     

    
      	
              (i)    
        

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

            

    

     

    
      	
              (ii)  
        

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

            

    

     

    
      	
              (iii) 
        

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

            

    

     

    
      	
              (iv)  
        

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

            

    

     

    
      	
              (l)    
        

            	
              an
      opinion of PetroHunter Energy’s Counsel, dated at the Closing Date,
      that

            

    

     

    
      	
              (i)    
        

            	
              PetroHunter
      Energy is duly incorporated and validly exists under the laws of Maryland
      and is in good standing under the laws of
  Maryland;

            

    

     

    
      	
              (ii)   
        

            	
              the
      Transaction Agreements have been duly executed and delivered by
      PetroHunter Energy and constitute valid and binding obligations of
      PetroHunter Energy, enforceable against PetroHunter Energy in accordance
      with their terms;  and

            

    

     

    
      	
              (iii)  
        

            	
              PetroHunter
      Energy directly owns all of the issued and outstanding securities of
      Seller;

            

    

     

    
      	
              (m) 
          

            	
              an
      opinion of Seller’s Counsel, dated at the Closing Date,
    that

            

    

     

    
      	
              (i)    
        

            	
              Seller
      is duly incorporated and validly exists under the laws of Australia and is
      in good standing under the laws of
Australia;

            

    

     

    
      	
              (ii)   
        

            	
              the
      Transaction Agreements have been duly executed and delivered by Seller and
      constitute valid and binding obligations of Seller, enforceable against
      Seller in accordance with their
  terms;  and

            

    

     

    
      	
              (n)    
        

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -19-

     

     

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

     

    
      	
              5.5  

            	
              Falcon
      Deliveries on Closing

            

    

     

    On the
Closing Date, Falcon will deliver the Purchase Price in the amount and in the
manner provided by this Agreement and the following documents all duly executed
and to be dated as of the Closing Date:

     

    
      	
              (a)    
        

            	
              an
      executed copy of the Transaction
Agreements;

            

    

     

    
      	
              (b)    
        

            	
              all
      material Approvals, acceptances, authorizations, exemptions, waivers or
      consents, including approvals by the TSXV, Governmental Authorities,
      regulatory authorities, lenders, lessors and other third parties and
      judicial approvals and orders legally required for the consummation of the
      Agreement and the Transaction contemplated by this
    Agreement;

            

    

     

    
      	
              (c)    
        

            	
              confirmation
      satisfactory to Sellers that the delivery of the Convertible Securities
      and the Acquisition Shares and the Transaction contemplated by this
      Agreement have received all requisite approvals or that such approvals are
      not required;

            

    

     

    
      	
              (d)    
        

            	
              a
      certificate signed by any two of its officers certifying
    that:

            

    

     

    
      	
              (i)    
        

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

            

    

     

    
      	
              (ii)   
        

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

            

    

     

    
      	
              (iii)  
        

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

            

    

     

    
      	
              (iv)   
        

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

            

    

     

    
      	
              (e)    
        

            	
              an
      opinion of Falcon’s Counsel, dated at the Closing Date,
    that

            

    

     

    
      	
              (i)    
        

            	
              Falcon
      is duly incorporated and validly exists under the laws of British Columbia
      is in good standing under the laws of British Columbia;
  and

            

    

     

    
      	
              (ii)   
        

            	
              the
      Transaction Agreements have been duly executed and delivered by Falcon and
      constitute valid and binding obligations of Falcon, enforceable against
      Purchaser in accordance with their
terms.

            

    

     

    
      	
              (f)    
        

            	
              conditional
      approval of the TSXV for the Transaction;
and

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -20-

       

       

    

    
      	
              (g)    
        

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

            

    

     

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

     

    
      	
              5.6  

            	
              Purchaser
      Deliveries on Closing

            

    

     

    On the
Closing Date, Purchaser shall deliver the following documents all duly executed
and to be dated as of the Closing Date:

     

    
      	
              (a)    
        

            	
              an
      executed copy of the Transaction
Agreements;

            

    

     

    
      	
              (b)    
        

            	
              a
      certificate signed by any two of its officers certifying
    that:

            

    

     

    
      	
              (i)    
        

            	
              the
      representations and warranties of Purchaser herein contained are true and
      correct as of the Closing Date;

            

    

     

    
      	
              (ii)   
        

            	
              the
      resolutions of the Board of Directors of Purchase approving the
      Transaction Agreements and the Transaction are in full force and
      effect;

            

    

     

    
      	
              (iii)  
        

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

            

    

     

    
      	
              (iv)   
        

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

            

    

     

    
      	
              (c)    
        

            	
              an
      opinion of Purchaser’s Counsel, dated at the Subsequent Closing Date,
      that

            

    

     

    
      	
              (i)    
        

            	
              Purchaser
      is duly organized and validly exists under the laws of Australia and is in
      good standing under the laws of
Australia;

            

    

     

    
      	
              (ii)   
        

            	
              the
      Transaction Agreements have been duly executed and delivered by Purchaser
      and constitute valid and binding obligations of Purchaser, enforceable
      against Purchaser in accordance with their terms;
  and

            

    

     

    
      	
              (iii)  
        

            	
              Falcon
      directly owns all of the issued and outstanding securities of
      Purchaser.

            

    

     

    
      	
              (d)    
        

            	
              such
      other documents and assurances as may be reasonably required by
      PetroHunter Energy or Seller,

            

    

     

    all in
form and substance satisfactory to PetroHunter or Seller, each acting reasonably
and in good faith.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -21-

       

       

    

    
      	
              5.7  

            	
              Approvals

            

    

     

    Falcon
may, in its sole discretion, seek Approval of the Transaction from the Treasurer
of the Commonwealth of Australia.  All Parties recognize and agree
that Sweetpea may assign an undivided interest in the Permits to Purchaser only
with the Approval of the Minister for Mines and Energy of the Northern Territory
of Australia, and the Local Aboriginal Groups acting through their
representative.  Each Party agrees to use their best efforts to obtain
the Northern Territory and Local Aboriginal Group Approvals, and, if sought by
Falcon, the approval of the Treasurer of the Commonwealth of Australia, in as
expeditious a manner as possible.  If Falcon seeks Approval of the
Treasurer of the Commonwealth of Australia, then the Transaction shall not close
unless and until such Approval is obtained.  Thereafter, until the
Approvals of the Minister for Mines and Energy of the Northern Territory of
Australia and the Local Aboriginal Groups acting through their representative
are obtained, PetroHunter Energy shall cause Sweetpea to act as the nominee
owner of Falcon’s or Purchaser’s interest in the Permits.  In this
event, Falcon or Purchaser shall hold beneficial title to its interest in the
Permits, and the Parties shall have all rights and obligations that would
otherwise be applicable if the Approvals had been obtained.  Without
limiting the foregoing, Falcon shall be responsible for, and shall pay and
reimburse Sellers for its undivided 50% working interest pursuant to the
Beetaloo Operating Agreement, in the same manner as if Purchaser were a record
title owner of said undivided 50% interest in the Permits.

     

    ARTICLE
6

    RESOLUTION
OF DISPUTES

     

    
      	
              6.1  

            	
              Arbitration
      – If Not Principally Related to Convertible Securities
    Issues

            

    

     

    Any
dispute between the Parties arising during the period of this Agreement or at
any time thereafter which touches upon the validity, construction, meaning,
performance or effect of this Agreement or the rights and liabilities of the
Parties or any matter arising out of or connected with this Agreement, except a
dispute principally related to the Convertible Securities, shall be exclusively
and definitively resolved through final and binding arbitration.

     

    
      	
               
      

            	
              (a)

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

            

    

     

    
      	
               
      

            	
              (b)

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

            

    

     

    
      	
               
      

            	
              (c)

            	
              If
      the arbitration is to be conducted by a sole arbitrator, then the
      arbitrator will be jointly selected by the parties to the
      dispute.  If the parties to the dispute fail to agree on the
      arbitrator within 30 days after the filing of the arbitration, then the
      IAMA shall appoint the arbitrator. If the arbitration is to be conducted
      by three arbitrators and there are only two parties to the dispute, then
      each party to the dispute shall appoint one arbitrator within 30 days of
      the filing of the arbitration, and the two arbitrators so appointed shall
      select the presiding arbitrator within 30 days after the latter of the two
      arbitrators has been appointed by the parties to
      the   

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -22-

       

       

    

    
      	 	 	
              dispute.  If
      a party to the dispute fails to appoint its party-appointed arbitrator or
      if the two party-appointed arbitrators cannot reach an agreement on the
      presiding arbitrator within the applicable time period, then the IAMA
      shall appoint the remainder of the three arbitrators not yet
      appointed.

            

    

     

    
      	
               
      

            	
              (d)

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

            

    

     

    
      	
               
      

            	
              (e)

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

            

    

     

    
      	
               
      

            	
              (f)

            	
              Any
      party to the dispute may apply to a court for interim measures (i) prior
      to the constitution of the arbitral tribunal (and thereafter as necessary
      to enforce the arbitral tribunal’s rulings); or (ii) in the absence of the
      jurisdiction of the arbitral tribunal to rule on interim measures in a
      given jurisdiction.  The Parties agree that seeking and
      obtaining such interim measures shall not waive the right to
      arbitration.  The arbitrators (or in an emergency the presiding
      arbitrator acting alone in the event one or more of the other arbitrators
      is unable to be involved in a timely fashion) may grant interim measures
      including injunctions, attachments and conservation orders in appropriate
      circumstances, which measures may be immediately enforced by court
      order.  Hearings on requests for interim measures may be held in
      person, by telephone, by video conference or by other means that permit
      the parties to the dispute to present evidence and
      arguments.  Without limiting the generality of the foregoing,
      any party to the dispute may have recourse to and shall be bound by the
      Pre-arbitral Referee Procedure of the International Chamber of Commerce in
      accordance with its rules then in
effect.

            

    

     

    
      	
               
      

            	
              (g)

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

            

    

     

    
      	
               
      

            	
              (h)

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

            

    

     

    
      	
               
      

            	
              (i)

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

            

    

     

    
      	
              6.2  

            	
              Arbitration
      – If Principally Related to Convertible Securities
  Issues

            

    

     

    Any
dispute between the Parties arising during the period of this Agreement or at
any time thereafter which principally relates to the Convertible Securities
shall be subject to arbitration 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -23-

     

     

    pursuant
to Arbitration Act, 1991
(Ontario) and as provided in this Article and the decision of the
arbitrational tribunal shall be final and binding as between the Parties and
shall not be subject to appeal.  Such arbitration shall be subject to
the following provisions, namely:

     

    
      	
              (a)    
        

            	
              The
      party desiring arbitration shall nominate one arbitrator and shall notify
      the other party hereto of such nomination.  Such notice shall
      set forth a brief description of the matter submitted for arbitration and,
      if appropriate, the paragraph hereof pursuant to which such matter is so
      submitted.  Such other party shall, within 30 days after
      receiving such notice, nominate an arbitrator and the two arbitrators
      shall select a third person as an arbitrator and as chairman of the
      arbitral tribunal to act jointly with them.  If said arbitrators
      shall be unable to agree on the selection of such chairman, the chairman
      shall be appointed by a Judge of the Ontario Superior Court upon the
      application of any of the parties
hereto.

            

    

     

    
      	
              (b)    
        

            	
              The
      arbitration shall take place in Toronto, Ontario and the chairman shall
      fix the time and location in such city for the purpose of hearing such
      evidence and representations as either of the parties may present and,
      subject to the provisions hereof, the decisions of the arbitrators or of
      any two of them in writing shall be binding upon the parties both in
      respect of procedure and the conduct of the parties during the proceedings
      and the final determination of the issues therein.  Said
      arbitrators shall, after hearing any evidence and representations that the
      parties may submit, make their decision and reduce the same to writing and
      deliver one copy thereof to each of the parties hereto.  The
      majority of the arbitrators may determine any matters of procedure for the
      arbitration not specified herein.

            

    

     

    
      	
              (c)    
        

            	
              If
      the party hereto receiving the notice of the nomination of an arbitrator
      by the party desiring arbitration fails within the said 30 days to
      nominate an arbitrator, then the arbitrator nominated by the party
      desiring arbitration may proceed alone to determine the dispute in such
      manner and at such time as he shall think fit and his decision shall,
      subject to the provisions hereof, be binding upon the
    parties.

            

    

     

    
      	
              (d)    
        

            	
              Notwithstanding
      the foregoing, the arbitration may be carried out by a single arbitrator
      if the parties hereto so agree, in which event the provisions of this
      paragraph shall apply, mutatis
      mutandis.

            

    

     

    
      	
              (e)    
        

            	
              The
      cost of the arbitration shall be borne equally by the Parties, unless the
      chairman and arbitrators decide otherwise in their final written
      decision.

            

    

     

    
      	
              (f)    
        

            	
              Insofar
      as they do not conflict with the provisions of this Article, the Ontario
      Arbitration Act shall be applicable to arbitration held under this Article
      and the chairman and arbitrators shall have jurisdiction to do all acts
      and make such orders as provided
therein.

            

    

     

    
      	
              (g)    
        

            	
              Submission
      to arbitration pursuant to the provisions of this Article and the
      obtaining of the decision of the arbitration tribunal on the matters and
      claims in 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -24-

       

       

    

    
      	 	dispute
      shall be a condition precedent to the bringing of any action at law or
      suit in equity with respect to this
Agreement.

    

     

    
      	
              6.3  

            	
              Arbitration—Mixed
      Issues

            

    

     

    The
Parties recognize that disputes may involve more than one issue, and
consequently have provided that the correct arbitration venue and procedure will
turn upon whether the disputed issues principally relate to Convertible
Securities or to other matters.  An arbitrator or arbitral panel
constituted under this Agreement shall always have power to determine whether
the disputed issues principally relate to Convertible Securities or other
matters, with the understanding that principal relationship will be determined
based on numerosity and complexity of the issues that need to be resolved and
the applicable governing law, rather than monetary value of the
issues.  Under no circumstances will the Parties ever be involved in
cotemporaneous arbitration proceedings in two different venues, unless all
Parties to each putative proceeding agree.

     

    ARTICLE
7

    GENERAL

     

    
      	
              7.1  

            	
              Taxes
      and Fees

            

    

     

    Sellers
shall be responsible for any stamp duties applicable to the
Transaction.  Each Party shall pay its own legal and other
professional fees in respect of the Transaction.

     

    
      	
              7.2  

            	
              Complete
      Closings

            

    

     

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

     

    
      	
              7.3  

            	
              Status
      of the Agreement

            

    

     

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

     

    
      	
              7.4  

            	
              Tender

            

    

     

    Any
tender of documents or money or delivery of Notice pursuant to this Agreement
may be given by or made upon the Parties’ Counsel on behalf of the
Parties.

     

    
      	
              7.5  

            	
              Specific
      Performance and other Remedies

            

    

     

    Each of
the Parties hereto hereby recognizes and acknowledges that a breach by any other
Party (the “Breaching
Party”) of any covenants or other commitments contained in this Agreement
will cause the non-Breaching Party to sustain injury for which it would not have
an adequate remedy at law for money damages.  Therefore, each of the
Parties hereto hereby agree that, in the 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -25-

     

     

    event of
any such breach, the non-Breaching Party shall be entitled to the remedy of
specific performance of such covenants or commitments and provisional,
interlocutory and permanent injunctive and other equitable relief in addition to
any other remedy to which it may be entitled, at law or in equity, and each of
the Parties hereto further hereby agrees to waive any requirement for the
securing or posting of any bond in connection with the obtaining of any such
injunctive or other equitable relief.

     

    
      	
              7.6  

            	
              Obligations
      as Covenants

            

    

     

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

     

    
      	
              7.7  

            	
              Amendment
      of Agreement

            

    

     

    Subject
to Section 7.9, no modification or amendment of this Agreement shall be binding
unless executed in writing by the Parties in the same manner as the execution of
this Agreement.

     

    
      	
              7.8  

            	
              Further
      Assurances

            

    

     

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

     

    
      	
              7.9  

            	
              Waiver

            

    

     

    Subject
to Section 7.7, no waiver of any default, breach or non-compliance under this
Agreement shall be effective unless in writing and signed by the Party to be
bound by the waiver or by its counsel.  Subject to Section 7.7, no
waiver shall be inferred from or implied by any failure to act or delay in
acting by a Party in respect of any default, breach or non-observance or by
anything done or omitted to be done by the other Party.  The waiver by
a Party of any default, breach or non-compliance under this Agreement shall not
operate as a waiver of that Party’s rights under this Agreement in respect of
any continuing or subsequent default, breach or non-observance (whether of the
same or any other nature).

     

    
      	
              7.10  

            	
              Time

            

    

     

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

     

    
      	
              7.11  

            	
              Entire
      Agreement

            

    

     

    This
Agreement constitutes the entire agreement between the Parties with respect to
the subject matter hereof and, except as stated in the instruments and documents
to be executed and delivered pursuant hereto, contains all of the
representations, conditions, warranties and 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -26-

     

    agreements
of the respective Parties with respect to the subject matter hereof. There are
no verbal representations, undertakings or agreements of any kind between the
Parties. This Agreement
supersedes all prior negotiations or agreements between the Parties, whether
written or verbal, with respect to the subject matter of this
Agreement.

     

    
      	
              7.12  

            	
              Severability

            

    

     

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

     

    
      	
              7.13  

            	
              Counterparts
      and Facsimile

            

    

     

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

     

    
      	
              7.14  

            	
              Notices

            

    

     

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

     

    
      	
              (a)    
        

            	
              to
      Sellers (which to Sweetpea shall be c/o
  PetroHunter):

            

    

     

    PetroHunter
Energy Corporation

    1600
Stout Street, Suite 2000

    Denver,
Colorado 80202

    

    Attention:
Chief Executive Officer

    Facsimile
number:  (720) 889-8371

    

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

    

    Dill Dill
Carr Stonbraker & Hutchings, P.C.

    455
Sherman Street, Suite 300

    Denver,
Colorado 80203

    

    Attention:
Fay M. Matsukage, Esq.

    Facsimile
number: (303) 777-3823

    

    And

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -27-

       

       

    

    Davis
Graham & Stubbs LLP

    1550
Seventeenth Street, Suite 500

    Denver,
Colorado 80202

    

    Attention:  Gregory
Danielson, Esq. and Shannon Ponder, Esq.

    Facsimile
number:  (303) 893-1379

    

    
      	
              (b)    
        

            	
              to
      Falcon or Purchaser:

            

    

     

    Falcon
Oil & Gas Ltd.

    1875
Lawrence Street, Suite 1400

    Denver,
Colorado  80202

    

    Attention:
Chief Executive Officer

    Facsimile
number: (303) 572-8927

    

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

    

    Aird
& Berlis LLP

    Brookfield
Place, 181 Bay Street

    Suite
1800, Box 754

    Toronto,
Ontario

    M5J
2T9

    

    Attention:
Daniel N. Bloch

    Facsimile
number: (416) 863-1515

    

    or to
such other address as any Party hereto may, from time to time, designate in
writing delivered in a like manner.  If delivered or sent by
facsimile, Notice shall be deemed delivered on the date of delivery or facsimile
transmission, unless delivered or transmitted after 4:00 p.m. on a Business
Day or on a day which is not a Business Day, in which event Notice shall be
deemed delivered on the next Business Day.

     

    
      	
              7.15  

            	
              Confidentiality

            

    

     

    
      	
              (a)    
        

            	
              Falcon,
      Purchaser and its employees, officers, directors, contractors, agents and
      professional representatives shall keep the existence of and the terms of
      this Agreement in strictest
confidence.

            

    

     

    
      	
              (b)    
        

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

            

    

     

    
      	
              7.16  

            	
              Successors
      and Assigns

            

    

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -28-

       

       

    

    
      	
              7.17  

            	
              Enurement

            

    

     

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

     

    
      	
              7.18  

            	
              Language

            

    

     

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

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
         

        
          

        

      

      
         

        
          -

        

      

    

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

     

    
      	 
      	 
      	
              PETROHUNTER
      ENERGY CORPORATION

            
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	
              I/We
      have the authority to bind the corporation.

            
	 
      	 
      	
              SWEETPEA
      PETROLEUM PTY LTD.

            
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	
              I/We
      have the authority to bind the corporation.

            
	 
      	 
      	
              FALCON
      OIL & GAS LTD.

            
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	
              I/We
      have the authority to bind the
corporation.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -2-

       

       

    

    
      	 
      	 
      	 
      
	 
      	 
      	
              FALCON
      OIL & GAS AUSTRALIA

              PTY
      LTD

            
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	
              I/We
      have the authority to bind the
corporation.exh10-2_agreement.htm

     

    
      

      

    

     

     

     

     

     

     

    EXHIBIT 10.2

     

    PURCHASE AND SALE AGREEMENT BETWEEN PETROHUNTER
ENERGY CORPORATION

    AND PETROHUNTER OPERATING COMPANY AND FALCON OIL
& GAS LTD. AND

    FALCON OIL & GAS USA, INC. DATED AUGUST 22,
2008

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    

     

    

     

    PURCHASE
AND SALE AGREEMENT

     

    

     

    B
E T W E E N:

     

    

     

    PETROHUNTER
ENERGY CORPORATION

     

    

     

    -
and –

     

    

     

    PETROHUNTER
OPERATING COMPANY

     

    

     

    -
and –

     

    

     

    FALCON
OIL & GAS LTD.

     

    

     

    -
and –

     

    

     

    FALCON
OIL & GAS USA, INC.

     

    

     

    

     

    

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    TABLE OF
CONTENTS

     

    Page

    
      	
              ARTICLE
      1 INTERPRETATION AND GENERAL

            	
              1

            
	 
      	
              1.1

            	
              Defined
      Terms

            	
              1

            
	 
      	
              1.2

            	
              General

            	
              8

            
	 
      	
              1.3

            	
              Governing
      Law

            	
              9

            
	
              ARTICLE
      2 PURCHASE AND SALE

            	
              9

            
	 
      	
              2.1

            	
              Initial
      Transaction

            	
              9

            
	 
      	
              2.2

            	
              Completion
      Capital Consideration

            	
              9

            
	 
      	
              2.3

            	
              Nature
      of the Option

            	
              9

            
	 
      	
              2.4

            	
              Exercise
      of the Option

            	
              9

            
	 
      	
              2.5

            	
              Failure
      to Exercise the Option

            	
              10

            
	 
      	
              2.6

            	
              Subsequent
      Transaction

            	
              10

            
	 
      	
              2.7

            	
              Computing
      Price and Assets to Be Assigned

            	
              10

            
	 
      	
              2.8

            	
              Purchaser
      May Become Operator

            	
              12

            
	 
      	
              2.9

            	
              Satisfaction
      of the Subsequent Purchase Price

            	
              12

            
	 
      	
              2.10

            	
              Convertible
      Securities

            	
              13

            
	
              ARTICLE
      3 REPRESENTATIONS AND WARRANTIES

            	
              14

            
	 
      	
              3.1

            	
              Representations
      and Warranties by PetroHunter Energy and Seller

            	
              14

            
	 
      	
              3.2

            	
              Representations
      and Warranties by Falcon and Purchaser

            	
              17

            
	
              ARTICLE
      4 WARRANTY CLAIMS

            	
              19

            
	 
      	
              4.1

            	
              Survival
      of Warranties

            	
              19

            
	 
      	
              4.2

            	
              Limitations
      on Warranty Claims

            	
              19

            
	
              ARTICLE
      5 INITIAL CLOSING

            	
              20

            
	 
      	
              5.1

            	
              Initial
      Closing

            	
              20

            
	 
      	
              5.2

            	
              PetroHunter
      Energy and Seller Deliveries on Initial Closing

            	
              20

            
	 
      	
              5.3

            	
              Falcon
      and Purchaser Deliveries on Initial Closing

            	
              21

            
	 
      	
              5.4

            	
              Risk
      and Damage

            	
              22

            
	
              ARTICLE
      6 covenants

            	
              22

            
	 
      	
              6.1

            	
              Covenants
      and Agreements of the Seller

            	
              22

            
	 
      	
              6.2

            	
              Covenants
      and Agreements of the Purchaser

            	
              24

            
	 
      	
              6.3

            	
              Covenants
      Concerning Interim New Leasing

            	
              24

            

    

     

    -i-

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      TABLE OF
CONTENTS

      (continued)

       

      Page

    

    
      	 
      	
              6.4

            	
              Covenants
      Concerning Interim New Drilling

            	
              25

            
	
              ARTICLE
      7 CONDITIONS PRECEDENT

            	
              25

            
	 
      	
              7.1

            	
              Conditions
      for the Benefit of the Purchaser to the Initial
Transaction

            	
              25

            
	 
      	
              7.2

            	
              Mutual
      Conditions Precedent to the Subsequent Transaction

            	
              26

            
	 
      	
              7.3

            	
              Conditions
      for the Benefit of Seller to the Subsequent Transaction

            	
              27

            
	 
      	
              7.4

            	
              Conditions
      for the Benefit of Falcon and Purchaser to the Subsequent
      Transaction

            	
              28

            
	 
      	
              7.5

            	
              Deemed
      Satisfaction of Conditions to the Subsequent Transaction

            	
              29

            
	
              ARTICLE
      8 TERMINATION

            	
              29

            
	 
      	
              8.1

            	
              Termination
      Before Initial Closing

            	
              29

            
	 
      	
              8.2

            	
              Termination
      Before Subsequent Closing

            	
              29

            
	 
      	
              8.3

            	
              Effect
      of Termination

            	
              30

            
	
              ARTICLE
      9 SUBSEQUENT CLOSING

            	
              31

            
	 
      	
              9.1

            	
              Subsequent
      Closing

            	
              31

            
	 
      	
              9.2

            	
              Seller
      Deliveries

            	
              31

            
	 
      	
              9.3

            	
              Falcon
      and Purchaser Deliveries

            	
              32

            
	 
      	
              9.4

            	
              Risk
      and Damage

            	
              33

            
	
              ARTICLE
      10 RESOLUTION OF DISPUTES

            	
              33

            
	 
      	
              10.1

            	
              Arbitration-If
      Not Principally Related to Convertible Securities Issues

            	
              33

            
	 
      	
              10.2

            	
              Arbitration
      – If Principally Related to Convertible Securities Issues

            	
              33

            
	 
      	
              10.3

            	
              Procedures
      Common to Both Arbitration Fora

            	
              34

            
	 
      	
              10.4

            	
              Arbitration—Mixed
      Issues

            	
              35

            
	
              ARTICLE
      11 GENERAL

            	
              35

            
	 
      	
              11.1

            	
              Taxes
      and Fees

            	
              35

            
	 
      	
              11.2

            	
              Complete
      Closings

            	
              35

            
	 
      	
              11.3

            	
              Status
      of the Agreement

            	
              35

            
	 
      	
              11.4

            	
              Tender

            	
              35

            
	 
      	
              11.5

            	
              Specific
      Performance and other Remedies

            	
              36

            
	 
      	
              11.6

            	
              Obligations
      as Covenants

            	
              36

            
	 
      	
              11.7

            	
              Amendment
      of Agreement

            	
              36

            

    

     

    -ii-

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      TABLE OF
CONTENTS

      (continued)

       

      Page

    

    
      	 
      	
              11.8

            	
              Further
      Assurances

            	
              36

            
	 
      	
              11.9

            	
              Waiver

            	
              36

            
	 
      	
              11.10

            	
              Time

            	
              36

            
	 
      	
              11.11

            	
              Entire
      Agreement

            	
              37

            
	 
      	
              11.12

            	
              Severability

            	
              37

            
	 
      	
              11.13

            	
              Counterparts
      and Facsimile

            	
              37

            
	 
      	
              11.14

            	
              Notices

            	
              37

            
	 
      	
              11.15

            	
              Exclusivity

            	
              39

            
	 
      	
              11.16

            	
              Confidentiality

            	
              39

            
	 
      	
              11.17

            	
              Successors
      and Assigns

            	
              40

            
	 
      	
              11.18

            	
              Enurement

            	
              40

            
	 
      	
              11.19

            	
              Language

            	
              40

            

    

     

    

    Exhibit
A:                                Initial
Escrow Agreement

    Exhibit
B:                                Assignment
and Bill of Sale (Initial Working Interests)

    Exhibit
C:                                Option
Exercise Form

    Exhibit
D:                                Subsequent
Escrow Agreement

    Exhibit
E:                                Assignment
and Bill of Sale (Assets)

    Exhibit
F:                                Joint
Operating Agreement

    

    Schedule
1:                                Plat
of Buckskin Mesa Project Area

    Schedule
2:                                The
Leases

    Schedule
3:                                The
Wells

    Schedule
4:                                Material
Agreements

    Schedule
5:                                Subsequent
Work Program

    Schedule
6:                                Disclosure
Schedule

    

     

     

    -iii-

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    PURCHASE AND SALE
AGREEMENT

     

    THIS
PURCHASE AND SALE AGREEMENT (“Agreement”) is made and entered into this 22nd day
of August, 2008, by and between PetroHunter Energy Corporation (“PetroHunter
Energy”), PetroHunter Operating Company (“Seller”), Falcon Oil & Gas Ltd.
(“Falcon”) and Falcon Oil & Gas USA, Inc. (“Purchaser”).
PetroHunter Energy, Seller, Falcon and Purchaser may sometimes be referred to
herein individually as a “Party” and collectively as the
“Parties”.  This Agreement is based on the following
premises:

     

    WHEREAS Seller is the owner of certain
interests in the Buckskin Mesa Project Area (as hereinafter defined);
and

     

    WHEREAS Seller has agreed to
sell portions of its interests in the Buckskin Mesa Project Area to Purchaser
(as hereinafter defined) on the terms and conditions set out in this
Agreement;

     

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

     

    ARTICLE
1

    INTERPRETATION
AND GENERAL

     

    
      	
              1.1  

            	
              Defined
      Terms

            

    

     

    In this
Agreement, unless the subject matter or context otherwise requires:

     

    “Acceptance Date” means the
last to occur of:

     

    
      	
              (a)    
        

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

            

    

     

    
      	
              (b)    
        

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

            

    

     

    “Acquisition Shares” means the
Common Shares issuable upon the exercise of the Convertible
Securities.

     

    “Additional Completion Capital”
means such amount, if any, beyond the Completion Capital as Purchaser may, in
its sole discretion, choose to deliver to the Escrow Agent under the terms of
the Initial Escrow Agreement.

     

    “Adjustment Amount” shall have
the meaning ascribed thereto in the Australian Purchase and Sale
Agreement.

     

    “Agreement” means this purchase
and sale agreement, including all Exhibits and Schedules hereto, as amended from
time to time in accordance with the terms hereof, “hereof”, “hereto” and
“hereunder” and similar expressions refer to this Agreement and not any
particular section of 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -2-

     

    this
Agreement; “Article”, “Section” and “Schedule” mean and refer to the specified
article, section or Schedule of or to this Agreement.

     

    “Allowable Discount” means the
Announcement Price less the following allowable discounts, if the Prospectus
Price is less than the Announcement Price:

     

    
      	
              Announcement
      Price

            	
              Discount

            
	
              Up
      to $0.50

            	
              25%

            
	
              $0.51
      to $2.00

            	
              20%

            
	
              Above
      $2.00

            	
              15%

            

    

    

     

    “Alternative Transaction” has
the meaning ascribed thereto in Section 11.15.

     

    “Announcement Price” means the
price of the Common Shares on the TSXV at the close of trading on the day
immediately prior to the announcement of the exercise of the
Option.

     

    “Approvals” means all consents,
waivers, permits, and approvals of any person, including without limitation a
Party’s Board of Directors, CCES Piceance Partners I, LLC, the Daniels Group, a
Governmental Authority, and TSXV, required in connection with an applicable
Transaction.

     

    “Assets” means the 50%
undivided interest in the Data, Leases, Material Agreements (excluding
Agreements 1, 2, 6, 7, 8 and 9 listed in Section B of Schedule 4) and Wells that
are subject to the assignment and bill of sale delivered by Seller to Purchaser
at the Subsequent Closing.

     

    “Beetaloo PSA” means that
certain Purchase and Sale Agreement between PetroHunter Energy, Sweetpea
Petroleum Pty. Ltd., Falcon and Falcon Oil & Gas Australia Pty.
Ltd.

     

    “Board of Directors” means the
board of directors of each of PetroHunter Energy, Seller, Falcon and Purchaser,
as the case may be.

     

    “Breaching Party” has the
meaning ascribed thereto in Section 11.5.

     

    “Buckskin Mesa Project Area”
means the area identified on the plat attached to this Agreement as Schedule
1.

     

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

     

    “Canadian Securities Laws”
means the applicable securities laws of the Province of Ontario and the
respective regulations made and forms prescribed thereunder, together with all
applicable published policy statements and blanket orders and rulings of the
Ontario Securities Commission.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -3-

     

    “Clean Title” means title that
(i) an experienced, reasonable, prudent operator in the Rocky Mountains would,
after reviewing the title and electing to assume such business risks as it
ordinarily would assume in similar circumstances, find acceptable for drilling
purposes, if it knew that drilling on the leased lands might not be commenced
for a period of up to 12 months after its acquisition of the lease; provided,
however, that such title must in all events be free and clear of all liens and
encumbrances, other than Permitted Encumbrances, or (ii) title, as to specific
Leases, that Purchaser chooses to accept in its sole discretion.

     

    “Closing” means the Initial
Closing or the Subsequent Closing, as the case may be.

     

    “Closing Date” means either the
Initial Closing Date or the Subsequent Closing Date, as the case may
be.

     

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

     

    “Completion Capital” has the
meaning ascribed thereto in Section 2.2.

     

    “Control” a Person (first
Person) is considered to control another Person (second Person) if:

     

    
      	
              (a)    
        

            	
              the
      first Person, directly or indirectly, beneficially owns or exercises
      control or direction over securities of the second Person carrying votes
      which, if exercised, would entitle the first person to elect a majority of
      the directors of the second Person, unless that first person holds the
      voting securities only to secure an
obligation;

            

    

     

    
      	
              (b)    
        

            	
              the
      second Person is a partnership, other than a limited partnership, and the
      first person holds more than 50% of the interests of the partnership;
      or

            

    

     

    
      	
              (c)    
        

            	
              the
      second Person is a limited partnership and the general partner of the
      limited partnership is the first
Person.

            

    

     

    “Convertible Securities” means
the securities of Falcon with the characteristics described in Section
2.10.

     

    “Daniels Group” means,
collectively, Daniels Petroleum Corporation, Energy Investments, Inc., Gunsmoke
Production Company, Laramide Geosciences, LLC, and Rio Blanco Minerals,
LLC.

     

    “Data” means all files,
records, correspondence and information relating to the Leases, Material
Agreements, and Wells, including without limitation invoice and payment records,
abstracts, lease files, well files, and geological, geophysical and engineering
data, that is in the possession or under the control of the Seller.

     

    “Effective Date” shall means
September 1, 2008.

     

    “Environmental Laws” means all
applicable federal, state, and local laws concerning contamination, pollution or
protection of the natural environment or otherwise relating to the
environment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -4-

     

    “Escrow Agent” means Patton
Boggs LLP, in its capacity as escow agent under the Initial Escrow Agreement or
Subsequent Escrow Agreement, as the case may be.

     

    “Exercise Price” means the
deemed exercise price of the Convertible Securities which shall be equal to the
Announcement Price less the Allowable Discount.

     

    “Falcon’s Counsel” means
together, Aird & Berlis LLP and Lohf Shaiman Jacobs Hyman & Feiger
PC.

     

    “Federal Leases” means the
leases identified on Schedule 2, Part 1, to this Agreement, together with any
extensions or renewals thereof.

     

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

     

    “Initial Closing” means the
transfer of the Initial Working Interest and the grant of the Option and the
completion of all other matters contemplated by this Agreement at PetroHunter
Energy’s offices on the Initial Closing Date.

     

    “Initial Closing Date” means
11:00 a.m. (Denver time) on the later of (i) August 29, 2008, or (ii) six
Business Days after all of the conditions set forth in Section 7.1 have been
waived by Purchaser or satisfied by Seller.

     

    “Initial Completion Program” means the work
program in respect of the New Wells, as more particularly described on Schedule
“C” to the Initial Escrow Agreement.

     

    “Initial Escrow Agreement”
means the escrow agreement among PetroHunter Energy, Seller, Sweetpea Petroleum
Pty Ltd, Falcon, Purchaser, Falcon Oil & Gas Pty. Ltd., and Escrow Agent, to
be executed on the Acceptance Date in the form attached hereto as Exhibit
A.

     

    “Initial Transaction” has the
meaning ascribed thereto in Section 2.1.

     

    “Initial Transaction
Agreements” means this Agreement, the JOA, and the Initial Escrow
Agreement.

     

    “Initial Working Interest”
means a 25% working interest in all of the New Wells, in each case together with
an undivided 25% interest in the Leases, but only to the extent the Leases cover
lands within the 40-acre quarter-quarter section in which the well is located,
and even then only as to the depths now owned by Seller.

     

    “Interim New Drilling Costs”
has the meaning ascribed thereto in Section 6.4.

     

    “Interim New Leasing Costs” has
the meaning ascribed thereto in Section 6.3.

     

    “JOA” means the joint operating
agreement between Seller and Purchaser in
the form attached hereto as Exhibit F.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -5-

     

    “Leases” means, collectively,
the Federal Leases, New Leases, Old Leases, and all other oil and gas, surface,
or other leases in which Seller owns an interest and which cover lands in the
Buckskin Mesa Project Area, but only as to depths owned by Seller, even if such
leases are misidentified or omitted from Schedule 2, Parts 1, 2 and 3, or are
acquired by Seller after the preparation of Schedule 2 and before the Subsequent
Closing.

     

    “Material Agreements” means the
agreements specifically identified on Schedule 4 to this Agreement.

     

    “Mineral Acre” means the full
fee oil and gas ownership interest in one acre of land, so that, for example, a
person may own one Mineral Acre either by owning a 100% fee oil and gas interest
in a single acre of land or by owning an undivided 25% fee oil and gas interest
in four acres of land.

     

    “Net Leasehold Acre” means the
full oil and gas leasehold interest in one Mineral Acre, so that, for example, a
person may have one Net Leasehold Acre by owning the entire leasehold interest
in an oil and gas lease covering one Mineral Acre or by owning an undivided 25%
leasehold interest in an oil and gas lease covering four Mineral
Acres.

     

    “New Leases” means the leases
identified on Schedule 2, Part 2, to this Agreement, together with any
extensions or renewals thereof.

     

    “New Wells” means the wells
identified on Schedule 3, Part 1, to this Agreement.

     

    “Notice” has the meaning
attributed to it in Section 11.14.

     

    “Old Leases” means the leases
identified on Schedule 2, Part 3, to this Agreement, together with any
extensions or renewals thereof.

     

    “Old Wells” means the wells
identified on Schedule 3, Part 2, to this Agreement, together with all fixtures,
equipment and personal property located within the Buckskin Mesa Project Area,
owned by Seller, and held for use in connection with the operation of such wells
or the handling, storage, transportation and marketing of production
therefrom.

     

    “Option” means the option to
purchase the Assets, as more particularly described in Article 2.

     

    “Option Exercise Date” means
the date the completed Option Exercise Form is delivered by Purchaser to Seller
in accordance with Section 2.4, below.

     

    “Option Exercise Form” means
the option exercise form in the form attached hereto as Exhibit C.

     

    “Option Expiry Date” means 5:00
p.m. Denver time on the Business Day that is 30 days after the last to occur of
the following, which date shall automatically be extended for an additional 30
days upon Purchaser’s request:

     

    
      	
              (a)    
        

            	
              Falcon’s
      or Purchaser’s receipt of Notice from Seller (including reasonable back-up
      information) stating that all of  the Completion Capital has
      been expended; or

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -6-

     

    
      	
              (b)    
        

            	
              Falcon’s
      or Purchaser’s receipt of Notice from Seller that the testing and
      completion of the New Wells has occurred;
or

            

    

     

    
      	
              (c)    
        

            	
              if
      Seller and Purchaser have agreed to spend more than the Completion
      Capital, then the last to occur of the
  following:

            

    

     

    
      	
              (i)    
        

            	
              Purchaser’s
      receipt of Notice from Seller (including reasonable back-up information)
      stating that all of the Completion Capital and the Additional Completion
      Capital has been expended; or

            

    

     

    
      	
              (ii)   
        

            	
              Purchaser’s
      receipt of Notice from Seller that the testing and completion of all of
      the New Wells that are to be completed with the Completion Capital and the
      Additional Completion Capital has occurred, even if less than all five New
      Wells.

            

    

     

    “Permitted Encumbrances”
means:

     

    
      	
              (a)    
        

            	
              lessors’
      royalties, overriding royalties, net profits interests, production
      payments, reversionary interests and similar burdens if the net cumulative
      effect of such burdens does not operate to reduce the net revenue interest
      set forth on Schedule 2, Parts 1, 2 and
3;

            

    

     

    
      	
              (b)    
        

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

            

    

     

    
      	
              (c)    
        

            	
              all
      rights to consent by, required notices to, filings with, or other actions
      by federal, state and local governmental entities in connection with the
      ownership of the Leases, if the same are customarily obtained subsequent
      to such transfer of ownership;

            

    

     

    
      	
              (d)    
        

            	
              easements,
      rights-of-way, servitudes, permits, and surface leases on, over, or in
      respect of property leased by Seller or over which Seller owns
      rights-of-way, easements, permits, or licenses that are of record in Rio
      Blanco County, Colorado, to the extent such matters, individually or in
      the aggregate, do not materially interfere with oil and gas operations on
      the Leases and do not materially affect the value thereof
    and;

            

    

     

    
      	
              (e)    
        

            	
              any
      encumbrance, title defect or matter (whether or not affecting Clean Title)
      expressly waived by Purchaser.

            

    

     

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

     

    “PetroHunter Energy’s Counsel”
means, together, Dill Dill Carr Stonbraker & Hutchins, P.C. and Davis Graham
& Stubbs LLP.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -7-

     

     

    “Prospectus” means a short form
prospectus issued by Falcon qualifying the distribution of the Common Shares
underlying the Convertible Securities.

     

    “Prospectus Price” means the
price of the Common Shares on the TSXV at the close of trading on the day
immediately prior to the date that Falcon receives a receipt for a (final)
Prospectus from one or more of the securities regulatory authorities in
Canada.

     

    “Purchase Price” means the
Initial Purchase Price and the Subsequent Purchase Price,
collectively.

     

    “Purchaser” means Falcon Oil
& Gas USA, Inc.

     

    “Purchaser’s Counsel” means,
together, Aird & Berlis LLP and Lohf Shaiman Jacobs Hyman & Feiger
PC.

     

    “Seller” means PetroHunter
Operating Company.

     

    “Seller’s Counsel” means,
together, Dill Dill Carr Stonbraker & Hutchins, P.C. and Davis Graham &
Stubbs LLP.

     

    “Subsequent Cash Payment” has
the meaning ascribed thereto in Section 2.9(b)(i).

     

    “Subsequent Closing” means the
transfer of the Assets and the completion of all other matters contemplated by
this Agreement at Seller’s offices on the Subsequent Closing Date.

     

    “Subsequent Closing Date” means
11:00 a.m. (Denver time) on the date that is last to occur of the
following:

     

    
      	
              (a)    
        

            	
              if
      there is no disagreement upon the Leases as to which Seller has Clean
      Title or the Net Acres covered by each Lease, then 15 Business Days after
      the date on which the Purchaser delivers the executed Option Exercise Form
      to Seller,

            

    

     

    
      	
              (b)    
        

            	
              if
      there is a disagreement upon the Leases as to which Seller has Clean Title
      or the Net Acres covered by each Lease, then the date provided by Section
      2.7(g), or

            

    

     

    
      	
              (c)    
        

            	
              two
      Business Days after the satisfaction of all conditions set forth in
      Section 7.4.

            

    

     

    “Subsequent Escrow Agreement”
means the escrow agreement among PetroHunter Energy, Seller, Falcon, Purchaser
and Escrow Agent in the form of escrow agreement attached hereto as Exhibit
D.

     

    “Subsequent Purchase Price” has
the meaning ascribed thereto in Section 2.9.

     

    “Subsequent Securities Payment”
has the meaning ascribed thereto in Section 2.9(b)(ii).

     

    “Subsequent Transaction” has
the meaning ascribed thereto in Section 2.6.

     

    “Subsequent Transaction
Agreements” means, collectively, (i) the Option Exercise Form, which
document shall previously have been exercised, but the original of which shall
be 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -8-

     

    provided
on the Subsequent Closing; (ii) an amendment to the JOA adding the Assets to
Exhibit A and, if Purchaser is becoming Operator pursuant to Section 2.8, naming
Purchaser as Operator therein; and (iii) the Subsequent Escrow
Agreement.

     

    “Subsequent Work Program” means
the work program in respect of the Buckskin Mesa Project Area, as set forth on
Schedule 5 attached hereto.

     

    “Subsequent Work Program
Amount” has the meaning ascribed thereto in Section 2.9.

     

    “Subsidiary” means a Person
that is Controlled directly or indirectly by another Person and includes a
Subsidiary of that Subsidiary.

     

    “Transaction Agreements” means,
together, the Initial Transaction Agreements and the Subsequent Transaction
Agreements.

     

    “Transactions” means, together,
the Initial Transaction and the Subsequent Transaction.

     

    “TSXV” means TSX Venture
Exchange.

     

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

     

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

     

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

     

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

     

    “Wells” means the Old Wells and
the New Wells, collectively.

     

    “Working Interests” means the
Initial Working Interest and the Subsequent Working Interest,
collectively.

     

    
      	
              1.2  

            	
              General

            

    

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -9-

     

    
      	
              1.3  

            	
              Governing
      Law

            

    

     

    With
respect to all matters related to the Initial Working Interest and the Assets,
and to the interpretation and enforcement of this Agreement, this Agreement
shall be governed by the laws of the State of Colorado and the applicable laws
of the United States. With respect to all matters related to the Convertible
Securities, this Agreement shall be governed by the laws of the Province of
Ontario and the applicable laws of Canada.

     

    ARTICLE
2

    PURCHASE
AND SALE

     

    
      	
              2.1  

            	
              Initial
      Transaction

            

    

     

    Seller
shall:

     

    
      	
              (a)    
        

            	
              sell
      and assign the Initial Working Interest to Purchaser;
  and

            

    

     

    
      	
              (b)    
        

            	
              grant
      the Option to Purchaser,

            

    

     

    (together,
the “Initial
Transaction”) in exchange for the delivery of the Initial Completion
Capital, on and subject to the terms and conditions of this
Agreement.

     

    
      	
              2.2  

            	
              Completion
      Capital Consideration

            

    

     

    As
consideration for the Initial Transaction, Purchaser shall deliver to Escrow
Agent, for release from time to time to Seller in its capacity as Operator under
the JOA and in accordance with the terms of the Initial Escrow Agreement, an
amount equal to US$7,000,000 less the Adjustment Amount, if any (the “Completion Capital”), which
shall be used to pay 100% of the first US$7,000,000 (less the Adjustment Amount,
if any) incurred in performing the Initial Completion
Program.  

     

    
      	
              2.3  

            	
              Nature
      of the Option

            

    

     

    The
Option shall:

     

    
      	
              (a)    
        

            	
              be
      exercisable by the Purchaser at any time without payment of any additional
      consideration, other than the Subsequent Purchase Price at the Subsequent
      Closing;

            

    

     

    
      	
              (b)    
        

            	
              be
      non-transferable; and

            

    

     

    
      	
              (c)    
        

            	
              expire
      on the Option Expiry Date.

            

    

     

    
      	
              2.4  

            	
              Exercise
      of the Option

            

    

     

    The
Option may be exercised in whole at any time prior to the Option Expiry Date by
Purchaser, in its sole discretion, by completing the Option Exercise Form and
made a part hereof and delivering same to Seller at its head office currently
located at 1600 Stout Street, Suite 2000, Denver, Colorado 80202, United States
of America.  Upon compliance with the conditions 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -10-

     

    relating
to the Option as aforesaid, Purchaser shall proceed with the Subsequent
Transaction in accordance with the terms of this
Agreement.  

     

    
      	
              2.5  

            	
              Failure
      to Exercise the Option

            

    

     

    If the
Option is not exercised prior to the Option Expiry Date, then the Option shall
be null and void and of no further force or effect whatsoever, there shall be no
further liability or obligation on the part of any Party under this Article 2,
and this Agreement shall terminate in accordance with Section
8.2(c)(i).

     

    
      	
              2.6  

            	
              Subsequent
      Transaction

            

    

     

    Upon the
exercise of the Option in accordance with Section 2.4, Seller shall sell to
Purchaser, and Purchaser shall purchase from Seller, the Assets on and subject
to the terms and conditions of this Agreement (the “Subsequent
Transaction”).

     

    
      	
              2.7  

            	
              Computing
      Price and Assets to Be Assigned

            

    

     

    
      	
              (a)    
        

            	
              The
      Parties intend that Purchaser shall receive Clean Title to approximately
      9,955 Net Leasehold Acres in the Subsequent Transaction.  If
      Seller assigns to Purchaser at the Subsequent Closing Clean Title to 9,500
      or more Net Leasehold Acres, there will be no change in the contemplated
      Subsequent Transaction.  If, however, Seller assigns to
      Purchaser Clean Title to less than 9,500 Net Leasehold Acres, then the
      Subsequent Purchase Price will be reduced in proportion to the shortfall
      in acreage between the intended 9,955 Net Leasehold Acres and the actual
      Net Leasehold Acres that are assigned.  Finally, if Seller is
      unable to assign to Purchaser Clean Title to at least 8,000 Net Leasehold
      Acres, then Purchaser shall have the right to terminate this Agreement
      before the Subsequent
Closing.  

            

    

     

    
      	
              (b)    
        

            	
              Seller
      is conclusively deemed to have Clean Title to the Federal Leases at the
      date of this agreement, if the Colorado State Office of the Bureau of Land
      Management shows record title and all operating rights in a particular
      Federal Lease held as to all depths solely by Seller and if the lease is
      not burdened by any liens or encumbrances, except Permitted
      Encumbrances.  If Seller does not have sole ownership of record
      title and operating rights (as, for example, with Federal Leases that are
      now owned of record by Gunsmoke Production Company), then Seller must
      obtain such record title and operating rights before the Subsequent
      Closing. If a Federal Lease is burdened by a lien or encumbrance that is
      not a Permitted Encumbrance (for example, the Global Project Finance AG
      mortgage), then each such lien or encumbrance must, as to the undivided
      interest proposed to be assigned to Purchaser, be removed at or before the
      Subsequent Closing.  Finally, despite the presumption set forth
      above, Seller may lose Clean Title as a result of an act, event or
      omission occurring between the date of this Agreement and the Subsequent
      Closing Date, such as the failure timely to pay a necessary rental or
      minimum royalty.

            

    

     

    
      	
              (c)    
        

            	
              Seller
      is conclusively deemed to have Clean Title to the New Leases at the date
      of this Agreement, if (i) they are held by a shut-in gas well and all
      necessary shut-in 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -11-

     

     

    
      	 	
              gas payments have been timely made and accepted; (ii) they are
      still in their original or renewed primary terms and such primary terms
      will not expire earlier than 12 months after the Subsequent Closing Date;
      and (iii) they are not burdened by any liens or encumbrances, except for
      Permitted Encumbrances.  If necessary shut-in gas payments have
      not been made or if less than 12 months after the Subsequent Closing Date
      remains on their original or renewed primary terms, then Seller must
      either obtain new leases or obtain new lease extensions affording, in
      either case, a valid primary term continuing on a paid-up basis for a
      period of at least 12 months after the Subsequent Closing
      Date.  Finally, despite the conclusive presumption set forth
      above, Seller may lose Clean Title as a result of an act, event or
      omission occurring between the date of this Agreement and the Subsequent
      Closing Date, such as a failure timely to pay a necessary shut-in royalty
      payment.

            

    

     

    
      	
              (d)    
        

            	
              For
      the purposes of this Agreement, Seller is conclusively deemed not to have Clean
      Title to the Old Leases at the date of this Agreement.  First,
      Seller must either (i) obtain new leases on a paid-up basis for a primary
      term of at least 12 months after the Subsequent Closing Date or (ii)
      obtain ratifications, revivals and amendments of existing leases which
      include provisions deeming the existing well to be a shut-in well for
      purposes of the lease, stating that all necessary shut-in payments have
      been made to keep the lease in effect, and agreeing that the lease is now
      in full force and effect.  Each new lease or new ratification,
      revival and amendment shall be obtained from the appropriate mineral owner
      identified in a title report prepared by a petroleum landman experienced
      in Rio Blanco County, Colorado, who has examined the county records for
      the period from and after the certification of the most recent title
      report contained in Seller’s files at the date of this
      Agreement.  Second, each Old Lease must not be burdened by any
      liens or encumbrances, other than Permitted
      Encumbrances.  Finally, nothing must have occurred or failed to
      occur depriving the Seller of Clean Title between the date of the new
      lease or ratification, revival and amendment and the Subsequent Closing
      Date.

            

    

     

    
      	
              (e)    
        

            	
              If
      Purchaser exercises the Option, representatives of the Purchaser and
      Seller will meet at mutually convenient times during the four Business
      Days immediately following the Option Exercise Date to agree upon the
      Leases as to which Seller has Clean Title and the Net Leasehold Acres
      covered by each.  If Purchaser and Seller agree on all such
      matters, then, within eight Business Days after the Option Exercise Date,
      (i) the Purchaser and Seller will agree upon the adjustment to the
      Subsequent Purchase Price and (ii) the Purchaser will specify, in its sole
      discretion, how much of that adjustment will be made in the Subsequent
      Cash Payment and how much in the Subsequent Securities
      Payment.  All computations of Net Leasehold Acres performed in
      accordance with this Section 2.7 are
      performed solely for the purpose of determining the Subsequent Purchase
      Price and preparing the necessary assignments at the Subsequent
      Closing.  There will no further payments or refunds between the
      Seller and Purchaser if, as will surely happen, later surveys or better
      knowledge prove that the number of Net Leasehold Acres was
      incorrect.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -12-

     

    
      	
              (f)    
        

            	
              If
      the parties fail timely to agree upon the Leases as to which Seller has
      Clean Title and the Net Leasehold Acres covered by each, then all such
      unagreed matters will be finally and conclusively resolved by expert
      determination by the law firm of Poulson, Odell & Peterson, LLC,
      Denver, Colorado, or, if they do not agree to serve, by an independent and
      disinterested lawyer or landman appointed by the President of the Denver
      Association of Petroleum Landmen.  The expert shall have
      absolute power to determine the timing and procedures to be used in
      resolving the unagreed points, and such resolution by the expert, when
      completed, shall be final and conclusive upon the parties.  All
      costs and fees of the expert shall be borne in equal shares by the Seller
      and Purchaser.  The expert shall make its determination
      hereunder within 30 days of any Party requesting such a
      determination.

            

    

     

    
      	
              (g)    
        

            	
              Within
      four Business Days after the parties receive the expert’s resolution of
      all unagreed points, the Purchaser will specify, in its sole discretion,
      how much of any adjustment in the Subsequent Purchase Price will be made
      in the Subsequent Cash Payment and how much in the Subsequent Securities
      Payment.  The Subsequent Closing shall occur within four
      Business Days after such identification by the
  Purchaser.

            

    

     

    
      	
              (h)    
        

            	
              Notwithstanding
      anything in this Agreement to the contrary, if Falcon exercises the
      Option, Falcon shall not have any obligations or rights with respect to
      the Material Agreements identified as 1, 2, 6, 7, 8, and 9 listed in
      Section B of Schedule 4. and shall assume its proportionate 50% interest
      in the rights and obligations with respect to gas gathering matters as set
      forth in the agreements identified as 3, 4, and 5 listed in Section B of
      Schedule 4.

            

    

     

    
      	
              2.8  

            	
              Purchaser
      May Become Operator

            

    

     

    At any
time after exercising the Option and continuing until the Subsequent Closing,
Purchaser may, in its sole discretion, provide Seller notice in accordance with
Section 11.4 that Purchaser wishes to become Operator under the JOA pursuant to
this Section 2.8.  If Purchaser timely provides this notice, then (i)
the Subsequent Purchase Price shall automatically increase from US$25,000,000 to
US$28,500,000; and, at the Subsequent Closing, (ii) Seller shall resign as
Operator under the JOA; (iii) Seller shall vote to elect Purchaser as successor
Operator; and (iv) Seller shall join in amending the JOA to name Purchaser as
Operator.

     

    
      	
              2.9  

            	
              Satisfaction
      of the Subsequent Purchase Price

            

    

     

    The
amount payable pursuant to Section 2.6, as adjusted in accordance with Sections
2.7 and 2.8, shall be satisfied by Falcon and Purchaser:

     

    
      	
              (a)    
        

            	
              committing
      to pay an aggregate sum of US$18,000,000 (less the amount delivered to the
      Escrow Agent as Additional Completion Capital, if any, which shall be
      counted and deducted against the US$18,000,000 obligation), to the
      Operator at the times and in the manner required by the JOA, which amount
      shall be used to pay 100% of the first US$18,000,000 (or such lesser
      amount described above)  

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -13-

     

    
      	 	
              incurred
      in performing the Subsequent Work Program (unless otherwise mutually
      agreed by Purchaser and Seller), referred to herein as the “Subsequent Work Program
      Amount”;

            

    

     

    AND

     

    
      	
              (b)    
        

            	
              subject
      to any purchase price adjustment under Section 2.7, and increased by the
      Adjustment Amount, if any, paying the amount of US$25,000,000 (or
      US$28,500,000, if Purchaser has provided notice under Section 2.8 that it
      wishes to become Operator) to Seller (as to cash) or PetroHunter Energy
      (as to securities), in cash, securities or a combination thereof, subject
      to requisite regulatory approvals and as decided by Purchaser in its sole
      discretion:

            

    

     

    
      	
              (i)    
        

            	
              with
      the cash portion, if any, paid by Purchaser by wire transfer to a bank
      account specified by Seller (the “Subsequent Cash
      Payment”); and

            

    

     

    
      	
              (ii)   
        

            	
              with
      the securities portion, if any, paid by depositing into escrow pursuant to
      the terms of the Subsequent Escrow Agreement one or more certificates
      representing the Convertible Securities registered in the name of
      PetroHunter Energy (the “Subsequent Securities
      Payment”)(the Subsequent Work Program Amount, together with either
      the Subsequent Cash Payment and the Subsequent Securities Payment, the
      “Subsequent Purchase
      Price”);

            

    

     

    AND

     

    
      	
              (c)    
        

            	
              reimbursing
      Seller, by wire transfer to a bank account specified by Seller,
      Purchaser’s proportionate share of Interim New Drilling Costs and Interim
      New Leasing Costs.

            

    

     

    
      	
              2.10  

            	
              Convertible
      Securities

            

    

     

    The
Convertible Securities shall have the following characteristics:

     

    
      	
              (a)    
        

            	
              the
      number of Convertible Securities to be issued to PetroHunter Energy shall
      be equal to the quotient resulting from dividing the dollar amount which
      Purchaser has decided to pay in securities by the Exercise
      Price.

            

    

     

    
      	
              (b)  

            	
              such
      securities shall be subject to the following legending
      requirements:

            

    

     

    “UNLESS
PERMITTED UNDER SECURITIES LEGISLATION THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE [4 months and one
day after the distribution date].”

     

    “WITHOUT
PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE AND COMPLIANCE WITH ALL
APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -14-

    

     

     

    TRADED ON
OR THROUGH THE FACILITIES OF THE TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR
TO OR FOR THE BENEFIT OF CANADIAN RESIDENT UNTIL [4 months and one
day from the day of issue].”

     

    "THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT").  THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, OR OTHERWISE TRANSFERRED IN THE UNITED STATES EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION
OF THE CORPORATION."

     

    
      	
              (c)    
        

            	
              a
      term of 12 months following the Subsequent Closing
  Date;

            

    

     

    
      	
              (d)    
        

            	
              non-transferable;
      and

            

    

     

    
      	
              (e)    
        

            	
              non-exercisable
      until: (i) the earlier to occur of (A) a receipt for the (final)
      Prospectus has been received by Falcon from one or more of the securities
      regulatory authorities in Canada and (B) four months and one day from the
      issuance of the Convertible Securities; and (ii) the Acquisition Shares
      have been admitted for trading on the
TSXV.

            

    

     

    ARTICLE
3

    REPRESENTATIONS
AND WARRANTIES

     

    
      	
              3.1  

            	
              Representations
      and Warranties by PetroHunter Energy and
Seller

            

    

     

    PetroHunter
Energy and Seller jointly and severally represent and warrant to Falcon and
Purchaser that as of the date of this Agreement, the Acceptance Date and as of
each Closing Date:

     

    
      	
              (a)    
        

            	
              each
      of PetroHunter Energy and Seller is a corporation duly incorporated,
      organized and validly existing and in good standing under the laws of the
      State of Maryland;

            

    

     

    
      	
              (b)    
        

            	
              each
      of PetroHunter Energy and Seller has the corporate power, authority and
      capacity to enter into the Transaction Agreements and all other agreements
      contemplated by the Transaction Agreements and to carry out and complete
      their obligations under the Transaction Agreements and all other
      agreements contemplated by the Transaction
  Agreements;

            

    

     

    
      	
              (c)    
        

            	
              the
      Transaction Agreements and the obligations of PetroHunter Energy and
      Seller  under the Transaction Agreements and the documents and
      transaction contemplated thereby have been duly and validly authorized by
      all requisite corporate proceedings and constitute, legal, valid and
      binding obligations of each , enforceable against each in accordance with
      their terms, subject to the limitations

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -15-

     

    
      	 	
              with
      respect to enforcement imposed by applicable laws in connection with
      bankruptcy, insolvency, liquidation, reorganization or other laws
      affecting the enforcement of creditors’ rights generally and subject to
      the availability of equitable remedies such as specific performance and
      injunction which are only available in the discretion of the court from
      which they are sought;

            

    

     

    
      	
              (d)    
        

            	
              neither
      the entering into nor the delivery of the Transaction Agreements nor the
      completion by PetroHunter Energy and Seller of the Transactions
      contemplated thereby will conflict with, or constitute a material default
      under, or result in a material violation of: (i) any of the provisions of
      the formation documents or by-laws of either PetroHunter Energy and Seller
      ; or (ii) any applicable laws;

            

    

     

    
      	
              (e)    
        

            	
              each
      of PetroHunter Energy and Seller: (i) has not made an assignment in favor
      of its creditors or a proposal in bankruptcy to its creditors or any class
      thereof; (ii) has not had any petition for a receiving order presented in
      respect of it; and (iii) has not initiated proceedings with respect to a
      compromise or arrangement with its creditors or for its winding up,
      liquidation or dissolution;

            

    

     

    
      	
              (f)    
        

            	
              neither
      PetroHunter Energy nor Seller is under any obligation, contractual or
      otherwise, to request or obtain any Approval in respect of either
      Transaction, except as provided in Schedule
6;

            

    

     

    
      	
              (g)    
        

            	
              each
      of PetroHunter Energy and Seller is aware that the Acquisition Shares have
      not been and will not be registered under the U.S. Securities Act or the
      securities laws of any state and that these securities may not be issued,
      offered or sold in the United States without registration under the U.S.
      Securities Act or compliance with requirements of an exemption from
      registration and the applicable laws of all applicable states and
      acknowledges that Falcon has no present intention of filing a registration
      statement under the U.S. Securities Act in respect of the Acquisition
      Shares;

            

    

     

    
      	
              (h)    
        

            	
              each
      of PetroHunter Energy and Seller is a U.S. Resident as defined under the
      U.S. Securities Act, and each is an "accredited investor" as that term is
      defined in Section 501(a) of Regulation D promulgated under the Securities
      Act of 1933.  Neither of them will offer or sell the Acquisition
      Shares in the United States unless such securities are registered under
      the U.S. Securities Act and the securities laws of all applicable states
      of the United States or an exemption from such registration requirements
      is available, and neither of them will resell the Acquisition Shares,
      except in accordance with the provisions of applicable securities
      legislation, regulations, rules, policies and orders and stock exchange
      rules;

            

    

     

    
      	
              (i)    
        

            	
              each
      of PetroHunter Energy and Seller acknowledges that there are restrictions
      on their ability to resell the Acquisition Shares and it is the
      responsibility of each of them to find out what those restrictions are and
      to comply with them before selling the Acquisition
  Shares;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -16-

     

     

    
      	
              (j)    
        

            	
              each
      of PetroHunter Energy and Seller acknowledges that the Convertible
      Securities and Acquisition Shares, if applicable, will be subject to
      resale restrictions under applicable Canadian Securities Laws and the TSXV
      Policies. Each of them acknowledges that all certificates issued
      representing the Convertible Securities and the Acquisition Shares, as
      well as all certificates issued in exchange for or in substitution
      therefor, will bear legends to the following
  effect:

            

    

     

    “UNLESS
PERMITTED UNDER SECURITIES LEGISLATION THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE  [4 months and one
day after the distribution date].”

     

    “WITHOUT
PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE AND COMPLIANCE WITH ALL
APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR
THROUGH THE FACILITIES OF THE TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO
OR FOR THE BENEFIT OF CANADIAN RESIDENT UNTIL  [4 months and one
day from the day of issue].”

     

    "THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT").  THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, OR OTHERWISE TRANSFERRED IN THE UNITED STATES EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION
OF THE CORPORATION."

     

    
      	
              (k)    
        

            	
              each
      of PetroHunter Energy and Seller acknowledges that any securities of
      Falcon held by either of them including the Convertible Securities and
      Acquisition Shares issued to PetroHunter Energy will be subject to the
      TSXV providing its final acceptance to the
  Transactions;

            

    

     

    
      	
              (l)    
        

            	
              there
      is no material uninsured litigation, claim or proceeding, including
      appeals and applications for review, in progress, pending or, to the best
      of the knowledge of each of PetroHunter Energy and Seller, threatened
      against either of them or relating to any Leases and Wells before any
      Governmental Authority or arbitration panel, and there is not presently
      outstanding against either of them or in respect of any Leases and Wells,
      any judgment, decree, injunction, rule or order of any Governmental
      Authority or arbitrator which would have material adverse affect on any
      Leases and Wells, including, without limitation, the value thereof, except
      as set forth on Schedule 6;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -17-

     

     

    
      	
              (m)    
        

            	
              neither
      PetroHunter Energy nor Seller  has received nor delivered any
      written notices of violation or alleged violation of any provisions of any
      Lease or Material Agreement, applicable law or by-law, except as set forth
      on Schedule 6;

            

    

     

    
      	
              (n)    
        

            	
              there
      are no claims, actions or proceedings, pending or threatened, by any
      Government Authority which might adversely affect the Leases and Wells or
      any interests therein;

            

    

     

    
      	
              (o)    
        

            	
              all
      Data has been made and will continue to be made available to the
      Purchaser;

            

    

     

    
      	
              (p)    
        

            	
              all
      overriding royalties, net profits interests and other burdens on
      production that would burden the interest of the leasehold title holders
      in the Leases and Wells were of record in the real property records of Rio
      Blanco County at March 31, 2008, and no additional burdens or promises to
      create additional burdens, recorded or unrecorded, have been created or
      made since that date;

            

    

     

    
      	
              (q)    
        

            	
              neither
      PetroHunter Energy nor Seller has ever received any claim, demand, or
      notice based upon a lack of compliance with Environmental Laws anywhere
      within the Buckskin Mesa Project
Area;

            

    

     

    
      	
              (r)    
        

            	
              except
      to the extent which is not material: (i) all permits and approvals
      required in respect of the Leases and Wells which Seller operates have
      been issued or obtained and are in full force and effect, and (ii) there
      is no breach or violation thereof;

            

    

     

    
      	
              (s)    
        

            	
              the
      Completion Capital and Additional Completion Capital, if any, shall be
      used by PetroHunter Energy and Seller only in accordance with the Initial
      Completion Program; and

            

    

     

    
      	
              3.2  

            	
              Representations
      and Warranties by Falcon and
Purchaser

            

    

     

    Falcon
hereby guarantees, represents and warrants to PetroHunter Energy and Seller, for
and on behalf of Falcon and Purchaser that as of the date of this Agreement, the
Acceptance Date and as of each Closing Date:

     

    
      	
              (a)    
        

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

            

    

     

    
      	
              (b)    
        

            	
              Falcon
      is a corporation duly incorporated, organized and validly existing and in
      good standing under the laws of the Province of British
      Columbia;

            

    

     

    
      	
              (c)    
        

            	
              Purchaser
      is a corporation duly incorporated, organized and validly existing and in
      good standing under the laws of the State of
  Colorado;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -18-

     

    
      	
              (d)    
        

            	
              the
      Transaction Agreement and the obligations of Falcon and Purchaser
      thereunder and the documents and transactions contemplated therein have
      been duly and validly authorized by all requisite corporate proceedings
      and constitute, legal, valid and binding obligations of each, enforceable
      against each in accordance with their terms, subject to the limitations
      with respect to enforcement imposed by applicable laws in connection with
      bankruptcy, insolvency, liquidation, reorganization or other laws
      affecting the enforcement of creditors’ rights generally and subject to
      the availability of equitable remedies such as specific performance and
      injunction which are only available in the discretion of the court from
      which they are sought;

            

    

     

    
      	
              (e)    
        

            	
              neither
      the entering into nor the delivery of the Transaction Agreements nor the
      completion by Falcon and Purchaser of the Transactions will conflict with,
      or constitute a material default under, or result in a material violation
      of (i) any of the provisions of the formation documents or by-laws of
      either Falcon or Purchaser, or (ii) any applicable
  laws;

            

    

     

    
      	
              (f)    
        

            	
              each
      of Falcon and Purchaser (i) is not an insolvent person within the meaning
      of the Bankruptcy and
      Insolvency Act (Canada), the Companies Creditors
      Arrangement Act (Canada) or the Winding-up and Restructuring
      Act (Canada), (ii) has not made an assignment in favour of its
      creditors or a proposal in bankruptcy to its creditors or any class
      thereof, (iii) has not had any petition for a receiving order presented in
      respect of it, and (iv) has not initiated proceedings with respect to a
      compromise or arrangement with its creditors or for its winding up,
      liquidation or dissolution;

            

    

     

    
      	
              (g)    
        

            	
              to
      the best of the knowledge of Falcon and Purchaser, there is no outstanding
      suit, action, litigation, claim or legal proceeding, including appeals and
      applications for review, in progress relating to Falcon or Purchaser
      before any court, commission, board or arbitration panel which, if
      determined adversely to Falcon or Purchaser,
  would:

            

    

     

    
      	
              (i)    
        

            	
              prevent
      Falcon or Purchaser from satisfying the Purchase Price;
  or

            

    

     

    
      	
              (ii)    
        

            	
              prevent
      Falcon or Purchaser from fulfilling in any material respect its
      obligations contained in the Transaction Agreements or arising from the
      Transactions;

            

    

     

    
      	
              (h)    
        

            	
              the
      Convertible Securities shall have the characteristics described in Section
      2.10;

            

    

     

    
      	
              (i)    
        

            	
              the
      Acquisition Shares when issued shall be duly and validly issued as fully
      paid and non-assessable Common
Shares;

            

    

     

    
      	
              (j)    
        

            	
              Falcon
      shall use its commercially reasonable best efforts to have the
      distribution of the Acquisition Shares qualified as “free trading” Common
      Shares by any Prospectus issued;
and

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -19-

     

    
      	
              (k)    
        

            	
              Falcon
      shall use its commercially reasonable best efforts to have the preliminary
      Prospectus filed within 20 Business Days from the Subsequent Closing
      Date.

            

    

     

    ARTICLE
4

    WARRANTY
CLAIMS

     

    
      	
              4.1  

            	
              Survival
      of Warranties

            

    

     

    
      	
              (a)    
        

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

            

    

     

    
      	
              (i)    
        

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

            

    

     

    
      	
              (ii)   
        

            	
              any
      Warranty Claim which is based on intentional misrepresentation or fraud by
      the Seller or the Purchaser may be made or brought at any
      time.

            

    

     

    
      	
               
      

            	
              (b)

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

            

    

     

    
      	
              4.2  

            	
              Limitations
      on Warranty Claims

            

    

     

    
      	
              (a)    
        

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

            

    

     

    
      	
              (b)    
        

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

            

    

     

    
      	
              (c)    
        

            	
              Subject
      to the receipt of all necessary approvals and all applicable laws, the
      satisfaction of any amounts owing by Sellers to Falcon or Purchaser, or by
      Falcon or Purchaser to Sellers, may be paid by the indemnifying party
      through the 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -20-

     

     

    
      	 	delivery
      of either cash or check, in either case such method of payment shall be
      determined by the indemnifying party in its
  discretion.

    

     

    ARTICLE
5

     

    INITIAL
CLOSING

     

    
      	
              5.1  

            	
              Initial
      Closing

            

    

     

    The
Initial Transaction contemplated by this Agreement shall be completed on the
Initial Closing Date.

     

    
      	
              5.2  

            	
              PetroHunter
      Energy and Seller Deliveries on Initial
Closing

            

    

     

    At the
Initial Closing, PetroHunter Energy and Seller will deliver the following
documents, all duly executed and to be dated as of the Initial Closing
Date:

     

    
      	
              (a)    
        

            	
              an
      assignment and bill of sale conveying the Initial Working Interest,
      substantially in the form attached as Exhibit
B;

            

    

     

    
      	
              (b)    
        

            	
              the
      Initial Transaction Agreements;

            

    

     

    
      	
              (c)    
        

            	
              a
      certificate of each of PetroHunter Energy and Seller signed by any two of
      their respective officers certifying
that:

            

    

     

    
      	
              (i)    
        

            	
              the
      representations and warranties of PetroHunter Energy and Seller herein
      contained are true and correct as of the Initial Closing
    Date;

            

    

     

    
      	
              (ii)   
        

            	
              the
      resolutions of the Board of Directors of PetroHunter Energy and Seller
      approving the Transaction Agreements and the Transactions are in full
      force and effect;

            

    

     

    
      	
              (iii)     

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

            

    

     

    
      	
              (iv)   
        

            	
              all
      necessary corporate action has been taken by PetroHunter Energy and Seller
      to authorize the execution and delivery of the Transaction Agreements and
      to consummate the transactions contemplated by the
      Transactions.

            

    

     

    
      	
              (d)   
        

            	
              an
      opinion of PetroHunter Energy’s Counsel, dated at the Initial Closing
      Date, that

            

    

     

    
      	
              (i)    
        

            	
              PetroHunter
      Energy is duly incorporated and validly exists under the laws of Maryland
      and is in good standing under the laws of
  Maryland;

            

    

     

    
      	
              (ii)   
        

            	
              the
      Initial Transaction Agreements have been duly executed and delivered by
      PetroHunter Energy and constitute valid and binding obligations of
      

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -21-

     

    
      	 	PetroHunter
      Energy, enforceable against PetroHunter Energy in accordance with their
      terms; and

    

     

    
      	
              (iii)  
        

            	
              PetroHunter
      Energy directly owns all of the issued and outstanding securities of
      Seller;

            

    

     

    
      	
              (e)    
        

            	
              an
      opinion of Seller’s Counsel, dated at the Initial Closing Date,
      that

            

    

     

    
      	
              (i)    
        

            	
              Seller
      is duly incorporated and validly exists under the laws of Maryland and is
      in good standing under the laws of Maryland;
and

            

    

     

    
      	
              (ii)   
        

            	
              the
      Initial Transaction Agreements have been duly executed and delivered by
      Seller and constitute valid and binding obligations of Seller, enforceable
      against Seller in accordance with their terms;
  and

            

    

     

    
      	
              (f)    
        

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

            

    

     

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

     

    
      	
              5.3  

            	
              Falcon
      and Purchaser Deliveries on Initial
Closing

            

    

     

    On the
Initial Closing, Falcon and Purchaser will deliver the Initial Purchase Price in
the amount and in the manner provided by this Agreement and the following
documents duly executed and to be dated the Initial Closing Date:

     

    
      	
              (a)    
        

            	
              the
      Initial Transaction Agreements;

            

    

     

    
      	
              (b)    
        

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

            

    

     

    
      	
              (i)    
        

            	
              the
      representations and warranties of Falcon and Purchaser herein contained
      are true and correct as of the Initial Closing
  Date;

            

    

     

    
      	
              (ii)   
        

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

            

    

     

    
      	
              (iii)  
        

            	
              Falcon
      and Purchaser have performed and complied with all covenants and
      agreements contained in this Agreement to be performed or complied with by
      Falcon or Purchaser at or prior to the Initial Closing Date;
      and

            

    

     

    
      	
              (iv)   
        

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -22-

     

    
      	
              (c)    
        

            	
              an
      opinion of Falcon’s Counsel, dated at the Initial Closing Date,
      that

            

    

     

    
      	
              (i)    
        

            	
              Falcon
      is duly incorporated and validly exists under the laws of British Columbia
      is in good standing under the laws of British
  Columbia;

            

    

     

    
      	
              (ii)   
        

            	
              the
      Initial Transaction Agreements have been duly executed and delivered by
      Falcon and constitute valid and binding obligations of Falcon, enforceable
      against Falcon in accordance with their
    terms;  and

            

    

     

    
      	
              (iii)  
        

            	
              Falcon
      owns all of the issued and outstanding securities of
      Purchaser.

            

    

     

    
      	
              (d)    
        

            	
              an
      opinion of Purchaser’s Counsel, dated at the Subsequent Closing Date,
      that

            

    

     

    
      	
              (i)    
        

            	
              Purchaser
      is duly incorporated and validly exists under the laws of Colorado and is
      in good standing under the laws of Colorado;
and

            

    

     

    
      	
              (ii)   
        

            	
              the
      Initial Transaction Agreements have been duly executed and delivered by
      Purchaser and constitute valid and binding obligations of Purchaser,
      enforceable against Purchaser in accordance with their
    terms.

            

    

     

    
      	
              (e)    
        

            	
              conditional
      approval of the TSXV for the Transactions;
and

            

    

     

    
      	
              (f)    
        

            	
              such
      other documents and assurances as may be reasonably required by
      PetroHunter Energy or Seller,

            

    

     

    all in
form and substance satisfactory to PetroHunter Energy and Seller, each acting
reasonably and in good faith.

     

    
      	
              5.4  

            	
              Risk
      and Damage

            

    

     

    The
Initial Working Interest shall be at the risk of Seller until completion of the
Initial Transaction contemplated by this Agreement.

     

    ARTICLE
6

    COVENANTS

     

    
      	
              6.1  

            	
              Covenants
      and Agreements of the Seller

            

    

     

    Seller
covenants and agrees with Falcon and Purchaser that, from the date of this
Agreement to the Subsequent Closing, it shall:

     

    
      	
              (a)    
        

            	
              allow
      Purchaser and its representatives reasonable access during normal business
      hours to the Seller’s offices and to Seller’s files, books, records,
      including, without limitation, the Data and any and all information
      relating to Seller’s tax matters, contracts, leases, licenses and real,
      personal and intangible property and financial condition, and shall cause
      Seller’s auditors and other third parties retained or otherwise hired by
      Seller to cooperate
with  Purchaser;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -23-

     

     

    
      	
              (b)    
        

            	
              deliver
      or make available (or will deliver or make available within five Business
      Days after the date of this Agreement) to Purchaser any documents relating
      to the subject matter of this Agreement to the extent that same are in
      Seller’s possession or control;

            

    

     

    
      	
              (c)    
        

            	
              provide,
      upon Purchaser’s request, letters of authorization to any regulatory
      authority having jurisdiction over the Leases and Wells, authorizing the
      release to Purchaser and its representatives of any information on file
      relating to the Leases and Wells;

            

    

     

    
      	
              (d)    
        

            	
              allow
      Purchaser and its representatives access, at Purchaser’s risk and expense,
      to the lands covered by the Leases to complete surveys and perform such
      tests and inspections as Purchaser may in its discretion require,
      including without limitation soil and environmental tests, provided that
      Seller shall be given prior notice and an opportunity to attend such tests
      and inspections;

            

    

     

    
      	
              (e)    
        

            	
              maintain
      in full force and effect all of Seller’s policies of insurance now in
      effect in respect of the Leases and Wells and shall give all notices and
      present all claims under all existing policies in a due and timely fashion
      as may be reasonably required in accordance with prudent business
      practice;

            

    

     

    
      	
              (f)    
        

            	
              notify
      Purchaser as soon as it or any of its directors or officers have
      determined that a state of facts exist which results in, or could
      reasonably be expected to result
in:

            

    

     

    
      	
              (i)    
        

            	
              any
      representation and warranty of Seller being untrue or incorrect in any
      material respects;

            

    

     

    
      	
              (ii)   
        

            	
              the
      non-fulfillment of any conditions set forth in this Agreement by the
      Seller; or

            

    

     

    
      	
              (iii)  
        

            	
              any
      adverse material change in either of Seller or the Leases and Wells,
      ownership, capital or financial position or condition of Seller, or change
      in a material fact that would result in an adverse material change in, or
      would reasonably be expected to result in an adverse material change in
      either of Seller, the Leases and Wells, ownership, capital or financial
      position or condition of Seller;

            

    

     

    
      	
              (g)    
        

            	
              take
      such steps as are necessary to assist Falcon in securing TSXV acceptance
      to the Transactions including, without limitation, providing as soon as
      practicable:

            

    

     

    
      	
              (i)    
        

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

            

    

     

    
      	
              (ii)   
        

            	
              a
      technical report with respect to the Leases and Wells as required by TSXV
      prepared in accordance with National Instrument 51-101 Standards of Disclosure for
      Oil and Gas Activities, published by Canadian Governmental
      Authorities;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -24-

     

     

    
      	
              (iii)  
        

            	
              a
      legal opinion satisfactory to TSXV, relating to the status of the Leases
      and Wells and such other matters as TSXV may require;
  and

            

    

     

    
      	
              (iv)   
        

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

            

    

     

    
      	
              (h)    
        

            	
              obtain
      all necessary Approvals, releases, waivers, and consents as are
      customarily obtained before closing a transaction of the type contemplated
      hereby and undertake any other reasonable action, as may be required to
      complete Seller’s obligations under this Agreement and to consummate the
      Transactions;

            

    

     

    
      	
              (i)    
        

            	
              take
      such steps as are necessary to assist Falcon in complying with the
      post-closing filings required to be made under applicable Canadian
      Securities Laws, including the filing of applicable reports of
      distribution and business acquisition
reports;

            

    

     

    
      	
              (j)    
        

            	
              not
      sell, transfer, assign or encumber any interest in any Lease or Well, or
      the production from any Lease or Well, except with respect to those
      certain obligations under the Beetaloo
PSA;

            

    

     

    
      	
              (k)    
        

            	
              not
      enter into any new agreements or commitments in respect of the Leases or
      Wells which extend beyond the Initial Closing, except with respect to
      those certain obligations under the Beetaloo PSA;
  and

            

    

     

    
      	
              (l)    
        

            	
              not
      amend or modify any Material Agreement, except with respect to those
      certain obligations under the Beetaloo
PSA.

            

    

     

    
      	
              6.2  

            	
              Covenants
      and Agreements of the Purchaser

            

    

     

    Falcon  covenants
and agrees with PetroHunter Energy and Seller that, from the date of this
Agreement to the Subsequent Closing, it shall use its best efforts to obtain
TSXV acceptance to the Transactions and related transactions and comply with all
other regulatory requirements, requirements of TSXV and requirements of the
Canadian Securities Laws applicable to the issue of Convertible Securities and
the Acquisition Shares to PetroHunter Energy as contemplated by this Agreement
on or before the Subsequent Closing Date.

     

    
      	
              6.3  

            	
              Covenants
      Concerning Interim New Leasing

            

    

     

    During
the period from the Effective Date to the Subsequent Closing Date, Seller may
undertake, at its sole expense, such curative action (including obtaining
ratifications, revivals, extensions, renewals and even new leases) in respect of
the leases identified in Schedule 2 as it wishes in its sole discretion, without
the need for any prior approval by Falcon or Purchaser.  During that
same time period from the Effective Date to the Subsequent Closing Date, Seller
may also undertake such new leasing of open, unleased interests (interests that
would not be covered by the leases shown in Schedule 2, even if all such
scheduled leases were valid and in full force and effect) within the Buckskin
Mesa Project Area.  Purchaser shall pay its proportionate share of all
costs incurred in connection with such new leasing of open, unleased interests
(“Interim New Leasing Costs”), including without limitation the costs of outside
landmen, title reports, 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -25-

     

     

    brokerage
fees, bonuses and paid-up delay rentals, at the Subsequent Closing in accordance
with Section 2.9(c).

     

    
      	
              6.4  

            	
              Covenants
      Concerning Interim New Drilling

            

    

     

    During
the period from the Effective Date to the Subsequent Closing Date, Seller may
from time to time propose the drilling of one or more wells in the Buckskin Mesa
Project Area by giving notice of the proposed operation to Purchaser under
Article VI.B.1 of the JOA, just as if the JOA were then in effect as to the
lands on which such well or wells are to be drilled.  Purchaser shall
notify Seller in respect of each proposal whether it wishes to participate in
the drilling operation, again just as if the JOA were in
effect.  Purchaser will pay its proportionate share of the costs then
incurred in each such drilling operation in which it elects to participate at
the Subsequent Closing in accordance with Section 2.9(c).  If the
Subsequent Closing does not occur, Purchaser will have no liability whatsoever
for such costs.  As to each such drilling operation in which Purchaser
does not elect to participate, a proposal to deepen the well made after the
Subsequent Closing will be governed by Article VI.B.4, so that Purchaser will
have the ability to participate on the terms set forth in Article VI.B.4 in the
deepening of that well beneath the total depth actually drilled by Seller in
that well or, if shallower, the objective depth or zone set forth in Seller’s
notice of the proposed drilling operation.  If Seller wishes before
the Subsequent Closing to deepen a well in which Purchaser did not elect to
participate, Seller shall give notice of the proposed operation to Purchaser
under Article VI.B.4 of the JOA, just as if the JOA were then in effect as to
the lands on which such well or wells are to be drilled.  Purchaser
shall notify Seller in respect of each proposal whether it wishes to participate
in the deepening operation, again just as if the JOA were in
effect.  If Purchaser elects to participate in the deepening
operations, then the costs of such operations shall be determined in accordance
with the JOA and Purchaser will pay its proportionate share of such costs at the
Subsequent Closing in accordance with Section 2.9(c).  If the
Subsequent Closing does not occur, Purchaser will have no liability whatsoever
for such costs.  Seller covenants that it will provide Purchaser the
notice and afford Purchaser the participation opportunity set forth in this
Section 6.4 in respect of each well that Seller drills or deepens in the
Buckskin Mesa Project Area before the Option Expiry Date (if the Option is not
exercised) or the Subsequent Closing Date (if the Option is
exercised).

     

    ARTICLE
7

    CONDITIONS
PRECEDENT

     

    
      	
              7.1  

            	
              Conditions
      for the Benefit of the Purchaser to the Initial
  Transaction

            

    

     

    The
obligation of Falcon and Purchaser to complete the Initial Transaction is
subject to the satisfaction on or before the Initial Closing Date, for the
exclusive benefit of Purchaser, of each of the following
conditions:

     

    
      	
              (a)    
        

            	
              the
      Lease Acquisition and Development Agreement effective August 23, 2005,
      between MAB Resources LLC and the Daniels Group, as most recently amended
      by a Sixth Amendment dated March 26, 2008, shall have been further amended
      to set forth terms and conditions (including, but by no means limited to,
      those related to drilling obligations and to payments in connection with
      additional leases), that are satisfactory to Purchaser in its sole and
      absolute discretion;

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -26-

     

    
      	
              (b)    
        

            	
              all
      litigation involving Seller and Daniels Group shall have been
      dismissed;

            

    

     

    
      	
              (c)    
        

            	
              the
      Daniels Group shall have consented to the anticipated assignments of
      the  Initial Working Interests in the Initial Transaction and
      the Assets in the Subsequent Transaction, without the imposition of any
      conditions unacceptable to
Purchaser;

            

    

     

    
      	
              (d)    
        

            	
              Purchaser
      shall have no reason to believe there are any material violations of any
      Environmental Laws anywhere within the Buckskin Mesa Project
      Area;

            

    

     

    
      	
              (e)    
        

            	
              CCES
      Piceance Partners I, LLC, shall have consented to the anticipated partial
      assignment to Purchaser of the Gas Gathering Agreement effective April 11,
      2008, and shall have agreed that neither Falcon nor Purchaser shall have
      liability or obligation whatsoever to CCES Piceance Partners I, LLC, under
      the Letter of Understanding dated April 10, 2007 or the Second Amended and
      Restated Addendum dated April 11,
2008;

            

    

     

    
      	
              (f)       

            	
              The
      release of any lien set forth on Schedule 6;
;

            

    

     

    
      	
              (g)    
        

            	
              Global
      Project Finance AG shall have agreed to cause the release of the Initial
      Working Interests from the liens of all mortgages, deeds of trust and
      other encumbrances for its benefit or for the benefit of its affiliates
      simultaneously with the Initial Closing and to cause the release of the
      Assets from the liens of all mortgages, deeds of trust and other
      encumbrances for its benefit or for the benefit of its affiliates
      simultaneously with the Subsequent Closing;
and

            

    

     

    
      	
              (h)    
        

            	
              CCES
      Piceance Partners I, LLC shall have agreed to cause the release of the
      Initial Working Interests from the liens of all mortgages, deeds of trust
      and other encumbrances for its benefit or for the benefit of its
      affiliates simultaneously with the Initial Closing and to cause the
      release of the Assets from the liens of all mortgages, deeds of trust and
      other encumbrances for its benefit or for the benefit of its affiliates
      simultaneously with the Subsequent
Closing.

            

    

     

    
      	
              7.2  

            	
              Mutual
      Conditions Precedent to the Subsequent
  Transaction

            

    

     

    The
obligations of Seller and Purchaser to complete the Subsequent Transaction and
the transactions contemplated by this Agreement are subject to all of the
following conditions being satisfied on or before the Subsequent Closing, which
conditions are for the mutual benefit of all parties to this Agreement and may
be waived in whole or in part only if jointly waived by all of the parties to
this Agreement:

     

    
      	
              (a)    
        

            	
              exercise
      of the Option in accordance with Article
2;

            

    

     

    
      	
              (b)    
        

            	
              all
      material Approvals, acceptances, authorizations, exemptions, waivers or
      consents, including approvals by TSXV, Governmental Authorities,
      regulatory authorities, lenders, lessors and other third parties and
      judicial approvals and orders legally required for the consummation of the
      Agreement and the transactions contemplated by this Agreement, shall have
      been obtained or 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -27-

     

     

    
      	 	received
      from the persons, authorities or bodies having jurisdiction in the
      circumstances;

    

     

    
      	
              (c)    
        

            	
              none
      of the Approvals, authorizations, consents, orders, laws or regulations
      contemplated in this Section 7.2 shall have contained terms or conditions
      or require undertakings or security deemed unsatisfactory or unacceptable
      by any of the parties acting
reasonably;

            

    

     

    
      	
              (d)    
        

            	
              there
      shall be no actions, suits, litigation, arbitration, proceedings or claims
      in progress, pending or threatened against, relating to, or affecting in
      any material way, Seller, Purchaser, the Transaction Agreements or the
      transactions contemplated hereby;

            

    

     

    
      	
              (e)    
        

            	
              Falcon
      shall have obtained all necessary approvals, including, but not limited to
      the approval of its Board of Directors, the TSXV, and the issuance of the
      Convertible Securities and the issuance and listing of the Acquisition
      Shares; and

            

    

     

    
      	
              (f)    
        

            	
              the
      issuance of the Convertible Securities, if applicable, to PetroHunter
      Energy, and the transfer of the Working Interests, the granting of the
      Option and the Leases and Wells to the Purchaser shall be done in
      compliance with all applicable
laws.

            

    

     

    
      	
              7.3  

            	
              Conditions
      for the Benefit of Seller to the Subsequent
  Transaction

            

    

     

    The
obligation of the Seller to complete the Subsequent Transaction and the
transactions contemplated by this Agreement is subject to the satisfaction on or
before the Subsequent Closing, for the exclusive benefit of the Seller, of each
of the following conditions:

     

    
      	
              (a)    
        

            	
              the
      representations and warranties of Falcon and Purchaser shall be true and
      correct in all material respects as at the Subsequent Closing with the
      same force and effect as if such representations and warranties had been
      made at and as of the date of this
Agreement;

            

    

     

    
      	
              (b)    
        

            	
              Falcon
      and Purchaser shall have, in all material respects, performed and complied
      with all covenants and agreements contained in the Transaction Agreements
      to be performed or complied with, or caused to be performed or complied
      with, by Falcon and Purchaser at or prior to the Subsequent Closing
      Date;

            

    

     

    
      	
              (c)    
        

            	
              Falcon
      and Purchaser will have made the payments outlined in Section 2.9 and
      delivered the instruments listed in Section 9.3;
  and

            

    

     

    
      	
              (d)    
        

            	
              the
      receipt by PetroHunter Energy of confirmation satisfactory to PetroHunter
      Energy that the purchase of the Convertible Securities and the Acquisition
      Shares and the transactions contemplated by this Agreement have received
      all requisite approvals or that such approvals are not
      required.

            

    

     

    The
foregoing conditions are for the exclusive benefit of the Seller and may be
waived in whole or in part by the Seller, in its sole discretion, at any
time.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -28-

     

     

    
      	
              7.4  

            	
              Conditions
      for the Benefit of Falcon and Purchaser to the Subsequent
      Transaction

            

    

     

    The
obligation of Falcon and Purchaser to complete the Subsequent Transaction and
the transactions contemplated by this Agreement is subject to the satisfaction
on or before the Subsequent Closing Date, for the exclusive benefit of the
Purchaser, of each of the following conditions:

     

    
      	
              (a)    
        

            	
              the
      representations and warranties of PetroHunter Energy and Seller herein
      shall be true and correct in all material respects as at the Subsequent
      Closing with the same force and effect as if such representations and
      warranties had been made at and as of the date of this
      Agreement;

            

    

     

    
      	
              (b)    
        

            	
              PetroHunter
      Energy and Seller shall have, in all material respects, performed and
      complied with all covenants and agreements contained in the Transaction
      Agreements to be performed or complied with, or caused to be performed or
      complied with, by Seller at or prior to the Subsequent Closing
      Date;

            

    

     

    
      	
              (c)    
        

            	
              since
      the date of this Agreement, there shall not have been any adverse material
      change in the business, operations, assets, liabilities, ownership,
      capital or financial position, prospects or condition of PetroHunter
      Energy and Seller or change in a material fact that has a material adverse
      affect on, or would reasonably be expected to have a material adverse
      effect on, the business, operations, assets, liabilities, ownership,
      capital or financial position or condition of PetroHunter Energy or
      Seller, except with respect to those certain obligations under the
      Beetaloo PSA;

            

    

     

    
      	
              (d)    
        

            	
              PetroHunter
      Energy and Seller will have delivered the instruments listed in Section
      9.2;

            

    

     

    
      	
              (e)    
        

            	
              Seller’s
      title to the Assets will be free and clear of all liens and encumbrances,
      other than Permitted Encumbrances and with respect to those certain
      obligations under the Beetaloo PSA, at the Subsequent Closing
      Date;

            

    

     

    
      	
              (f)    
        

            	
              no
      material default of PetroHunter Energy and Seller under the Transaction
      Agreements will have occurred which has not been waived by the Purchaser
      or rectified by PetroHunter Energy and
Seller;

            

    

     

    
      	
              (g)    
        

            	
              the
      receipt by Purchaser of confirmation satisfactory to Purchaser that the
      purchase of the Working Interests and the Leases and Wells and the
      transactions contemplated by this Agreement have received all necessary
      Approvals, other than Approval by the Bureau of Land Management, which is
      customarily obtained after transfer of
  ownership;

            

    

     

    
      	
              (h)    
        

            	
              Falcon
      not being required to prepare and file a prospectus or similar document or
      to register the Convertible Securities or the Acquisition Shares or make
      any filings or seek any approvals of any nature whatsoever from any
      governmental or regulatory authority of any kind whatsoever in the United
      States or any other non 

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -29-

     

     

    
      	 	Canadian
      jurisdiction in connection with the issue and sale or resale of the
      Convertible Securities and/or the Acquisition
Shares;

    

     

    
      	
              (i)    
        

            	
              PetroHunter
      Energy or Seller, whichever is applicable, shall have delivered to Falcon
      or Purchaser, whichever is applicable, on a timely basis to enable the
      Purchaser to complete the Subsequent
  Transaction:

            

    

     

    
      	
              (i)    
        

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

            

    

     

    
      	
              (ii)   
        

            	
              a
      technical report with respect to the Leases and Wells as required by TSXV
      prepared in accordance with National Instrument 51-101 Standards of Disclosure for
      Oil and Gas Activities, published by Canadian Governmental
      Authorities, if required;

            

    

     

    
      	
              (iii)  
        

            	
              a
      legal opinion, satisfactory to the TSXV, relating to the status of
      PetroHunter Energy and Seller, the Leases and Wells, and such other
      matters as TSXV may require, as determined at its discretion;
      and

            

    

     

    
      	
              (iv)   
        

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

            

    

     

    The
foregoing conditions are for the exclusive benefit of the Purchaser and may be
waived in whole or in part by the Purchaser, in its sole discretion, at any
time.

     

    
      	
              7.5  

            	
              Deemed
      Satisfaction of Conditions to the Subsequent
  Transaction

            

    

     

    All
conditions in this Article 7 to be satisfied on or before the Subsequent Closing
shall be deemed to be satisfied if the Subsequent Transaction
occurs.

     

    ARTICLE
8

    TERMINATION

     

    
      	
              8.1  

            	
              Termination
      Before Initial Closing

            

    

     

    This
Agreement may be terminated:

     

    
      	
              (a)    
        

            	
              by
      Purchaser in the event that Seller does not fulfill any of the conditions
      in Section 7.1;

            

    

     

    
      	
              (b)    
        

            	
              by
      mutual written consent of Seller and Purchaser;
  or

            

    

     

    
      	
              (c)    
        

            	
              automatically
      if the Initial Closing has not occurred on or before November 15, 2008 and
      has not been extended by written agreement of the Parties to this
      Agreement.

            

    

     

    
      	
              8.2  

            	
              Termination
      Before Subsequent Closing

            

    

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -30-

     

    
      	
              (a)    
        

            	
              by
      either Seller or Purchaser in the event any of the conditions in Section
      7.2 are not satisfied;

            

    

     

    
      	
              (b)    
        

            	
              by
      Seller in the event that Purchaser does not fulfill any of the conditions
      in Section 7.3;

            

    

     

    
      	
              (c)    
        

            	
              by
      Purchaser in the event that:

            

    

     

    
      	
              (i)    
        

            	
              Purchaser
      fails to exercise the Option;

            

    

     

    
      	
              (ii)   
        

            	
              Purchaser
      exercises its right to terminate this Agreement under Section
      2.7(a)

            

    

     

    
      	
              (iii)  
        

            	
              Seller
      delays or fails to provide information needed by Falcon to secure required
      Approvals or to complete its filing requirements with the TSXV or other
      regulatory authorities;

            

    

     

    
      	
              (iv)   
        

            	
              Seller
      fails to cure a material breach of any representation, warranty, covenant
      or agreement set forth in this Agreement within five Business Days after
      receiving notice of such breach; or

            

    

     

    
      	
              (v)    
        

            	
              a
      permanent injunction or other order of a court or competent authority
      preventing the Subsequent Closing shall have become final and not subject
      to further appeal; or

            

    

     

    
      	
              (vi)   
        

            	
              Seller
      does not fulfill any of the conditions in Section
  7.4;

            

    

     

    
      	
              (d)    
        

            	
              by
      mutual written consent of Seller and Purchaser;
  or

            

    

     

    
      	
              (e)    
        

            	
              automatically
      if the Subsequent Closing has not occurred on or before the Subsequent
      Closing Date and has not been extended by written agreement of the Parties
      to this Agreement.

            

    

     

    
      	
              8.3  

            	
              Effect
      of Termination

            

    

     

    If this
Agreement is terminated by a Party as provided by Section 8.1 or 8.2(c)(i) or
8.2(c)(ii), this Agreement shall be null and void and of no further force or
effect whatsoever and there shall be no further liability or obligation on the
part of PetroHunter Energy, Seller, Falcon or Purchaser, although Purchaser
shall retain any Initial Working Interest acquired at the Initial
Closing.  If this Agreement is terminated as provided by Section 8.2
(other than as provided by Sections 8.2(c)(i) or 8.2(c)(ii), then the
terminating Party shall have such rights and remedies, if any, against another
Party as may be provided by applicable law; provided, however, that Purchaser
shall in all events retain the Initial Working Interest and Sections 11.1 and
11.16 hereof shall survive such termination.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -31-

     

    ARTICLE
9

    SUBSEQUENT
CLOSING

     

    
      	
              9.1  

            	
              Subsequent
      Closing

            

    

     

    The
Subsequent Transaction contemplated by this Agreement shall be completed on the
Subsequent Closing Date.

     

    
      	
              9.2  

            	
              Seller
      Deliveries

            

    

     

    At the
Subsequent Closing, PetroHunter Energy and Seller will deliver the following
documents, all duly executed and dated as of the Subsequent Closing
Date:

     

    
      	
              (a)    
        

            	
              an
      assignment and bill of sale conveying the Assets, substantially in the
      form of Exhibit E;

            

    

     

    
      	
              (b)    
        

            	
              the
      Subsequent Transaction Agreements;

            

    

     

    
      	
              (c)    
        

            	
              a
      certificate of PetroHunter Energy and Seller signed by any two of their
      respective officers certifying
that:

            

    

     

    
      	
              (i)    
        

            	
              the
      representations and warranties of PetroHunter Energy and Seller herein
      contained are true and correct as of the Subsequent Closing
      Date;

            

    

     

    
      	
              (ii)   
        

            	
              the
      resolutions of the Board of Directors of PetroHunter Energy and Seller
      approving the Subsequent Transaction Agreements and the Subsequent
      Transaction are in full force and
effect;

            

    

     

    
      	
              (iii)  
        

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

            

    

     

    
      	
              (iv)   
        

            	
              all
      necessary corporate action has been taken by PetroHunter Energy and Seller
      to authorize the execution and delivery of the Subsequent Transaction
      Agreements and to consummate the transactions contemplated by the
      Subsequent Closing Date;

            

    

     

    
      	
              (d)    
        

            	
              an
      opinion of PetroHunter Energy’s Counsel, dated at the Subsequent Closing
      Date, that

            

    

     

    
      	
              (i)    
        

            	
              PetroHunter
      Energy is duly incorporated and validly exists under the laws of Maryland
      and is in good standing under the laws of
  Maryland;

            

    

     

    
      	
              (ii)   
        

            	
              the
      Subsequent Transaction Agreements have been duly executed and delivered by
      PetroHunter Energy and constitute valid and binding obligations of
      PetroHunter Energy, enforceable against PetroHunter Energy in accordance
      with their terms; and

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -32-

     

    
      	
              (iii)  
        

            	
              PetroHunter
      Energy directly owns all of the issued and outstanding securities of
      Seller;

            

    

     

    
      	
              (e)    
        

            	
              an
      opinion of Seller’s Counsel, dated at the Subsequent Closing Date,
      that

            

    

     

    
      	
              (i)    
        

            	
              Seller
      is duly incorporated and validly exists under the laws of Maryland and is
      in good standing under the laws of Maryland;
and

            

    

     

    
      	
              (ii)   
        

            	
              the
      Subsequent Transaction Agreements have been duly executed and delivered by
      Seller and constitute valid and binding obligations of Seller, enforceable
      against Seller in accordance with their terms;
  and

            

    

     

    
      	
              (f)    
        

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

            

    

     

    all in
form and substance satisfactory to Falcon and the Purchaser acting reasonably
and in good faith.

     

    
      	
              9.3  

            	
              Falcon
      and Purchaser Deliveries

            

    

     

    On the
Subsequent Closing, Falcon and Purchaser will deliver the Subsequent Purchase
Price in the form, the amount and in the manner provided by this Agreement and
the following documents duly executed and to be dated the Subsequent Closing
Date:

     

    
      	
              (a)    
        

            	
              the
      Subsequent Transaction Agreements;

            

    

     

    
      	
              (b)    
        

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

            

    

     

    
      	
              (i)    
        

            	
              the
      representations and warranties of Falcon and Purchaser herein contained
      are true and correct as of the Subsequent Closing
  Date;

            

    

     

    
      	
              (ii)   
        

            	
              Falcon
      and Purchaser have performed and complied with all covenants and
      agreements contained in this Agreement to be performed or complied with by
      Falcon and Purchaser at or prior to the Subsequent Closing Date;
      and

            

    

     

    
      	
              (iii)     

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

            

    

     

    
      	
              (c)    
        

            	
              an
      opinion of Falcon’s Counsel, dated at the Subsequent Closing Date,
      that

            

    

     

    
      	
              (i)    
        

            	
              Falcon
      is duly incorporated and validly exists under the laws of British Columbia
      is in good standing under the laws of British
  Columbia;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -33-

     

     

    
      	
              (ii)      

            	
              the
      Subsequent Transaction Agreements have been duly executed and delivered by
      Falcon and constitute valid and binding obligations of Falcon, enforceable
      against Falcon in accordance with their
terms;

            

    

     

    
      	
              (iii)  
        

            	
              Falcon
      directly owns all of the issued and outstanding securities of
      Purchaser.

            

    

     

    
      	
              (d)    
        

            	
              an
      opinion of Purchaser’s Counsel, dated at the Subsequent Closing Date,
      that

            

    

     

    
      	
              (i)    
        

            	
              Purchaser
      is duly incorporated and validly exists under the laws of Colorado and is
      in good standing under the laws of Colorado;
and

            

    

     

    
      	
              (ii)   
        

            	
              the
      Subsequent Transaction Agreements have been duly executed and delivered by
      Purchaser and constitute valid and binding obligations of Purchaser,
      enforceable against Purchaser in accordance with their
    terms.

            

    

     

    
      	
              (e)    
        

            	
              such
      other documents and assurances as may be reasonably required by
      PetroHunter Energy or Seller,

            

    

     

    all in
form and substance satisfactory to PetroHunter Energy and Seller, each acting
reasonably and in good faith.

     

    
      	
              9.4  

            	
              Risk
      and Damage

            

    

     

    The
Assets shall be at the risk of Seller until completion of the Subsequent
Transaction contemplated by this Agreement.

     

    ARTICLE
10

    RESOLUTION
OF DISPUTES

     

    
      	
              10.1  

            	
              Arbitration
      – If Not Principally Related to Convertible Securities
    Issues

            

    

     

    Any
dispute between the Parties arising during the period of this Agreement or at
any time thereafter which touches upon the validity, construction, meaning,
performance or effect of this Agreement or the rights and liabilities of the
Parties or any matter arising out of or connected with this Agreement, except a
dispute principally related to the Convertible Securities, shall be subject to
arbitration pursuant to the Uniform Arbitration Act,
Colorado Revised Statutes § 13-22-201 (2007) and as provided in this
Article and the decision of the arbitrational tribunal shall be final and
binding as between the Parties and shall not be subject to appeal.

     

    
      	
              10.2  

            	
              Arbitration
      – If Principally Related to Convertible Securities
  Issues

            

    

     

    Any
dispute between the Parties arising during the period of this Agreement or at
any time thereafter which principally relates to the Convertible Securities
shall be subject to arbitration pursuant to Arbitration Act, 1991
(Ontario) and as provided in this Article and the decision of the
arbitrational tribunal shall be final and binding as between the Parties and
shall not be subject to appeal.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -34-

     

     

    
      	
              10.3  

            	
              Procedures
      Common to Both Arbitration Fora

            

    

     

    Any
arbitration to be carried out under either Section 10.1 or 10.2 shall be subject
to the following provisions, namely:

     

    
      	
              (a)    
        

            	
              The
      party desiring arbitration shall nominate one arbitrator and shall notify
      the other party hereto of such nomination.  Such notice shall
      set forth a brief description of the matter submitted for arbitration and,
      if appropriate, the paragraph hereof pursuant to which such matter is so
      submitted.  Such other party shall, within 30 days after
      receiving such notice, nominate an arbitrator and the two arbitrators
      shall select a third person as an arbitrator and as chairman of the
      arbitral tribunal to act jointly with them.  If said arbitrators
      shall be unable to agree on the selection of such chairman, the chairman
      shall be appointed by the President of the Colorado Oil and Gas
      Association (if the arbitration is under Section 10.1) or a Judge of the
      Ontario Superior Court (if under Section 10.2) upon the application of any
      of the parties hereto.

            

    

     

    
      	
              (b)    
        

            	
              The
      arbitration shall take place in Denver, Colorado (if the arbitration is
      under Section 10.1) or Toronto, Ontario (if under Section 10.2) and the
      chairman shall fix the time and location in such city for the purpose of
      hearing such evidence and representations as either of the parties may
      present and, subject to the provisions hereof, the decisions of the
      arbitrators or of any two of them in writing shall be binding upon the
      parties both in respect of procedure and the conduct of the parties during
      the proceedings and the final determination of the issues
      therein.  Said arbitrators shall, after hearing any evidence and
      representations that the parties may submit, make their decision and
      reduce the same to writing and deliver one copy thereof to each of the
      parties hereto.  The majority of the arbitrators may determine
      any matters of procedure for the arbitration not specified
      herein.

            

    

     

    
      	
              (c)    
        

            	
              If
      the party hereto receiving the notice of the nomination of an arbitrator
      by the party desiring arbitration fails within the said 30 days to
      nominate an arbitrator, then the arbitrator nominated by the party
      desiring arbitration may proceed alone to determine the dispute in such
      manner and at such time as he shall think fit and his decision shall,
      subject to the provisions hereof, be binding upon the
    parties.

            

    

     

    
      	
              (d)    
        

            	
              Notwithstanding
      the foregoing, the arbitration may be carried out by a single arbitrator
      if the parties hereto so agree, in which event the provisions of this
      paragraph shall apply, mutatis
      mutandis.

            

    

     

    
      	
              (e)    
        

            	
              The
      cost of the arbitration shall be borne equally by the Parties, unless the
      chairman and arbitrators decide otherwise in their final written
      decision.

            

    

     

    
      	
              (f)    
        

            	
              Insofar
      as they do not conflict with the provisions of this Article, the Colorado
      Uniform Arbitration Act (as to arbitration in Denver) or the Ontario
      Arbitration Act (as to proceedings in Toronto) shall be applicable to
      arbitration held under 

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -35-

     

    
      	 	this
      Article and the chairman and arbitrators shall have jurisdiction to do all
      acts and make such orders as provided
therein.

    

     

    
      	
              (g)    
        

            	
              Submission
      to arbitration pursuant to the provisions of this Article and the
      obtaining of the decision of the arbitration tribunal on the matters and
      claims in dispute shall be a condition precedent to the bringing of any
      action at law or suit in equity with respect to this
      Agreement.

            

    

     

    
      	
              10.4  

            	
              Arbitration
      – Mixed Issues

            

    

     

    The
Parties recognize that disputes may involve more than one issue, and
consequently have provided that the correct arbitration venue and procedure will
turn upon whether the disputed issues principally relate to Convertible
Securities or to other matters.  An arbitrator or arbitral panel
constituted under this Agreement shall always have power to determine whether
the disputed issues principally relate to Convertible Securities or other
matters, with the understanding that principal relationship will be determined
based on the numerosity and complexity of the issues that need to be resolved
and the applicable governing law, rather than monetary value of the
issues.  Under no circumstances will the Parties ever be involved in
cotemporaneous arbitration proceedings in two different venues, unless all
parties to each putative proceeding agree.

     

    ARTICLE
11

    GENERAL

     

    
      	
              11.1  

            	
              Taxes
      and Fees

            

    

     

    Seller
shall be responsible for any sales and use taxes applicable to the
Transactions.  Each Party shall pay its own legal and other
professional fees in respect of the Transactions.

     

    
      	
              11.2  

            	
              Complete
      Closings

            

    

     

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

     

    
      	
              11.3  

            	
              Status
      of the Agreement

            

    

     

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

     

    
      	
              11.4  

            	
              Tender

            

    

     

    Any
tender of documents or money or delivery of Notice pursuant to this Agreement
may be given by or made upon the Parties’ Counsel on behalf of the
Parties.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -36-

     

     

    
      	
              11.5  

            	
              Specific
      Performance and other Remedies

            

    

     

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

     

    
      	
              11.6  

            	
              Obligations
      as Covenants

            

    

     

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

     

    
      	
              11.7  

            	
              Amendment
      of Agreement

            

    

     

    Subject
to Section 11.9, no modification or amendment of this Agreement shall be binding
unless executed in writing by the Parties in the same manner as the execution of
this Agreement.

     

    
      	
              11.8  

            	
              Further
      Assurances

            

    

     

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

     

    
      	
              11.9  

            	
              Waiver

            

    

     

    Subject
to Section 11.7, no waiver of any default, breach or non-compliance under this
Agreement shall be effective unless in writing and signed by the Party to be
bound by the waiver or by its counsel.  Subject to Section 11.7, no
waiver shall be inferred from or implied by any failure to act or delay in
acting by a Party in respect of any default, breach or non-observance or by
anything done or omitted to be done by the other Party. The waiver by a Party of
any default, breach or non-compliance under this Agreement shall not operate as
a waiver of that Party’s rights under this Agreement in respect of any
continuing or subsequent default, breach or non-observance (whether of the same
or any other nature).

     

    
      	
              11.10  

            	
              Time

            

    

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -37-

     

     

     

    
      	
              11.11  

            	
              Entire
      Agreement

            

    

     

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

     

    
      	
              11.12  

            	
              Severability

            

    

     

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

     

    
      	
              11.13  

            	
              Counterparts
      and Facsimile

            

    

     

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

     

    
      	
              11.14  

            	
              Notices

            

    

     

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

     

    
      	
              (a)    
        

            	
              to
      PetroHunter Energy (which to Seller shall be c/o PetroHunter
      Energy):

            

    

     

    PetroHunter
Energy Corporation

    1600
Stout Street, Suite 2000

    Denver,
Colorado 80202

    

    Attention:
Chief Executive Officer

    Facsimile
number:  (720) 889-8371

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      -38-

       

       

    

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

    

    Dill Dill
Carr Stonbraker & Hutchings, P.C.

    455
Sherman Street, Suite 300

    Denver,
Colorado 80203

    

    Attention:
Fay M. Matsukage, Esq.

    Facsimile
number: (303) 777-3823

    

    And

    

    Davis
Graham & Stubbs LLP

    1550
Seventeenth Street, Suite 500

    Denver,
Colorado 80202

    

    Attn:  Greg
Danielson, Esq. and Shannon Ponder, Esq.

    Facsimile
number:  (303) 893-1379

    

    
      	
              (b)    
        

            	
              to
      Falcon and Purchaser:

            

    

     

    Falcon
Oil & Gas Ltd.

    1875
Lawrence Street

    Suite
1400

    Denver,
Colorado  80202

    

    Attention:
Chief Executive Officer

    Facsimile
number: (303) 572-8927

    

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

    

    Aird
& Berlis LLP

    Brookfield
Place, 181 Bay Street

    Suite
1800, Box 754

    Toronto,
Ontario

    M5J
2T9

    

    Attention:
Daniel N. Bloch

    Facsimile
number: (416) 863-1515

    

    or to
such other address as any Party hereto may, from time to time, designate in
writing delivered in a like manner.  If delivered or sent by
facsimile, Notice shall be deemed delivered on the date of delivery or facsimile
transmission, unless delivered or transmitted after 4:00 p.m. on a Business
Day or on a day which is not a Business Day, in which event Notice shall be
deemed delivered on the next Business Day.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -39-

     

     

    
      	
              11.15  

            	
              Exclusivity

            

    

     

    Seller
and Purchaser agree that, from date of this Agreement until the earlier of: (i)
the Subsequent Closing Date; and (ii) the termination of this Agreement in
accordance with Article 8:

     

    
      	
              (a)    
        

            	
              Seller
      and Purchaser will deal exclusively with each other in respect of the
      Initial Working Interest and
Assets;

            

    

     

    
      	
              (b)    
        

            	
              Seller
      and Purchaser and their respective representatives will immediately cease
      all existing discussions and negotiations, if any, with any other party in
      respect of any transaction the consummation of which would or could
      reasonably be expected to interfere with or prevent the Transactions or
      materially reduce the benefit to Seller and Purchaser (collectively, an
      “Alternative
      Transaction”); and

            

    

     

    
      	
              (c)    
        

            	
              Seller
      and Purchaser will not, directly or indirectly, and will not permit any of
      their respective representatives, to solicit, initiate, or encourage
      proposals or offers from, or participate in negotiations with, any third
      party, or provide information to any third party, relative to any
      Alternative Transaction.

            

    

     

    
      	
              11.16  

            	
              Confidentiality

            

    

     

    
      	
              (a)    
        

            	
              Falcon
      and Purchaser and each of their respective employees, officers, directors,
      contractors, agents and professional representatives shall keep the
      existence of and the terms of this Agreement in strictest
      confidence.

            

    

     

    
      	
              (b)    
        

            	
              Until
      the Initial Closing, Falcon and Purchaser agree to treat all information
      it receives in connection with the Buckskin Mesa Project Area in
      confidence, except to the extent that it reasonably believes that
      disclosure is required under applicable law, TSXV rules, or the rules of
      regulatory agencies.

            

    

     

    
      	
              (c)    
        

            	
              If
      any Party is required or requested by legal process to disclose any
      confidential information, such Party will provide the other with prompt
      notice of such requirement or request so that it may seek an appropriate
      protective order or waive compliance with the provisions of this
      requirement or both.  If any Party is compelled to disclose
      confidential information to any tribunal or else stand liable for contempt
      or suffer other censure or penalty, such Party may disclose same without
      liability hereunder provided that it shall give the other advance written
      notice of the information to be disclosed and at the request of the other,
      shall seek to obtain assurances that such information will be accorded
      confidential treatment.

            

    

     

    
      	
              (d)    
        

            	
              The
      Parties agree that prior to making any press releases concerning the
      transactions contemplated by this Agreement, each of them shall provide a
      copy of such press release to the others in advance of it being
      released.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    -40-

     

     

    
      	
              11.17  

            	
              Successors
      and Assigns

            

    

     

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

     

    
      	
              11.18  

            	
              Enurement

            

    

     

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

     

    
      	
              11.19  

            	
              Language

            

    

     

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

     

    

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    
      	 
      	 
      	
              PETROHUNTER
      ENERGY CORPORATION

            
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	
              I/We
      have the authority to bind the corporation.

            
	 
      	 
      	
              PETROHUNTER
      OPERATING COMPANY

            
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	
              I/We
      have the authority to bind the corporation.

            
	 
      	 
      	
              FALCON
      OIL & GAS LTD.

            
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	
              I/We
      have the authority to bind the
corporation.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          -

        

      

    

    
      	 
      	 
      	
              FALCON
      OIL & GAS USA, INC.

            
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      
	
              Per:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	
              I/We
      have the authority to bind the
corporation.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}]]