AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

DOUBLE EAGLE PETROLEUM CO.

DBLE ACQUISITION CORPORATION,

AND

PETROSEARCH ENERGY CORPORATION

DATED AS OF MARCH 30, 2009

Table of Contents

Table of Contents
(continued)

Table of Contents
(continued)

Table of Contents
(continued)

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of March 30, 2009, by and among Double Eagle Petroleum Co., a Maryland corporation (“ Parent ”), DBLE Acquisition Corporation, a Nevada corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), and Petrosearch Energy Corporation, a Nevada corporation (the “ Company ”). Capitalized terms used and not otherwise defined herein have the meanings set forth in Article 1.

RECITALS

A. The respective Boards of Directors of each of Parent, Merger Sub and the Company believe it is in the best interests of their respective entities and stockholders that Parent acquire the Company through the merger of Merger Sub with and into the Company (the “ Merger ”).

B. The Boards of Directors of each of Parent, Merger Sub and the Company have approved the Merger, this Agreement and the transactions contemplated hereby.

C. Pursuant to the Merger, among other things, and subject to the terms and conditions of this Agreement, all of the issued and outstanding shares of capital stock of the Company, including without limitation, the Common Stock, the Series A 8% Convertible Preferred Stock and the Series B Convertible Preferred Stock of the Company (collectively, “ Company Capital Stock ”), shall be converted into the right to receive shares of Common Stock of Parent, with a par value of $0.10 per share (“ Parent Common Stock ”).

D. As an inducement to Parent and Merger Sub to enter into this Agreement, certain officers and directors of the Company have concurrently herewith entered into Voting Agreements with Parent in substantially the form attached hereto as Exhibit A (“ Voting Agreements ”) pursuant to which, among other things, such officers and directors will agree to vote the shares of Company Capital Stock owned by them in favor of the Merger.

E. The Company, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with the Merger.

NOW, THEREFORE, in consideration of the covenants, promises, representations and warranties set forth herein, and for other good and valuable consideration, intending to be legally bound hereby the parties agree as follows:

ARTICLE 1.
REFERENCES AND DEFINITIONS

1.1 References and Titles .

References and Titles. All references in this Agreement to Exhibits, Schedules, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections and other subdivisions of or to this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any Articles, Sections, subsections or other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and shall be disregarded in construing the language hereof. The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The words “this Article,” “this Section” and “this Subsection,” and words of similar import, refer only to the Article, Section or subsection hereof in which such words occur. The word “or” is not exclusive, and the word “including” (in its various forms) means including without limitation. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. As used in the representations and warranties contained in this Agreement, the phrase “to the knowledge” of the representing party shall mean that Responsible Officers of such party, individually or collectively, either (i) know that the matter being represented and warranted is true and accurate or (ii) have no reason, after reasonable inquiry, to believe that the matter being represented and warranted is not true and accurate.

1.2 Definitions .

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

“Accounts” has the meaning ascribed to it in Section 3.6(b).

“Acquisition Proposal” means any contract, proposal, offer or other indication of interest (whether or not in writing and whether or not delivered to the stockholders of the Company) relating to any of the following (other than the transactions contemplated by this Agreement or the Merger): (a) any Business Combination directly or indirectly involving the Company or the Company Subsidiaries, (b) the acquisition in any manner, directly or indirectly, of any business or group of assets that generates 10% or more of the Company’s consolidated net revenues, net income or stockholders’ equity, or assets representing 10% or more of the book value of the assets of the Target Companies, taken as a whole, or any license, lease, long-term supply agreement, exchange, mortgage, pledge or other arrangement having a similar economic effect, in each case in a single transaction or a series of related transactions, or (c) any direct or indirect acquisition of beneficial ownership (as defined under Section 13(d) of the Exchange Act) of 10% or more of the shares of the Company Common Stock, whether in a single transaction or a series of related transactions.

“Action or Proceeding” means any action, suit, complaint, petition, claim, investigation, proceeding, arbitration, litigation or Governmental Entity investigation, audit or other proceeding, whether civil or criminal, in law or in equity, or before any arbitrator or Governmental Entity.

“Affiliate” means, as applied to any Person, (a) any other Person directly or indirectly controlling, controlled by or under common control with, that Person, (b) any other Person that owns or controls 10% or more of any class of equity securities (including any equity securities issuable upon the exercise of any option or convertible security) of that Person or any of its Affiliates, or (c) any director, partner, executive officer, or manager of such Person. For the purposes of this definition, “control” (including with correlative meanings, the terms “controlling”, “controlled by”, and “under common control with”) as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or by contract or otherwise.

“Aggregate Cash Consideration” has the meaning ascribed to it in Section 2.6(a)(ii).

“Aggregate Consideration” means the sum of the (a) Aggregate Fractional Share Cash Amount; plus (b) the Aggregate Stock Consideration, or if applicable, the Aggregate Stock Consideration as Adjusted for Parent Stock Price, or if applicable, the Aggregate Stock Consideration as Adjusted for Working Capital Shortfall; plus (c) any Aggregate Cash Consideration.

“Aggregate Fractional Share Cash Amount” means the total amount of cash payable by Parent to all stockholders of the Company in lieu of fractional shares of Parent Common Stock.

“Aggregate Stock Consideration” has the meaning ascribed to it in Section 2.6(a)(i).

“Aggregate Stock Consideration as Adjusted for Parent Stock Price” has the meaning ascribed to it in Section 2.6(a)(i).

“Aggregate Stock Consideration as Adjusted for Working Capital Shortfall” has the meaning ascribed to it in Section 2.6(a)(iii).

“Agreement” means this Agreement and Plan of Merger, the Exhibits, the Company Disclosure Schedule, the Parent Disclosure Schedule and any other Schedules attached hereto, as the same may be amended or supplemented from time to time in accordance with the terms hereof.

“Articles of Merger” has the meaning ascribed to it in Section 2.2.

“Approval” means any approval, authorization, consent, permit, franchise, grant, license, easement, certificate, qualification or registration, or any waiver of any of the foregoing, required to be obtained from or made with, or any notice, statement or other communication required to be filed with or delivered to, any Governmental Entity or any other Person.

“Assets and Properties” of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned, licensed or leased by such Person, including cash, cash equivalents, investment assets, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, real estate, equipment, inventory, goods and Intellectual Property.

“Assumed Warrants” has the meaning ascribed to it in Section 2.6(e).

“Book-Entry Shares” has the meaning ascribed to it in Section 2.8(b).

“Books and Records” means, in the case of any Person, all files, documents, instruments, papers, books and records relating to the business of such Person, including financial statements, internal reports, Tax returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, contracts, Licenses, customer lists, computer files and programs (including data processing files and records), retrieval programs, operating data and plans and environmental studies and plans.

“Business Combination” means, with respect to any Person, (a) any merger, consolidation or other business combination to which such Person is a party; (b) any sale, dividend, split or other disposition of any capital stock or other equity interests of such Person whether outstanding or newly, issued; (c) any tender offer (including a self tender), exchange offer, recapitalization, restructuring, liquidation, dissolution or similar or extraordinary transaction; (d) any sale, dividend or other disposition of all or a material portion of the Assets and Properties of such Person; or (e) the entering into of any agreement or understanding, the granting of any rights or options, or the acquiescence of such Person, with respect to any of the foregoing.

“Business Day” means a day other than Saturday, Sunday or any day on which banks located in the State of Colorado are authorized or obligated to close.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq., as amended, and any regulations promulgated thereunder.

“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System List.

“Certificates” has the meaning ascribed to it in Section 2.8(b).

“Closing” means the closing of the transactions contemplated by Section 2.2.

“Closing Date” has the meaning ascribed to it in Section 2.2.

“COBRA” has the meaning ascribed to it in Section 3.14(d).

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“Company” has the meaning ascribed to it in the forepart of this Agreement.

“Company Affiliate(s)” has the meaning ascribed to it in Section 6.10.

“Company Capital Stock” means the Company Common Stock, the Company Series A Preferred Stock, the Company Series B Preferred Stock and any other class or series of capital stock of the Company.

“Company Charter Documents” has the meaning ascribed to it in Section 6.2(a).

“Company Common Stock” has the meaning ascribed to it in Section 3.2(a)(ii).

“Company Contract” has the meaning ascribed to it in Section 3.16.

“Company Disclosure Schedule” has the meaning ascribed to it in the forepart of Article 3.

“Company Employee Plans” has the meaning ascribed to it in Section 3.14(a).

“Company Financial Statements” means the audited consolidated financial statements of the Company and its subsidiaries (including the related notes) included (or incorporated by reference) in the Company’s Annual Report on Form 10-K for the years ended December 31, 2007 and December 31, 2008, in each case as filed with the SEC.

“Company Preferred Stock” has the meaning ascribed to it in Section 3.2(a)(i).

“Company Proposal” has the meaning ascribed to it in Section 6.2(b).

“Company Representative” means any director, officer, employee, agent, advisor (including legal, accounting and financial advisors) or other representative of any of the Target Companies.

“Company Reserve Report” means the reserve report as of December 31, 2008, prepared by the Company, as audited by Ryder Scott Company, Petroleum Consultants, and made available to Parent.

“Company Returns” has the meaning ascribed to it in Section 3.18.

“Company SEC Documents” has the meaning ascribed to it in Section 3.5.

“Company Series A Preferred Stock” has the meaning ascribed to it in Section 3.2(a)(i).

“Company Series B Preferred Stock” has the meaning ascribed to it in Section 3.2(a)(i).

“Company Stockholders’ Meeting” has the meaning ascribed to it in Section 3.25.

“Company Warrants” means all warrants to purchase Company Capital Stock listed on Schedule 2.

“Company Warrant Common Stock” has the meaning ascribed to it in Section 2.6(a)(i).

“Confidentiality Agreement” has the meaning ascribed to it in Section 6.4.

“Defensible Title” means such right, title and interest that is (a) evidenced by an instrument or instruments filed of record in accordance with the conveyance and recording laws of the applicable jurisdiction to the extent necessary to prevail against competing claims of bona fide purchasers for value without notice, and (b) subject to Permitted Liens, free and clear of all Liens, claims, infringements, burdens and other defects.

“Effective Time” has the meaning ascribed to it in Section 2.2.

“Environmental Law” means any Law relating to (a) emissions, discharges, releases or threatened releases of Hazardous Materials into the environment, including into ambient air, soil, sediments, land surface or subsurface, buildings or facilities, surface water, groundwater, publicly-owned treatment works, septic systems or land; (b) the generation, treatment, storage, disposal, use, handling, manufacturing, recycling, transportation or shipment of Hazardous Materials; (c) occupational health and safety; or (d) the pollution of the environment, solid waste handling, treatment or disposal, reclamation or remediation activities, or protection of environmentally sensitive areas; provided, however, that the term Environmental Law shall not include any Laws relating to plugging and abandonment obligations and liabilities. The term “Environmental Law” shall include, but not be limited to the following statutes and the regulations promulgated thereunder: the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq., RCRA, the Superfund Amendments and Reauthorization Act, 42 U.S.C. § 11011 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. § 300f et seq., CERCLA, and any state, county, or local regulations similar thereto.

“ERISA” has the meaning ascribed to it in Section 3.14(a).

“ERISA Affiliate” has the meaning ascribed to it in Section 3.14(a).

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

“Exchange Agent” means Parent’s transfer agent for its common stock or such other institution as designated by Parent.

“Exchange Ratio” has the meaning ascribed to it in Section 2.6(a)(i).

“Final Working Capital” has the meaning ascribed to it in Section 6.17.

“Final Working Capital Shortfall” means the positive difference, if any, between $8,750,000 minus the Final Working Capital.

“Financial Statement Date” has the meaning ascribed to it in Section 3.22(d).

“Fractional Share Cash Amount” has the meaning ascribed to it in Section 2.6(b).

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

“Governmental Action” means any authorization, application, approval, consent, exemption, filing, license, notice, registration, permit, franchise or other requirement of, to or with any Governmental Entity.

“Governmental Entity” means any court, tribunal, arbitrator, authority, agency, bureau, board, commission, department, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision, and shall include any stock exchange, quotation service and the Financial Industry Regulatory Authority, Inc.

“Government Licenses” has the meaning ascribed to it in Section 3.7.

“Hazardous Materials” means any substance: (a) the presence of which requires investigation or remediation under any federal, state or local statute, regulation, ordinance, order, action, policy or common law; (b) that is or becomes defined as “hazardous waste,” “hazardous substance,” pollutant or contaminant under any federal, state or local statute, regulation, ordinance, rule, directive or order or any amendments thereto including, without limitation, CERCLA (42 U.S.C. Section 9601 et seq.) and/or the Resource Conservation and Recovery Act (41 U.S.C. Section 6901 et seq.); (c) that is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by any Governmental Entity, agency, department, commission, board or instrumentality of the United States, the State of Texas or any political subdivision thereof; (d) that contains gasoline, diesel fuel or other petroleum hydrocarbons, or any fraction or byproducts thereof; (e) that contains polychlorinated biphenyls (PCBs), friable asbestos or urea formaldehyde foam insulation; (f) radon gas; (g) any chemical, material, waste or substance regulated by any Governmental Entity under Environmental Law; (h) any radioactive material, excluding any naturally occurring radioactive material, and any source, special or byproduct material as defined in 42 U.S.C. 2011 et seq.

“Indebtedness” of any Person means all obligations of such Person (a) for borrowed money, (b) evidenced by notes, bonds, debentures or similar instruments, (c) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (d) under capital leases and (e) in the nature of guarantees of the obligations described in clauses (a) through (d) above of any other Person.

“Indemnified Parties” shall have the meaning ascribed to it in Section 6.11(a).

“Independent Accountants” shall have the meaning ascribed to it in Section 6.17.

“Intellectual Property” shall have the meaning ascribed to it in Section 3.19.

“IRS” means the United States Internal Revenue Service or any successor entity.

“Law” or “Laws” means any law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance or other pronouncement having the effect of law whether in the United States, any foreign country, or any domestic or foreign state, county, city or other political subdivision or of any Governmental Entity.

“Liabilities” means all Indebtedness, obligations and other liabilities of a Person, whether absolute, accrued, contingent (or based upon any contingency), known or unknown, fixed or otherwise, or whether due or to become due.

“License” means any contract that grants a Person the right to use or otherwise enjoy the benefits of any Intellectual Property (including without limitation any covenants not to sue with respect to any Intellectual Property).

“Liens” means any mortgage, pledge, assessment, security interest, lease, lien, easement, license, covenant, condition, restriction, adverse claim, levy, charge, option, equity, adverse claim or restriction or other encumbrance of any kind, or any conditional sale contract, title retention contract or other contract or agreement to give any of the foregoing, except for any restrictions on transfer generally arising under any applicable federal or state securities law.

“Material Adverse Effect” means:

(a) when used with respect to the Company, a result or consequence that would (i) materially adversely affect the financial condition, results of operations, business, properties or prospects of the Company and its Subsidiaries (taken as a whole), or (ii) materially impair the ability of the Company and its Subsidiaries (taken as a whole) to own, hold, develop and operate their assets; provided, however, that a Material Adverse Effect shall not include any effect or change that arises by one or more of: (A) the determination that any wells drilled in the ordinary course of business are or are deemed to be non-commercial, (B) the determination that any wells perform or are performing below forecast, (C) any deferral of production resumption or contracting activities in the ordinary course of business or due to weather related events, (D) production from existing wells being below production reflected in reserve estimates, (E) labor shortages in the specialized areas necessary to the respective industry, (F) any adverse effect or losses resulting from any hedging transactions, (G) changes to economic, political or business conditions affecting the domestic energy markets generally, except, in each case, to the extent any such changes or effects materially disproportionately affect the Company, (H) the occurrence of natural disasters of any type, (I) changes in market prices, both domestically and globally, for any carbon-based energy product and any write-down for accounting purposes of oil and gas reserves as a result of a “ceiling test” or property impairment to the extent but only to the extent such write-down or property impairment is directly attributable to changes in market prices of oil or gas, (J) the announcement or pendency of this Agreement and the transactions contemplated hereby, compliance with the terms hereof or the disclosure of the fact that Parent is the prospective owner of the Company, including any Action or Proceeding arising from any of the foregoing, (K) the existence or occurrence of war, acts of war, terrorism or similar hostilities, (L) changes in Laws of general applicability or interpretations thereof by courts or Governmental Entities, or (M) changes in the market price of either Parent Common Stock or Company Common Stock (but not any change underlying such changes in price to the extent such change would otherwise constitute a Material Adverse Effect).

(b) when used with respect to Parent, a result or consequence that would (i) materially adversely affect the financial condition, results of operations, business, properties or prospects of the Parent and its Subsidiaries (taken as a whole), or (ii) materially impair the ability of the Parent and its Subsidiaries (taken as a whole) to own, hold, develop and operate their assets; provided, however, that a Material Adverse Effect shall not include any effect or change that arises by one or more of: (A) the determination that any wells drilled in the ordinary course of business are or are deemed to be non-commercial, (B) the determination that any wells perform or are performing below forecast, (C) any deferral of production resumption or contracting activities in the ordinary course of business or due to weather related events, (D) production from existing wells being below production reflected in reserve estimates, (E) labor shortages in the specialized areas necessary to the respective industry,

(F) any adverse effect or losses resulting from any hedging transactions, (G) changes to economic, political or business conditions affecting the domestic energy markets generally, except, in each case, to the extent any such changes or effects materially disproportionately affect Parent, (H) the occurrence of natural disasters of any type, (I) changes in market prices, both domestically and globally, for any carbon-based energy product and any write-down for accounting purposes of oil and gas reserves as a result of a “ceiling test” or property impairment to the extent but only to the extent such write-down or property impairment is directly attributable to changes in market prices of oil or gas, (J) the announcement or pendency of this Agreement and the transactions contemplated hereby, compliance with the terms hereof or the disclosure of the fact that Parent is the prospective owner of the Company, including any Action or Proceeding arising from any of the foregoing, (K) the existence or occurrence of war, acts of war, terrorism or similar hostilities, (L) changes in Laws of general applicability or interpretations thereof by courts or Governmental Entities, or (M) changes in the market price of either Parent Common Stock or Company Common Stock (but not any change underlying such changes in price to the extent such change would otherwise constitute a Material Adverse Effect).

“Merger” has the meaning ascribed to it in the recitals to this Agreement.

“Merger Sub” has the meaning ascribed to it in the forepart of this Agreement.

“NRS” means the Nevada Revised Statutes and all amendments and additions thereto.

“Notice of Objection” has the meaning ascribed to it in Section 6.17.

“Oil and Gas” means oil, condensate, gas, casinghead gas and other liquid or gaseous hydrocarbons.

“Oil and Gas Interest(s)” means: (a) direct and indirect interests in and rights with respect to oil, gas, mineral and related properties and assets of any kind and nature, including working, royalty and overriding royalty interests, production payments, operating rights, net profits interests, other non-working interests and non-operating interests; (b) interests in and rights with respect to Oil and Gas and other minerals or revenues therefrom and contracts in connection therewith and claims and rights thereto (including oil and gas leases, operating agreements, unitization and pooling agreements and orders, division orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing contracts and agreements and, in each case, interests thereunder), surface interests, mineral fee interests, reversionary interests, reservations and concessions; (c) easements, rights of way, licenses, permits, leases, and other interests associated with, appurtenant to, or necessary for the operation of any of the foregoing; and (d) interests in equipment and machinery (including well equipment and machinery), oil and gas production, gathering, transmission, compression, treating, processing and storage facilities (including tanks, tank batteries, pipelines and gathering systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries and other tangible personal property and fixtures associated with, appurtenant to, or necessary for the operation of any of the foregoing. References in this Agreement to the “Oil and Gas Interests of the Company” or “Company’s Oil and Gas Interests” mean the collective Oil and Gas Interests of the Company and its Subsidiaries. References in this Agreement to the “Oil and Gas Interests of Parent” or “Parent’s Oil and Gas Interests” mean the collective Oil and Gas Interests of the Parent and its Subsidiaries.

“Operated Oil and Gas Interests” has the meaning ascribed to it in Section 3.7.

“Option” means any security, right, subscription, warrant, option, “phantom” stock right or other contract that gives the right to (a) purchase or otherwise receive or be issued any shares of capital stock or other equity interests of any Person or any security of any kind convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of any Person; or (b) receive any benefits or rights similar to any rights enjoyed by or accruing to the holder of shares of capital stock or other equity interests of any Person, including any rights to participate in the equity, income or election of directors or officers of any Person.

“Order” means any writ, judgment, decree, injunction or similar order of any Governmental Entity or regulatory authority (in each such case whether preliminary or final).

“Other Filings” has the meaning ascribed to it in Section 6.1(a).

“Ownership Interests” means, as applicable: (a) the ownership interests of the Company in its proved properties, as set forth in the Company Reserve Report; or (b) the ownership interests of Parent in its proved properties, as set forth in the Parent Reserve Report.

“Parent” has the meaning ascribed to it in the forepart of this Agreement.

“Parent Bank Credit Agreement” means the Credit Agreement, dated as of February 26, 2009, among Parent and the other Borrowers identified therein, and Bank of Oklahoma, N.A., et. al., as lenders.

“Parent Closing Stock Price” means the average VWAP of the Parent Common Stock over the 20 trading days ending on the third trading day preceding the Closing Date.

“Parent Common Stock” has the meaning ascribed to it in Recital C.

“Parent Companies” means Parent and each of the Parent’s Subsidiaries.

“Parent Disclosure Schedule” has the meaning ascribed to it in the forepart of the Article 4.

“Parent Financial Statements” means the audited consolidated financial statements of Parent and its subsidiaries (including the related notes) included (or incorporated by reference) in Parent’s Annual Report on Form 10-K for the years ended December 31, 2007 and December 31, 2008, in each case as filed with the SEC.

“Parent Reserve Report” means the reserve report as of December 31, 2008 prepared by Parent as audited by Netherland, Sewell & Associates, Inc. and provided to the Company.

“Parent Returns” has the meaning ascribed to it in Section 4.13.

“Parent SEC Documents” has the meaning ascribed to it in Section 4.3.

“PBGC” means the Pension Benefit Guaranty Corporation established under ERISA.

“Permit” means any license, permit, franchise or authorization.

“Permitted Liens” means: (a) statutory Liens for Taxes, assessments or other governmental charges or levies (i) which are not yet delinquent or (ii) which are being contested in good faith and adequate reserves have been maintained as may be required by or consistent with GAAP and, whether reserves are set aside or not, are listed on the applicable Company Disclosure Schedule; (b) Liens of carriers, warehousemen, mechanics, laborers, materialmen, landlords, vendors, workmen and operators, in each case only to the extent arising by operation of law in the ordinary course of business or by a written agreement existing as of the date hereof and necessary or incident to the exploration, development, operation and maintenance of Oil and Gas properties and related facilities and assets for sums not yet due or being contested in good faith and adequate reserves have been maintained as may be required by or consistent with GAAP; (c) Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation (other than ERISA) that would not and will not, individually or in the aggregate, result in a Material Adverse Effect on the Target Companies; (d) deposits of cash or securities to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) Liens, easements, rights-of-way, restrictions, servitudes, permits, conditions, covenants, exceptions, reservations and other similar encumbrances incurred in the ordinary course of business or existing on property and not, in any case (i) materially impairing the value of the assets of any of the Target Companies, (ii) interfering with the ordinary conduct of the business of any of the Target Companies, or rights to any of their assets or (iii) increasing the working interest (without a corresponding increase in net revenue interest) or decreasing the net revenue interest of the Target Companies reflected in their respective Ownership Interests; (f) Liens created or arising by operation of law to secure a party’s obligations as a purchaser of oil and gas; (g) all rights to consent by, required notices to, filings with, or other actions by Governmental Authorities to the extent customarily obtained subsequent to closing; (h) farm-out, carried working interest, joint operating, unitization, royalty, overriding royalty, net profit interests, sales, area of mutual interest and similar agreements relating to the exploration or development of, or production from, Hydrocarbon properties entered into in the ordinary course of business, provided the effect thereof of any of such in existence on the working and net revenue interests of the Target Companies has been properly reflected in their respective Ownership Interests; (i) Liens arising under or created pursuant to the any Company Bank Credit Agreement, as applicable; (j) Liens described on the Company Disclosure Schedule; and (k) minor defects and irregularities in title of any property, so long as such defects and irregularities that do not (i) increase the working interest (without a corresponding increase in net revenue interest) or decrease the net revenue interest of the Target Companies that are reflected in their respective Ownership Interests, (ii) materially impair the value of any of the assets of the Target Companies, or (iii) interfere with the ordinary conduct of the business of any of the Target Companies or rights to any of their assets.

“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company or partnership, proprietorship, other business organization, trust, union, association or Governmental Entity.

“Pre-Closing Working Capital” has the meaning ascribed to it in Section 6.17.

“Pre-Closing Working Capital Statement” has the meaning ascribed to it in Section 6.17.

“Proxy Statement/Prospectus” has the meaning ascribed to it in Section 3.25.

“RCRA” means the Resource Conservation and Recovery Act, 42 U.S.C § 6901 et seq., as amended, and any regulations promulgated thereunder.

“Registration Statement” has the meaning ascribed to it in Section 3.25.

“Remaining Government Licenses” has the meaning ascribed to it in Section 3.7.

“Required Company Vote” means approval of the Company Proposal by the affirmative vote of a majority of the holders of the Company’s capital stock.

“Responsible Officers” means (a) for the Company, Richard Dole, David J. Collins and Wayne Beninger; and (b) for Parent, Richard Dole, Kurtis Hooley and D. Steven Degenfelder.

“Review Period” has the meaning ascribed to it in Section 6.17.

“SEC” means the Securities and Exchange Commission or any successor entity.

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

“SOX” means the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated thereunder.

“Subsidiary” means any Person in which the Company or Parent, as the context requires, directly or indirectly through Subsidiaries or otherwise, beneficially owns at least 50% of either the equity interest in, or the voting control of, such Person, whether or not existing on the date hereof.

“Superior Proposal” means a bona fide written Acquisition Proposal made by a third party for at least a majority of the voting power of the Company’s then outstanding equity securities or all or substantially all of the assets of the Target Companies, taken as a whole, if the Board of Directors of the Company determines in good faith (based on, among other things, the advice of its independent financial advisors and after consultation with outside counsel, and taking into account all legal, financial, regulatory and other aspects of the Acquisition Proposal) that such Acquisition Proposal (a) would, if consummated in accordance with its terms, be more favorable, from a financial point of view, to the holders of the Company Common Stock than the transactions contemplated by this Agreement (taking into account any amounts payable pursuant to Section 9.2(b) by the Company); (b) contains conditions which are all reasonably capable of being satisfied in a timely manner; and (c) is not subject to any financing contingency or to the extent financing for such proposal is required, that such financing is then committed.

“Surviving Corporation” has the meaning ascribed to it in Section 2.1.

“Target Companies” means the Company and each of the Company’s Subsidiaries.

“Tax” or “Taxes” or “Taxable” each has the meaning ascribed to it in Section 3.18.

“Tax Authority” has the meaning ascribed to it in Section 3.18.

“Third-Party Consent” means the consent or approval of any Person other than the Target Companies, any of the Parent Companies or any Governmental Entity.

“Third Party Expenses” has the meaning ascribed to it in Section 6.5.

“Voting Agreements” has the meaning ascribed to it in Recital D.

“VWAP” means for a share of Parent Common Stock as of any date, the dollar volume-weighted average price for the Parent Common Stock on the NASDAQ Stock Market during the period beginning at 9:30:01 a.m., New York City time (or such other time as the NASDAQ Stock Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City time (or such other time as the NASDAQ Stock Market publicly announces is the official close of trading) as reported by Bloomberg through its “Volume at Price” functions, or, if the foregoing does not apply, the dollar volume/weighted average price of the Parent Common Stock in the over-the-counter market on the electronic bulletin board for the Parent Common Stock during the period beginning at 9:30:01 a.m., New York City time (or such other time as the NASDAQ Stock Market publicly announces is the official open of trading) and ending at 4:00:00 p.m., New York City time (or such other time as the NASDAQ Stock Market publicly announces is the official close of trading) as reported by Bloomberg, or, if no dollar/volume weighted average price is reported for the Parent Common Stock by Bloomberg for such hours, the average of the highest closing bid prices and the lowest closing ask prices of each of the market makers for the Parent Common Stock as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). All such determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

“Working Capital” as of any date means, on a consolidated basis, the Company’s current assets minus current liabilities, and shall be calculated in accordance with the formula set forth on Schedule 4 attached hereto.

“Working Capital Adjustment” has the meaning ascribed to it in Section 6.17.

ARTICLE 2.
THE MERGER

2.1 The Merger . At the Effective Time and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the NRS, Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation and a wholly-owned subsidiary of Parent. The Company, following the Merger, is sometimes referred to herein as the “ Surviving Corporation .”

2.2 Effective Time . Unless this Agreement is earlier terminated pursuant to Section 9.1, the closing of the Merger (the “ Closing ”) will take place as promptly as practicable, but no later than two (2) Business Days following satisfaction or waiver of the conditions set forth in Article 7, at the offices of Patton Boggs LLP, 1801 California Street, Suite 4900, Denver, Colorado 80202, unless another place or time is agreed to by Parent and the Company. The date upon which the Closing actually occurs is herein referred to as the “ Closing Date .” On the Closing Date, the parties hereto shall cause the Merger to be consummated by filing the Articles of Merger (or like instrument) in substantially the form attached hereto as Exhibit B (the “ Articles of Merger ”) with the Secretary of State of Nevada in accordance with the relevant provisions of applicable Law (the date and time of acceptance by the Secretary of State of the State of Nevada or such later date and time agreed to in writing by the parties being referred to herein as the “ Effective Time ”).

2.3 Effect of the Merger on Constituent Corporations . At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the NRS, this Agreement and the Articles of Merger. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of Merger Sub and the Company shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of Merger Sub and the Company shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

2.4 Articles of Incorporation and Bylaws of Surviving Corporation .

(a) At the Effective Time, the form of Articles of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall become the Articles of Incorporation of the Surviving Corporation until thereafter amended, as provided by applicable Law and such Articles of Incorporation and the Bylaws of the Surviving Corporation; provided, however, that Article I of the amended and restated Articles of Incorporation of the Surviving Corporation shall read in its entirety as follows: “The name of the Corporation is Petrosearch Energy Corporation”.

(b) The form of Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall become the Bylaws of the Surviving Corporation until thereafter amended as provided by such Bylaws, the Articles of Incorporation and applicable Law.

2.5 Directors and Officers of Surviving Corporation . The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation. The directors of the Company shall each resign effective immediately prior to the Effective Time. The officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, each to hold office in accordance with the Bylaws of the Surviving Corporation. The officers of the Company shall each resign effective immediately prior to the Effective Time.

2.6 Maximum Number of Shares of Parent Common Stock to be Issued; Contingent Cash Consideration; Fractional Shares; Effect on Outstanding Securities of the Company, Merger Sub . The consideration to be paid by Parent in connection with the Merger shall be the Aggregate Consideration. On the terms and subject to the conditions of this Agreement, as of the Effective Time, by virtue of the Merger and without any action on the part of Parent or Merger Sub, the Company or the holder of any shares of the Company Capital Stock or Company Warrants, the following shall occur:

(a) Conversion of Company Capital Stock and Contingent Cash Consideration.

(i)  Stock Consideration . At the Effective Time, each share of Company Capital Stock issued and outstanding immediately prior to the Effective Time (other than any shares of Company Capital Stock to be canceled pursuant to Section 2.6(c)) will be canceled and extinguished and be converted automatically into the right to receive that number of shares of Parent Common Stock equal to the Exchange Ratio. The “ Exchange Ratio ” shall be equal to the quotient of: (A) the Aggregate Stock Consideration (as defined below) or, if applicable, the Aggregate Stock Consideration as Adjusted for Parent Stock Price (as defined below), or, if applicable, the Aggregate Stock Consideration as Adjusted for Working Capital Shortfall (as defined below), divided by (B) the sum of (I) the issued and outstanding Company Common Stock as of March 30, 2009 (41,340,584 shares), (II) the issued and outstanding Series A Preferred Stock, on an as converted basis (31,974 shares), (III) the issued and outstanding Series B Preferred Stock, on an as converted basis (20,093 shares), and (D) shares of Company Common Stock issuable upon exercise of any Company Warrants outstanding as of the Closing Date (the “ Company Warrant Common Stock ”); provided, however , only the shares of Company Warrant Common Stock that exceed 750,000 shares of Company Common Stock as of the Closing Date shall be included in the calculation. For purposes of this Agreement, the “Aggregate Stock Consideration” means 1,792,741 shares of Parent Common Stock; provided, however , if the Parent Closing Stock Price is greater than $6.25, then the Aggregate Stock Consideration shall be adjusted to equal $11,000,000 divided by the Parent Closing Stock Price (the “ Aggregate Stock Consideration as Adjusted for Parent Stock Price ”). In no event shall the Aggregate Stock Consideration as Adjusted for Parent Stock Price be less than 1,100,000 shares of Parent Common Stock.

(ii)  Cash Consideration . At the Effective Time, if the Parent Closing Stock Price is below $4.75 per share, an aggregate cash payment, in addition to the Aggregate Stock Consideration payable pursuant to Section 2.6(a)(i), will be made to the holders of Company Common Stock receiving Parent Common Stock equal to (A) $4.75 minus the greater of (I) the Parent Closing Stock Price or (II) $4.00, multiplied (B) by the Aggregate Stock Consideration (the “ Aggregate Cash Consideration ”). If Parent is required to pay any Aggregate Cash Consideration, then each holder of Company Common Stock shall be entitled to receive a portion of the Aggregate Cash Consideration equal to (X) the number of shares of Parent Common Stock that the holder of Company Common Stock is entitled to receive under Section 2.6(a)(i), multiplied by (Y) $4.75 less the greater of (I) the Parent Closing Stock Price or (II) $4.00.

(iii)  Adjustment to Consideration for Final Working Capital Shortfall . In the event that there is a Final Working Capital Shortfall, an adjustment equal to the Final Working Capital Shortfall shall be made to the consideration set forth in this Section 2.6 as follows: (A) first as an offset to any Aggregate Cash Consideration set forth in Section 2.6(a)(ii); or (B) if there is no Aggregate Cash Consideration or the Final Working Capital Shortfall is greater than the Aggregate Cash Consideration , then the Aggregate Stock Consideration, or, if applicable, the Aggregate Stock Consideration as Adjusted for Parent Stock Price, shall be adjusted to equal (I) $11,000,000 less the Final Working Capital Shortfall, divided by (II) $11,000,000, and multiplied by (III) the Aggregate Stock Consideration, or if applicable, the Aggregate Stock Consideration as Adjusted for Parent Stock Price (the “ Aggregate Stock Consideration as Adjusted for Working Capital Shortfall ”).

(b)  Fractional Shares . No fractional shares of Parent Common Stock shall be issued pursuant to the Merger. In lieu of the issuance of any such fractional share of Parent Common Stock, cash adjustments will be paid to holders in respect of any fractional share of Parent Common Stock that would otherwise be issuable. The amount of such adjustment shall be the product of such fraction of a share of Parent Common Stock multiplied by the Parent Closing Stock Price (the “ Fractional Share Cash Amount ”). No fractional cent shall be payable to any holder of Company Capital Stock, and the cash payable to any such holder shall be rounded down to the nearest cent.

(c)  Cancellation of Parent-Owned and Company-Owned Stock . Each share of Company Capital Stock owned by Parent or the Company or any Subsidiary of Parent or the Company immediately prior to the Effective Time shall be automatically canceled and extinguished without any conversion thereof and without any further action on the part of Parent, Merger Sub or the Company.

(d)  Capital Stock of Merger Sub . Each share of Common Stock of Merger Sub, par value $0.10 per share, that is issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock, par value $0.001 per share of the Surviving Corporation. From and after the Effective Time, each share certificate of Merger Sub theretofore evidencing ownership of any such shares shall continue to evidence ownership of such shares of Common Stock of the Surviving Corporation.

(e)  Company Warrants . At the Effective Time, all Company Warrants that are outstanding as of the Effective Time shall be assumed by Parent (each such Company Warrant an “ Assumed Warrant ” and collectively the “ Assumed Warrants ”). Each Assumed Warrant will continue to have, and be subject to, the same terms and conditions of such Assumed Warrant immediately prior to the Effective Time (including, without limitation, any repurchase rights or vesting provisions and provisions regarding the acceleration of vesting on certain transactions), except that (i) each Assumed Warrant will be exercisable (or will become exercisable in accordance with its terms) for that number of whole shares of Parent Common Stock equal to the product of the number of shares of Company Common Stock that were issuable upon exercise of such Assumed Warrant immediately prior to the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest whole number of shares of Parent Common Stock and (ii) the per share exercise price for the shares of Parent Common Stock issuable upon exercise of such Assumed Warrant will be equal to the quotient determined by dividing the exercise price per share of Company Common Stock at which such Assumed Warrant was exercisable immediately prior to the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.

(f)  Additional Adjustments to Exchange Ratio . The Exchange Ratio shall be equitably adjusted to reflect fully the effect of any stock split, reverse split, stock combination, stock dividend (including any dividend or distribution of securities convertible into Parent Common Stock or Company Capital Stock), reorganization, reclassification, recapitalization or other like change with respect to Parent Common Stock or Company Capital Stock occurring after the date hereof and prior to the Effective Time.

2.7 Dissenting Shares . No stockholders of any Company Capital Stock shall have dissenters’ rights under the NRS (pursuant to the exemption set forth in Section 92A.390 of the NRS), and the Company shall not take any action that would allow the stockholders of any Company Capital Stock to have dissenters’ rights in connection with the Merger.

2.8 Exchange Procedures .

(a)  Parent Common Stock; Cash. On the Closing Date, Parent shall deposit with the Exchange Agent for exchange in accordance with this Article 2: (i) the Aggregate Stock Consideration, or if applicable, the Aggregate Stock Consideration as Adjusted for Parent Stock Price, or if applicable, Aggregate Stock Consideration as Adjusted for Working Capital Shortfall; (ii) the Aggregate Cash Consideration, if any; and (iii) the Aggregate Fractional Share Cash Amount.

(b)  Exchange Procedures . As soon as practicable after the Effective Time, the Surviving Corporation shall cause to be mailed to each holder of record of a certificate or certificates who immediately prior to the Effective Time represented outstanding shares of Company Capital Stock (the “ Certificates ”) outstanding shares of Company Capital Stock represented by book-entry (“ Book-Entry Shares ”) and whose shares were converted into shares of Parent Common Stock pursuant to Section 2.6, (i) a letter of transmittal in customary form (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent or, in the case of Book-Entry Shares, upon adherence to the procedures set forth therein, which shall be in such form and have such other provisions as Parent may reasonably specify); and (ii) instructions for use in effecting the surrender of the Certificates or, in the case of Book-Entry Shares, the surrender of such shares, in exchange for certificates or Book-Entry Shares representing shares of Parent Common Stock and the right to receive any Aggregate Cash Consideration plus any cash for fractional shares as provided herein. Upon surrender of a Certificate or Book-Entry Shares for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holder of such Certificate or Book-Entry Shares shall be entitled to receive in exchange therefor a certificate or Book-Entry Shares representing the number of whole shares of Parent Common Stock and any respective pro rata portion of the Aggregate Cash Consideration, if applicable, plus any respective Fractional Share Cash Amount pursuant to Section 2.6 to which such holder is entitled pursuant to Section 2.6, and the Certificate or Book-Entry Shares so surrendered shall be canceled. Until surrendered, each outstanding Certificate and each outstanding Book-Entry Share that, prior to the Effective Time, represented shares of Company Capital Stock will be deemed from and after the Effective Time, for all corporate purposes, other than the payment of dividends, to evidence the ownership of the amount of cash and the number of full shares of Parent Common Stock into which such shares of Company Capital Stock shall have been so converted.

(c)  Distributions With Respect to Unexchanged Shares of Company Capital Stock . No dividends or other distributions with respect to Parent Common Stock declared or made after the Effective Time and with a record date after the Effective Time will be paid to the holder of any unsurrendered Certificate or Book-Entry Share with respect to the shares of Parent Common Stock represented thereby until the holder of record of such Certificate or such Book-Entry Share shall surrender such Certificate or, if a Book-Entry Share, completed the letter of transmittal to the Exchange Agent in accordance with Section 2.8(b). Subject to applicable Law, following surrender of any such Certificate or Book-Entry Share, there shall be paid to the record holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore payable with respect to such whole shares of Parent Common Stock.

(d)  Transfers of Ownership . If any certificate for shares of Parent Common Stock is to be issued pursuant to the Merger in a name other than that in which the Certificate surrendered in exchange therefor is registered, it will be a condition of the issuance thereof that the Certificate so surrendered will be properly endorsed and otherwise in proper form for transfer and that the Person requesting such exchange will have paid to Parent or any agent designated by it any transfer or other Taxes required by reason of the issuance of a certificate for shares of Parent Common Stock in any name other than that of the registered holder of the Certificate surrendered, or established to the satisfaction of Parent or any agent designated by it that such Tax has been paid or is not payable.

2.9 No Further Ownership Rights in Company Capital Stock . All shares of Parent Common Stock issued upon the surrender for exchange of shares of Company Capital Stock in accordance with the terms hereof (including any cash paid in respect thereof) shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Company Capital Stock, and there shall be no further registration of transfers on the records of the Company of shares of Company Capital Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates or Book-Entry Shares are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article 2.

2.10 Lost, Stolen or Destroyed Certificates . In the event any Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall issue certificates representing such shares of Parent Common Stock in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof; provided, however, that Parent or the Exchange Agent may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to provide an indemnity or deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent or the Exchange Agent with respect to the Certificates alleged to have been lost, stolen or destroyed.

2.11 Taking of Necessary Action; Further Action . If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company, the officers and directors of the Surviving Corporation shall be fully authorized to take, and shall take all such lawful and necessary action.

ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY

The Company hereby represents and warrants to Parent and Merger Sub that, as of the date of this Agreement, except as specifically set forth in the disclosure schedule attached as Schedule 1 hereto (the “ Company Disclosure Schedule ”):

3.1 Organization, Standing and Power . Each of the Target Companies is a corporation duly organized, validly existing and in good standing under the Laws of its state of incorporation and has all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now conducted and as proposed to be conducted. Each of the Target Companies is qualified to do business as a foreign corporation, and is in good standing, under the Laws of all jurisdictions where the nature of its business requires such qualification and where the failure to be so qualified or in good standing would have a Material Adverse Effect on the Company. The Company has made available to Parent complete and correct copies of each of the Target Companies’ (i) Articles of Incorporation and Bylaws, which Articles of Incorporation and Bylaws are in full force and effect and have not been amended, corrected, restated or superseded in any way; (ii) minutes of all directors’ and stockholders’ meetings, all of which are complete and accurate as of the date hereof; (iii) stock certificate books and all other records of the Target Companies, which collectively correctly set forth the record ownership of all outstanding shares of capital stock and all rights to purchase capital stock of the Target Companies, as applicable; and (iv) form of stock certificates, plans and agreements and rights to purchase shares of capital stock of any Target Company. Each of the Target Companies is not in violation, and has not taken any action in violation, of any provisions of its Articles of Incorporation or Bylaws. Each of the Target Companies is in possession of all Approvals required by applicable Law to be obtained and held by it that are necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted.

3.2 Capital Structure .

(a) The authorized and issued capital stock of the Company consists of:

(i)  Preferred Stock . 20,000,000 shares of preferred stock, $1.00 par value, 1,000,000 of which have been designated Series A 8% Convertible Preferred Stock (the “ Company Series A Preferred Stock ”), and 100,000 of which have been designated as Series B Convertible Preferred Stock (the “ Company Series B Preferred Stock ”, and together with the Company Series A Preferred Stock, the “ Company Preferred Stock ”). There are issued and outstanding 207,833 shares of Company Series A Preferred Stock and 43,000 shares of Company Series B Preferred Stock. Each outstanding share of Company Series A Preferred Stock is convertible into 0.1538461 shares of Company Common Stock, and each outstanding share of Company Series B Preferred Stock is convertible into 0.4672897 shares of Company Common Stock.

(ii)  Common Stock . 100,000,000 shares of Company Common Stock, $0.001 par value (the “ Company Common Stock ”), of which, at the date hereof, 41,340,584 shares are issued and outstanding.

(iii)  Options . Except for the Company Warrants, there are no outstanding Options to acquire shares of any Company Capital Stock.

(iv)  Warrants . There are Company Warrants issued and outstanding to acquire 777,380 shares of Company Common Stock. There are no other outstanding Company Warrants to acquire any other Company Capital Stock.

(v)  Other Rights . There are no other outstanding shares of Company Capital Stock or any other right to receive or purchase equity securities or securities convertible, exercisable or exchangeable for equity securities of the Company.

(b) All outstanding shares of Company Capital Stock are, and any shares of Company Capital Stock issuable upon the exercise of any Company Warrants (subject to receipt of the exercise price as provided therein) will be, validly issued, fully paid and nonassessable and not subject to preemptive rights created by statute, the Company’s Articles of Incorporation or Bylaws or any agreement to which the Company is a party or by which the Company may be bound. All outstanding Company securities have been issued in compliance with applicable federal and state securities Laws. Other than as described herein, there are no options, warrants, calls, conversion rights, commitments or agreements of any character to which the Company is a party or by which the Company may be bound that do or may obligate the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of the Company’s Capital Stock or that do or may obligate the Company to grant, extend or enter into any such option, warrant, call, conversion right, commitment or agreement.

(c) Section 3.2(c) of the Company Disclosure Schedule contains a complete and accurate list of the holders of record of outstanding Company Series A Preferred Stock, Company Series B Preferred Stock, Company Warrants, and the number of such securities held by each such holder, including the addresses of such holders. Such Section 3.2(c) of the Company Disclosure Schedule identifies the vesting schedule, applicable legends, exercise price and repurchase rights or other risks of forfeiture of any outstanding security listed therein.

(d) All Company Warrants have been issued in accordance with all federal and state securities Laws. The Company does not have in effect any stock appreciation rights plan and no stock appreciation rights are outstanding. None of the outstanding Company Warrants permit any accelerated vesting or exercisability of those warrants or the shares of Company Common Stock subject to those warrants by reason of the Merger or any other transactions contemplated by this Agreement, and the terms of the outstanding agreements for the Company Warrants each permit the Parent’s assumption of those warrants as warrants to purchase Parent Common Stock as provided in Section 2.6(e) of this Agreement, without the consent or approval of the holders of those warrants, the Company’s stockholders, or otherwise, and without any accelerated vesting of those Company Warrants or the underlying shares. True and complete copies of all agreements and instruments relating to the Company Warrants have been made available to Parent, and such agreements and instruments have not been amended, modified or supplemented, and there are no agreements to amend, modify or supplement such agreements or instruments in any case from the form made available to Parent. No unvested shares of Company Capital Stock shall vest on an accelerated basis by reason of the Merger or any transactions contemplated by this Agreement.

(e) Except for any restrictions imposed by applicable state and federal securities Laws or set forth in Section 3.2(e) of the Company Disclosure Schedule, there is no right of first refusal, co-sale right, right of participation, right of first offer, registration right option or other restriction on transfer applicable to any shares of Company Capital Stock.

(f) The Company is not a party or subject to any agreement or understanding, and, to the Company’s knowledge, there is no agreement or understanding between or among any Persons that affects or relates to the voting or giving of written consent with respect to any outstanding security of the Company.

(g) The holders of Company Capital Stock shall not have any dissenters’ rights in connection with the Merger under the NRS. Neither the Company nor any Company Representative has taken, or will take, any action that would allow any holder of Company Capital Stock to be entitled to dissenters’ rights under the NRS or otherwise in connection with the Merger.

3.3 Subsidiaries .

(a) The Company has no Subsidiaries except for the corporations and entities identified in Section 3.3(a) of the Company Disclosure Schedule.

(b) Neither the Company nor any of its Subsidiaries has agreed nor is obligated to make nor is bound by any written, oral or other agreement, contract, subcontract, lease, binding understanding, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan, commitment or undertaking of any nature, as of the date hereof or as may hereafter be in effect under which it may become obligated to make, any future investment in or capital contribution to any other Person. Except as set forth in Section 3.3(b) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries directly or indirectly owns any equity or similar interest in or any interest convertible into, or exchangeable or exercisable for, any equity or similar interest in, any Person.

3.4 Authority .

(a) Subject only to the requisite approval of the Merger and this Agreement by the stockholders of the Company, the Company has all requisite corporate power and authority to enter into this Agreement, to execute, deliver and perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement, the performance by the Company of its obligations hereunder and the consummation of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate action on the part of the Company’s Board of Directors, and no other action on the part of the Company’s Board of Directors is required to authorize the execution, delivery and performance of this Agreement and the consummation by the Company of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company, and assuming the due authorization, execution and delivery hereof by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, or other similar Laws affecting the enforcement of creditors’ rights generally, and except that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefor may be brought.

(b) The execution, delivery and performance of this Agreement does not, and the performance and consummation of the transactions contemplated hereby will not, conflict with or result in any material violation of any Law applicable to the Company, its Subsidiaries, its Assets and Properties or its Subsidiaries’ Assets and Properties, or conflict with or result in any conflict with, breach or violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation, forfeiture or acceleration of any obligation or the loss of a material benefit under, or result in the creation of a Lien on any of the Assets and Properties of the Company or its Subsidiaries pursuant to (i) any provision of the Articles of Incorporation or Bylaws of the Company or its Subsidiaries; or (ii) any Company Contract to which the Company or any of the Company’s Subsidiaries is a party or by which the Company, its Subsidiaries, any of its Assets and Properties or any of its Subsidiaries’ Assets and Properties may be bound or affected.

(c) No Approval is required to be obtained by the Company in connection with the execution, delivery and performance of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, except the requisite approval of the Merger and this Agreement by the stockholders of the Company and the Approvals set forth in Section 3.4(c) of the Company Disclosure Schedule.

3.5 SEC Documents; Financial Statements; Books and Records . The Company has filed with the SEC all forms and other documents (including exhibits and other information incorporated therein) required to be filed by it since January 1, 2007 (the “ Company SEC Documents ”). As of their respective dates, the Company SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act and SOX, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Documents, and none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company Financial Statements were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present, and the financial statements to be filed by the Company with the SEC after the date of this Agreement will fairly present, in accordance with applicable requirements of GAAP (in the case of the unaudited statements, subject to normal, recurring adjustments), the consolidated financial position of the Target Companies as of their respective dates and the consolidated results of operations, the consolidated cash flows and consolidated changes in stockholders’ equity of the Target Companies for the periods presented therein; each of such statements (including the related notes, where applicable) complies, and the financial statements to be filed by the Company with the SEC after the date of this Agreement will comply, with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and each of such statements (including the related notes, where applicable) has been, and the financial statements to be filed by the Company with the SEC after the date of this Agreement will be, prepared in accordance with GAAP consistently applied during the periods involved, except as indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q. The books and records of the Target Companies have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Ham, Langston & Brezina, L.L.P is an independent public accounting firm with respect to the Company and has not resigned or been dismissed as independent public accountants of the Company.

3.6 Payables; Receivables .

(a) Section 3.6(a) of the Company Disclosure Schedule sets forth an aging of accounts payable of the Company in the aggregate and by creditor (for the periods 0-30 days, 30-90 days and greater than 90 days, if applicable) as of February 28, 2009.

(b) Section 3.6 (b) of the Company Disclosure Schedule sets forth an aging of accounts receivable of the Company in the aggregate and by debtor (for the periods 0-30 days, 30-90 days and greater than 90 days as of February 28, 2009); provided however , that disclosure of debts owed by any single debtor that, in the aggregate, do not exceed $1,000 need not be included. All accounts and notes receivable (the “ Accounts ”) reflected on the Company Financial Statements are, taken as a whole, (i) valid, genuine and existing; (ii) subject to no defenses, setoffs or counterclaims; and (iii) current (not more than ninety (90) days past due) and collectable in the ordinary course of business, net of reserves less any applicable trade discounts. Except for Permitted Liens or as set forth in Section 3.6(b) of the Company Disclosure Schedule, no Person has any Lien on such Accounts or any part thereof; no agreement for deduction, free goods, discount or other deferred price or quantity adjustment has been made with respect to any of such Accounts; and to the Company’s knowledge, no customer of the Company with an Account balance exceeding $10,000 is involved in voluntary or involuntary bankruptcy proceedings or is otherwise insolvent or has notified the Company that such customer will not pay its Account.

3.7 Compliance with Laws . Each of the Target Companies is in compliance and has conducted its business and operations, with respect to the Oil and Gas Interests for which any of the Target Companies is the operator (the “ Operated Oil and Gas Interests ”), so as to comply with all applicable Laws. Each of the Target Companies is in compliance and has conducted its business and operations, other than with respect to the Operated Oil and Gas Interests, so as to comply with all applicable Laws, except where the failure to have so complied or conducted such business would not have a Material Adverse Effect on the Company. There are no Orders (whether rendered by a court or administrative agency or by arbitration) and, to the Company’s knowledge, no basis currently exists for any Orders against the Company, its Subsidiaries, any of its Assets and Properties or any of its Subsidiaries’ Assets and Properties, and none are pending or, to the knowledge of the Company, threatened. Neither the Company nor any of its Subsidiaries has received any written or oral notice from any Governmental Entity of any violation of Laws that has not been resolved. Each of the Target Companies has all permits, licenses, orders, authorizations, registrations,

concessions, certificates, approvals and other instruments of any Governmental Entity (the “ Government Licenses ”) (each of which is in full force and effect) necessary for the conduct of its Operated Oil and Gas Interests, and each of the Target Companies is in compliance with the terms, condition, limitations, restrictions, standards, prohibitions, requirements and obligations of such Government Licenses. Each of the Target Companies has all Government Licenses (each of which is in full force and effect) (the “ Remaining Government Licenses ”) necessary for the conduct of its business, not including the Operated Oil and Gas Interests, except where the failure to have, or to have maintained in full force and effect, any such Remaining Governmental License would not have a Material Adverse Effect on the Company, and each of the Target Companies is in compliance with the terms, conditions, limitations, restrictions, standards, prohibitions, requirements and obligations of such Remaining Government Licenses, except where the failure to be in compliance would not have a Material Adverse Effect on the Company. Each of the Target Companies has made all filings and registrations and the like necessary or required by Law to be filed by such Target Company to conduct its Operated Oil and Gas Interests. Each of the Target Companies has made all filings and registrations and the like necessary or required by Law to be filed by such Target Company to conduct its business other than its Operated Oil and Gas Interests, except where the failure to have so filed would not have a Material Adverse Effect on the Company. There is not now pending, or, to the Company’s knowledge, is there threatened, any Action or Proceeding against any Target Company before any Governmental Entity with respect to the Government Licenses for the Operated Oil and Gas Interests, nor is there any issued or outstanding written or oral notice, order or complaint with respect to the violation by any Target Company of the terms of any such Government License or any rule or regulation applicable thereto. There is not now pending, or, to the Company’s knowledge, is there threatened, any Action or Proceeding against any Target Company before any Governmental Entity with respect to the Remaining Government Licenses, nor is there any issued or outstanding written or oral notice, order or complaint with respect to the violation by any Target Company of the terms of any Remaining Government License or any rule or regulation applicable thereto, which if resolved adversely to any Target Company would have a Material Adverse Effect on the Company.

3.8 No Defaults . Neither the Company nor any of its Subsidiaries is, and has not received oral or written notice that it is or would be with the passage of time (x) in violation of any provision of its Articles of Incorporation