EXHIBIT 10.1
 
 
MEMBERSHIP INTEREST PURCHASE AGREEMENT
 
DATED AS OF MAY 31, 2011
 
BY AND BETWEEN
 
DIGITAL VALLEYS CORP. (THE “BUYER”)
 
AND
 
HIGH PLAINS OIL, LLC (THE “SELLER”)
 
RELATED TO
 
ALL OF THE MEMBERSHIP INTERESTS
 
OF
 
JHE HOLDINGS, LLC (THE “COMPANY”)
 
 
 
 
 

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TABLE OF CONTENTS
 
 
 

   Page  ARTICLE ONE -  DEFINITIONS    2  1.1.    Definitions of Certain Terms 
 2  1.2     Number and Gender of Words   10  1.3     Interpretation and
Construction   11        ARTICLE TWO - SALE AND PURCHASE OF THE SELLER
INTEREST    11  2.1   
Agreement of Sale and Purchase
 11   2.2    Purchase Consideration  11   2.3    Amended and Restated Pledge
Agreement   12   2.4    Registration and Resale Restrictions  13   2.5    Second
Amendment to LLC Agreement  13   2.6    Closing  14       ARTICLE THREE -
REPRESENTATIONS AND WARRANTIES OF THE SELLER    15   3.1    Organization,
Existence, and Good Standing  15    3.2    Authority and Authorization  15
  3.3    No Conflicts  16    3.4    Title to the Seller Interest   16    3.5   
Contracts Related to the Company Oil and Gas Properties  16   3.6    Litigation 
 16    3.7    The Company  16    3.8    Misleading Statements   18    3.9   
Brokers, Finders, etc  19        ARTICLE FOUR - REPRESENTATIONS AND WARRANTIES
OF THE BUYER   19    4.1    Organization, Existence, and Good Standing  19
   4.2    Authority for Agreements   19     4.3    No Conflicts  19     4.4   
Litigation   20     4.5    Knowledge and Access to Information   20     4.6   
Investment Intent  20     4.7    Consideration Shares   20     4.8    Brokers,
Finders, etc.   20        ARTICLE FIVE - COVENANTS OF THE SELLER   21   5.1   
No Solicitation   21    5.2    Required Consents   21    5.3    Notification 
 21    5.4    Reasonable Efforts  21    5.5    Delivery of Documents and Other
Papers; Proprietary Data, Record Retention.  21    5.6    Further Assurances 
 22    5.7    Nondisclosure of Confidential Information   23     5.8    Buyer
First Right  23    5.9    Eagle Ford Lease Conveyance   23

 
 
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   5.10    Title Opinion Bring-Down  24      

 ARTICLE SIX - COVENANTS OF THE BUYER   24    6.1    Governmental Approvals   24
    6.2    Access to Tax Information  24     6.3    Confidentiality  24
    6.4    Reasonable Efforts   25     6.5    Perfection of the Security
Interest Created by the Security Agreement   25     6.6    Recording of Retained
Interests  25        ARTICLE SEVEN INDEMNIFICATION    25     7.1    Survival  25
     7.2    Indemnification by the Seller   25      7.3    Indemnification by
the Buyer  26      7.4    Limitation of Damages; Materiality  26      7.5   
Conditions of Indemnification   28      7.6    Payment of Indemnity   29
     7.7    Expiration of Indemnification Rights  29      7.8    Indemnification
Rights Exclusive   30        ARTICLE EIGHT - CONDITIONS PRECEDENT   30
     8.1    Conditions to Obligations of Each Party  30       8.2    Conditions
to Obligations of the Buyer  30       8.3    Conditions to Obligations of the
Seller   31        ARTICLE NINE TERMINATION   32       9.1    Termination   32
      9.2    Effect of Termination   32       9.3    Notice of Termination  33  
     ARTICLE TEN MISCELLANEOUS   33       10.1    Expenses  33        10.2   
Severability   33        10.3    Notices  33        10.4    Headings  34
        10.5    Entire Agreement  34          10.6    Counterparts; Signature
Pages  34          10.7    Governing Law; Venue  35          10.8    Binding
Effect  35          10.9    Assignment  35          10.10    No Third Party
Beneficiaries  35          10.11    Amendment; Waivers  35          10.12   
Time of the Essence  35          10.13    Negotiated Transaction   36
         10.14    Attorney’s Fees  36                  

 
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Exhibits:
  Exhibit A Assignment Exhibit B Assumption Exhibit C Novation and Assignmentt
Exhibit D Amended and Restated Pledge Agreement Exhibit E Seller Closing
Certificate Exhibit F Buyer Closing Certificate Exhibit G Cross-Receipt
Exhibit H Second Amendment to LLC Agreement Exhibit I  Vested Assets Assignment
Exhibit J Pimuro Payment Agreement    

 

 

 Schedules:    1 Company Oil and Gas Properties  2 Working Interest Company Oil
and Gas Properti

 
 
 
 
 
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
 
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT is entered into effective as of this
31st day of May, 2011 (the “Effective Date”), by and between Digital Valleys
Corp., a Nevada corporation (the “Buyer”), High Plains Oil, LLC, a Nevada
limited liability company (the “Seller”), and JHE Holdings, LLC, a Texas limited
liability company (the “Company”).  The Buyer, the Seller and the Company are
sometimes referred to in this Agreement individually as a “Party” and
collectively as the “Parties.”
 
RECITALS:
 
A.           The Seller is the owner of 100% of the Company Interests in the
Company.
 
B.           The Company owns the royalty, leasehold, working, operating,
carried, net revenue, net profit, reversionary and other mineral Rights,
interests and Contract Rights,  described in Schedule 1 (collectively, the
“Company Oil and Gas Properties”).
 
C.           The Seller acquired the Seller Interest from James H. Edsel, Nancy
Edsel, and James Edsel, Jr., residents of Travis County, Texas (collectively,
the “Edsels”) in consideration for (i) $500,000 in cash, (ii) the promissory
note, dated January 1, 2011, in the principal amount of $7,500,000 issued by the
Seller and payable to the order of the Edsels (the “Promissory Note”), (iii) the
grant of a pledge of the Seller Interest and security interests under the
Membership Interest Pledge and Security Agreement dated as of January 1, 2011 by
and among the Seller and the Edsels (the “Pledge Agreement”), and (iv) a
guarantee of the Note obligation by the Company under the Guaranty Agreement
dated as of January 1, 2011 by and between the Company and the Edsels (the
“Guaranty Agreement”), and secured by the security interest in the assets of the
Company granted by the Company to the Edsels pursuant to that certain Security
Agreement dated as of January 1, 2011 (the “Company Security Agreement”), by and
between the Company and the Edsels.
 
D.           The Buyer desires to purchase the Seller Interest from the Seller
upon the terms and subject to the conditions contained in this Agreement; and
the Seller desires to sell the Seller Interest to the Buyer upon such terms and
subject to such conditions.
 
E.           The Seller desires to retain a 10% contractual profits interest in
the Company in the form of a right to 10% the net revenue, payments, royalities
and other distributions received by the Company from the Company Oil and Gas
Properties, as further defined in the Second Amendment to LLC Agreement (the
“Retained Profits Interest”), which will be converted into the Seller Retained
Interest (as defined herein) upon full and complete payment and satisfaction of
the obligations due under the Promissory Note and Amended and Restated Pledge
Agreement (as defined herein).
 
AGREEMENT
 
THEREFORE, in consideration of the mutual promises, covenants, representations,
and warranties contained in, and of the mutual benefits to be derived from, this
Agreement, the Buyer and the Seller agree as follows:
 
 
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ARTICLE ONE

 
DEFINITIONS
 
1.1.          Definitions of Certain Terms .  The terms defined in this
Section 1.1, whenever used in this Agreement, will have the respective meanings
indicated below for all purposes of this Agreement, unless otherwise
indicated.  All references herein to an Article or a Section are to an Article
or a Section of this Agreement, and all references to an Exhibit or a Schedule
are to an Exhibit or a Schedule attached to this Agreement, unless otherwise
indicated.
 
Affiliate means, when used with reference to a specified Person, (a) any Person
directly or indirectly owning, controlling, or holding the power to vote 50% or
more of the outstanding voting securities of the specified Person, (b) any
Person 50% or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held with the power to vote by the specified
Person, (c) any Person directly or indirectly controlling, controlled by, or
under common control with the specified Person, (d) if the specified Person is a
corporation, any officer or director of the specified Person or of any
corporation (or other entity) directly or indirectly controlling that specified
Person, (e) if the specified Person is a limited liability company, any officer,
manager, or managing member of the specified Person or of any limited liability
company (or other entity) directly or indirectly controlling that specified
Person, (f) if the specified Person is a partnership, any general partner of
such partnership, or if the general partner is a partnership, the general
partners of that partnership, and (g) if the specified Person is an individual,
such individual’s spouse and natural and adoptive lineal descendants, and their
respective spouses, parents, brothers, and sisters, and trusts and family
partnerships (or other entities) established for the benefit of any such Person.
 
Agreement means this Membership Interest Purchase Agreement, including all
Exhibits and Schedules, as it may be amended, modified, or supplemented from
time to time.
 
Amended and Restated Pledge Agreement has the meaning given to such term in
Section 2.3.
 
Applicable Period means the one-year period following the Closing Date.
 
Assignment means an assignment in the form of Exhibit A, properly completed,
signed, dated, and delivered by the Seller at the Closing, relating to the
assignment of the Seller Interest by the Seller to the Buyer.
 
Assumption means an assumption in the form of Exhibit B, properly completed,
signed, dated, and delivered by the Seller at the Closing, relating to the
assumption by the Buyer of all of the Seller’s obligations and liabilities under
the Promissory Note and the Security Agreement.
 
Breach means, as to any representation, warranty, covenant, obligation, or other
provision of this Agreement or any other Transaction Document, the occurrence of
any material inaccuracy in, material breach of, or material failure to comply
with, such representation, warranty, covenant, obligation, or other
provision.  To the extent this Agreement or another Transaction Document
provides for notice and/or the Right to cure the breach of or failure to
 
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comply with a covenant or obligation of a Party herein or therein, such breach
or failure will not constitute a “Breach” for purposes of this Agreement until
such notice has been given, the period to cure has lapsed, and such breach or
failure has not been timely cured.
 
Business means the business and operations of the Company relating to the
ownership, development, management, and operation of the Company Oil and Gas
Properties, as provided in the Company Agreement, and includes the condition
(financial and other), properties and assets, and prospects of the Company.
 
Business Day means any day other than a Saturday, a Sunday, or any other day on
which banking institutions in Nevada are authorized or obligated by Law to be
closed.
 
Buyer has the meaning given to such term in the introductory paragraph of this
Agreement.
 
Buyer Closing Certificate means a closing certificate in the form of Exhibit F,
properly completed, signed, dated, and delivered by the Buyer at the Closing.
 
Buyer First Right has the meaning given to such term in Section 5.8.
 
Buyer Indemnified Party has the meaning given to such term in Section 7.2.
 
Claim Notice has the meaning given to such term in Section 7.5(a).
 
Closing has the meaning given to such term in Section 2.6.
 
Closing Certificate means a Buyer Closing Certificate or a Seller Closing
Certificate.
 
Closing Date has the meaning given to such term in Section 2.6.
 
Company has the meaning given to such term in Recital A.
 
Company Agreement means the Regulations of JHE Holdings, LLC dated as of
March 1, 2004, as amended, as it may further be amended, modified, or
supplemented from time to time.  The Company Agreement has been adopted by the
Managers and Members of the Company as the company agreement of the Company
required by the Company Law.
 
Company Interest means a membership interest in the Company, including in
respect of such membership interest the right to receive distributions of cash
or property and the right to vote on matters submitted for a vote to the Members
of the Company.
 
Company Law means the Texas Limited Liability Company Act and its successor, the
Texas Business Organizations Code, as applicable, or any successor Law, and
regulations and rules issued pursuant thereto.
 
Company Oil and Gas Properties has the meaning set forth in Recital B.
 
Company Security Agreement has the meaning set forth in Recital C.
 
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Confidential Information means any information of or relating to the Company,
either Party, or an Affiliate of the Company or either Party, other than Public
Information, which is deemed to be confidential by the Company, either Party, or
any Affiliate of the Company or either Party, including, without limitation,
information coming within any one or more of the following
categories:  (a) information concerning (i) operations, (ii) finances,
(iii) business opportunities, (iv) business methods and concepts, and
(v) business plans; (b) information concerning (i) customers and prospective
customers, including customer names, customer lists, and the terms of contracts
with customers, and (ii) suppliers, including the terms of contracts with
suppliers; (c) information concerning (i) products and services, (ii) marketing
and sales plans, assessments, evaluations, reports, and presentation materials,
and (iii) Proprietary Rights of the Company, either Party, or any Affiliate of
the Company or either Party, and other concepts or ideas related to the business
of the Company, either Party, or any Affiliate of the Company or either Party,
that are proprietary and unique; (d) the results of any tests and/or studies
regarding the business of the Company, either Party, or any Affiliate of the
Company or either Party, and/or any reports from any third-Person contractors or
consultants engaged to analyze and/or interpret research data in connection with
the business of the Company, either Party, or any Affiliate of the Company or
either Party; (e) information concerning internal policies and procedures of the
Company, either Party, or any Affiliate of the Company or either Party,
including personnel policies and procedures; (f) financial statements, reports,
manuals, notebooks, letters (and other correspondence, including electronic
mail), and other written material pertaining to the Company, either Party, or
any Affiliate of the Company or either Party pertaining to the business of the
Company, either Party, or any Affiliate of the Company or either Party; and
(g) information furnished to the Company, either Party, or any Affiliate of the
Company or either Party, by a customer, a prospective customer, or a
third-Person that is not Public Information.
 
Consent means any consent, approval, ratification, waiver, or other
authorization, including the Edsel Consent and any Governmental Approval.
 
Contract means any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
 
Cross-Receipt means a cross-receipt in the form of Exhibit G, properly
completed, signed, dated, and delivered by the Parties at the Closing.
 
Current Financials means (a) the unaudited Financial Statements of the Company
for the fiscal years ended December 31, 2009, and December 31, 2010, and (b) the
unaudited Financial Statements of the Company for the one-month period ended
April 30, 2011.
 
Damages means all losses, claims, obligations, demands, assessments, penalties,
fines, forfeitures, liabilities, costs, damages (but not including incidental
and consequential damages), and reasonable attorneys’ fees and expenses, whether
or not involving a third-Person claim, arising, directly or indirectly, from,
asserted against or incurred by reason of, resulting in any manner from, or
relating in any manner to, the matters described in Section 7.2(a)-(c) or
Section 7.3(a)-(c), respectively.
 
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Debt of any Person means, from time to time, and without duplication, all
indebtedness, liabilities, and obligations of such Person, whether or not
considered as liabilities according to GAAP, and whether matured or unmatured,
direct or indirect, or absolute, fixed, or contingent.
 
Debtor Relief Law means the Bankruptcy Code of the United States and any other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, fraudulent transfer or conveyance,
suspension of payments, or similar Law from time to time in effect affecting the
Rights of creditors generally.
 
Documents and Other Papers means and includes all existing documents,
agreements, instruments, certificates, writings, notices, Consents, affidavits,
letters, facsimiles, telegrams, telexes, statements, files, computer disks,
microfiches, or other documents in electronic format (including electronic
mail), schedules, exhibits, or other papers or records.
 
Eagle Ford Leases means one or more leases, royalty, leasehold, working,
operating, carried, net revenue, net profit, reversionary and other mineral
Rights, interests and Contract Rights, held or acquired by the Seller, Jeff
Johnson or any of their affilates in the Eagle Ford area of South Texas.
 
Edsels has the meaning set forth in Recital C.
 
Edsel Consent means the consent of the Edsels to the Transaction (contained in
the Novation and Assignment), consenting to the assignment by the Seller to the
Buyer of the Seller Interest, the assumption by the Buyer of all of the Seller’s
obligations and liabilities under the Promissory Note effected by the Novation
and Assignment, the consent to the Retained Profits Interests, the consent to
the assumption of obligations under the Pledge Agreement, the execution of the
Amended and Restated Pledge Agreement, and the consent to the in the Second
Amendment to LLC Agreement.
 
Effective Date has the meaning given to such term in the introductory paragraph
of this Agreement.
 
Financial Statement means a balance sheet, profit and loss statement,
reconciliation of capital and surplus, and statement of cash flow.
 
Fundamental Representations means the representations of the Parties made in
Sections 3.1, 3.2, 3.3, 3.4, 4.1, 4.2, and 4.3.
 
GAAP means generally accepted accounting principles of the Accounting Principles
Board of the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board that are applicable as of the Effective
Date.
 
Governmental Approval means an approval, authorization, Consent, permit,
License, or exemption of, registration or filing with, or report or notice to,
any Governmental Authority.
 
 
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Governmental Authority means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government, including, without limitation, any government authority, agency,
department, board, commission, or instrumentality of any of the foregoing, and
any tribunal or arbitrator of competent jurisdiction.
 
Guaranty Agreement has the meaning set forth in Recital C.
 
Inchoate Liens means (a) Liens for Taxes not yet due and payable, (b) mechanic’s
Liens and materialmen’s Liens for services and materials for which payments are
not yet due or that are being contested in good faith by appropriate
proceedings, and (c) landlord’s Liens for rental payments not yet due and
payable.
 
Indemnified Parties means, collectively, the Buyer Indemnified Parties and the
Seller Indemnified Parties.
 
Indemnifying Party means, for purposes of Section 7.2, the Seller, and for
purposes of Section 7.3, the Buyer.
 
IRC means the Internal Revenue Code, as amended, or any successor Law, and
regulations and rules issued by the IRS pursuant to the Internal Revenue Code or
any successor Law.
 
IRS means the United States Internal Revenue Service and any successor agency.
 
June Distribution has the meaning given to such term in Section 2.2(f).
 
Knowledge of a particular fact or matter means, as to any Person, that such
Person has actual knowledge of such fact or other matter.  As to any Person
other than an individual, such Person will be deemed to have Knowledge of any
fact or matter of which an individual who is serving, or who at any time has
served, as a director, manager, partner, officer, executor, or trustee (or in
any similar capacity) has, or at any time had, Knowledge.
 
Law means any applicable statute, law, ordinance, rule, regulation, Order, writ,
injunction, decree, judgment, or opinion of any Governmental Authority.
 
License means any license, approval, certificate, permit, franchise, Consent,
concession, grant, or authorization granted by any Person, including any
Governmental Authority.
 
Lien means any lien, mortgage, pledge, security interest, encumbrance, adverse
claim, title defect, title retention agreement, voting trust agreement, property
settlement or marital dissolution agreement, preemptive right, right of first
refusal, or other interest, equity, option, restriction, or charge of any kind.
 
Litigation means any action, proceeding, claim, lawsuit, or investigation
conducted or threatened by or before any Governmental Authority.
 
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Manager means, at any time, a manager of the Company.
 
Material Adverse Effect means (a) a material adverse effect upon the validity,
performance, or enforceability of any of the terms of this Agreement or any
other Transaction Document, or (b) an event or circumstance that alone, or when
taken together with other events or circumstances, could reasonably be expected
to result in a material loss to the Business (or, for purposes of Section 7.5,
the business of an Indemnified Party), or that would have, or might reasonably
be expected to have, a material adverse effect on the Business (or, for purposes
of Section 7.5, the business of an Indemnified Party), or that would constitute
a criminal violation of Law.
 
Member means, at any time, a member of the Company, but only for so long as such
member remains a member in accordance with the Organizational Documents of the
Company and the Company Law.
 
Notice Period has the meaning given to such term in Section 7.5(a).
 
Novation and Assignment means the assignment and novation agreement, in the form
attached hereto as Exhibit C, under which, among other things, the Buyer is
substituted for the Seller as the maker under the Promissory Note and Buyer
assumes the obligations of Seller under the Pledge Agreement and the payment of
the June 1, 2011 installment payment obligation under the Promissory Note shall
be extended to the Closing Date, but no later than June 10, 2011.
 
Offered Interest has the meaning given to such term in Section 5.8.
 
Order means any order, award, decision, opinion, decree, injunction, judgment,
ruling, subpoena, or verdict entered, issued, made, or rendered by any
Governmental Authority.
 
Ordinary Course of Business means an action taken by a Person if (and only
if):  (a) such action is consistent with the past practices of such Person and
is taken in the ordinary course of the normal day-to-day operations of such
Person; (b) such action is not required to be authorized by the board of
directors or board of managers of such Person (or by any Person or group of
Persons exercising similar authority); and (c) such action is similar in nature
and magnitude to actions customarily taken without any authorization by the
board of directors or board of managers of such Person (or by any Person or
group of Persons exercising similar authority), in operations of other Persons
that are in the same line of business as such Person.
 
Organizational Documents means, as to any Person that is an entity, (a) the
articles or certificate of incorporation (or certificate of formation) and
bylaws of such Person, if such Person is a corporation, (b) the articles of
organization (or certificate of formation) and regulations (or operating
agreement or company agreement) of such Person, if such Person is a limited
liability company, (c) the certificate of limited partnership (or certificate of
formation) and agreement of limited partnership of such Person, if such Person
is a limited partnership, (d) the agreement of partnership of such Person, if
such Person is a general partnership, or (e) the organizational documents of any
other entity, and any amendments thereto.
 
 
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Parties has the meaning given to such term in the introductory paragraph of this
Agreement.
 
Permitted Encumbrances means (a) Permitted Liens, (b) lessors’ royalties and
overriding royalties that are of record in the various counties in which sale
properties are located, (c) joint operating and other agreements pertaining to
the development of the interests owned by the Company and that are customary in
the oil and gas industry, (d) easements, rights-of-way, permits, surface leases,
and other rights in respect of surface operations, pipelines, grazing, canals,
ditches, reservoirs, and the like, conditions, covenants, or other similar
restrictions, and easements of streets, alleys, highways, pipelines, telephone
lines, power lines, railways, and other easements, and rights-of-way on, over,
or in respect of real property or leasehold interests therein, and (e) Rights
reserved to or vested in any Governmental Authority to control or regulate real
property or leasehold interests therein, and applicable Laws related thereto.
 
Permitted Liens means (a) Inchoate Liens, (b) pledges or deposits made to secure
payment of workmen’s compensation, or to participate in any fund in connection
with workmen’s compensation, unemployment insurance, pensions, or other social
security programs, and (c) good faith pledges or deposits made to secure
performance of bids, tenders, Contracts (other than for the repayment of
borrowed money), or leases, not in excess of 10% of the aggregate amount due
thereunder, or to secure statutory obligations, surety or appeal bonds, or
indemnity, performance, or similar bonds in the Ordinary Course of Business.
 
Person means any natural person, firm, partnership, joint venture, association,
corporation, limited liability company, trust, Governmental Authority, or other
legal entity.
 
Pimuro has the meaning set forth in Section 2.2(g).
 
Pimuro Fees has the meaning set forth in Section 2.2(g).
 
Pledge Agreement has the meaning set forth in Recital C.
 
Promissory Note has the meaning set forth in Recital C.
 
Proprietary Right means any intangible property right owned by the Company, the
Buyer, the Seller, or any Affiliate of the Company, the Buyer, or the Seller,
including, but without limitation:  (a) any patent, invention, and industrial
design (whether or not patentable); (b) any registered, unregistered, and common
law trademark, service mark, domain name, logo, and trade name; (c) any
copyright; (d) any registration, application, and renewal of any of the
foregoing; (e) any trade secret, know-how, customer list, software, formula,
production process and technique, mask work, research and development
information, investigation, drawing, specification, design, plan, improvement
proposal, technical and computer datum, and information relating to any future
product plan or strategic issue; and (f) any Rights in or under any Contract,
including, but not limited to, any Right in any license agreement and
sub-license agreement with third-Persons relating to any of the foregoing.
 
Public Information means (a) information that is publicly available,
(b) information that a Person develops or has developed independently without
use of any Confidential Information of the Company, the Buyer, the Seller, or
any Affiliate of the
 
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Company, the Buyer, or the Seller, and without such Person’s involvement with
the Company, the Buyer, the Seller, or any Affiliate of the Company, the Buyer,
or the Seller, so long as such Person’s independent development of such
information can be documented and verified, and (c) information that is
rightfully received by a Person from a third-Person who has no duty of
confidentiality with respect to such information.
 
Purchase Consideration has the meaning given to such term in Section 2.2(a).
 
Representative means, with respect to a particular Person, any shareholder,
partner, joint venturer, member, director, officer, manager, employee, agent,
consultant, advisor, or other representative of such Person, including
attorneys, accountants, and financial advisors.
 
Retained Profits Interest has the meaning set forth in Recital E.
 
Rights means legal and equitable rights, remedies, powers, privileges, and
benefits.
 
Second Amendment to LLC Agreement means the Amended and Restated Limited
Liability Company Agreement of JHE Holdings, LLC dated as of the Effective Date,
duly adopted by the Managers and the Member immediately prior to the Closing, a
true and correct copy of which is attached as Exhibit H.
 
Securities Act means the Securities Act of 1933, as amended, and any successor
Law.
 
Security Agreement means the Membership Interest Pledge and Security Agreement,
dated as of January 1, 2011 by and among the Seller and the Edsels.
 
Seller has the meaning given to such term in the introductory paragraph of this
Agreement.
 
Seller Closing Certificate means a closing certificate in the form of Exhibit E,
properly completed, signed, dated, and delivered by the Seller at the Closing.
 
Seller Indemnified Parties has the meaning given to such term in Section 7.3.
 
Seller Interest has the meaning given to such term in Recital A.
 
Seller Notice has the meaning given to such term in Section 5.8.
 
Seller Retained Interest has the meaning given to such term in Section 2.2(e).
 
Subsidiary means, with respect to a specified Person, any other Person of which
at least a majority of the capital stock or other equity securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors, board of managers, or others performing similar functions
with respect to such Person is directly or indirectly owned or controlled by the
specified Person or by one or more if its Subsidiaries.
 
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Tax means any tax, assessment, fee, levy, impost, duty, deduction, withholding,
or other charge of any nature whatsoever from time to time or at any time
imposed by any Laws or by any Governmental Authority, including, without
limitation, any federal, state, local, or foreign net or gross income, gross
receipts, net proceeds, sales, ad valorem, value added, franchise, excise,
property, deed, stamp, alternative or add-on minimum, environmental, profits,
windfall profits, transaction, License, lease, service, occupation, severance,
energy, withholding, payroll, employment or unemployment, social security,
workers’ compensation, capital, premium, or other tax, together with any
interest, penalties, additions to tax, or additional amounts with respect
thereto.
 
Tax Return means any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Authority in connection with the determination, assessment, collection, or
payment of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any Law relating to any Tax.
 
Title Report means the supplemental title reports dated March 28, 2011, prepared
by Kelly Rogers, attorney at law, related to the material Company Oil & Gas
Properties in (a) Scurry, Victoria, Dimmit, Crane, Wharton, Grime and Zavala
Counties, Texas; (b) Madison County, Texas and (iii) Robertson County, Texas.
 
Transaction means the Buyer’s purchase of the Seller Interest from the Seller,
and the Seller’s sale of the Seller Interest to the Buyer, pursuant to this
Agreement, and includes the execution, delivery, and performance by the Parties
of this Agreement and the other Transaction Documents.
 
Transaction Documents means this Agreement, the Assignment, the Assumption, the
Promissory Note, the Security Agreement, the Closing Certificates, the
Cross-Receipt, and all other agreements, instruments, and documents executed and
delivered in connection with the Transaction.
 
Vesting Date has the meaning given to such term in Section 2.3(c).
 
Vested Interests has the meaning given to such term in Section 2.3(c).
 
Vested Interest Assignment has the meaning given to such term in Section 2.3(c).
 
1.2.          Number and Gender of Words.  Whenever in this Agreement the
singular number is used, the same will include the plural where appropriate and
vice versa, and words of any gender will include each other gender where
appropriate.
 
 
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1.3.          Interpretation and Construction.
 
(a)     The terms “hereof,” “herein,” and “herewith,” and words of similar
import, unless otherwise stated, shall be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement.
 
(b)     The terms “include,” “includes,” and “including,” when used in this
Agreement, shall be deemed to be followed by the words “without limitation,”
unless otherwise specified.
 
(c)     A reference to any Party to this Agreement or a party to any other
agreement or document referred to in this Agreement shall include such Party (or
party’s) predecessors, successors, and permitted assigns.
 
(d)     References to any Law means such Law as amended, modified, codified,
replaced, or reenacted, and all rules and regulations promulgated thereunder.
 
ARTICLE TWO
 
SALE AND PURCHASE OF THE SELLER INTEREST
 
2.1.          Agreement of Sale and Purchase.  (a)  Upon the terms and subject
to the conditions contained in this Agreement, and in consideration of the
obligations of the Buyer provided in this Agreement, at the Closing the Seller
will sell, assign, transfer, grant, bargain, deliver, and convey the Seller
Interest to the Buyer, free and clear of all Liens (other than Permitted Liens),
but subject to the Retained Profits Interest, the Promissory Note and the
Security Agreement, and the Buyer will purchase the Seller Interest from the
Seller, upon such terms and subject to such conditions.
 
2.2.          Purchase Consideration.  In consideration for the purchase by the
Buyer from the Seller and sale by the Seller to the Buyer of the Seller
Interest, the Buyer and Seller agree as follows:
 
(a)     Buyer will issue 1,000,000 shares of common stock of the Buyer to the
Seller (the “Consideration Shares”);
 
(b)     Buyer will pay the $1,000,000 installment payment to the Edsels due June
1, 2011, under the Promissory Note, and payable on the Closing Date, but no
later than June 10, 2011, under the terms of the Novation and Assignment;
 
(c)     Buyer will assume all of the Seller’s obligations and liabilities under
the Promissory Note and execute and deliver the Novation and Assignment;
 
(d)     Buyer will assume all of the Seller’s obligations and liabilities under
the Pledge Agreement and the execution and delivery of the Amended and Restated
Pledge Agreement;
 
 
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(e)     Subject to the terms of the Amended and Restated Pledge Agreement, Buyer
will undertake to cause the Company to assign and transfer a 10% undivided
interest in the Company Oil and Gas Properties (the “Seller Retained Interest”)
to the Seller in exchange for the Retained Profits Interests upon full and
complete payment and satisfaction of the obligations due under the Promissory
Note and Amended and Restated Pledge Agreement; provided, however, that the
Buyer shall retain a Buyer First Right to re-acquire the Retained Profits
Interests and the Seller Retained Interest in accordance with Section 5.8; and
 
(f)     Buyer will undertake to cause the Company to make the distribution to
the Seller of cash held in the bank accounts of the Company as of the Closing
Date and remitted to the Company through and including June 30, 2011 in the
manner consistent with the past practices of the Company (the “June
Distribution”).  The June Distribution will be made within five (5) business
days of June 30, 2011.  Except as otherwise contemplated by this Agreement, the
Company will have no cash or cash equivalents and no current liabilities on the
Closing Date.
 
(g)     The Buyer agrees to pay Pimuro Capital Partners, LLC (“Pimuro”), a
consultant to the Seller who advised the Seller with regard to the Transaction
and this Agreement, the fees, commissions, or expenses relating to such
consulting arrangement between the Seller and Pimuro in the amount and payable
in accordance to the Pimuro Payment Agreement attached here as Exhibit J (the
“Pimuro Fees”).
 
The payments under Sections 2.2(a), (b), (c), (d), (e) and (f)  together with
the convenants, representations, warranties and undertakings contemplated in
this Agreement are collected referred to herein as the “Purchase Consideration”.
 
2.3.          Amended and Restated Pledge Agreement.  Concurrently with the
execution of this Agreement and under the terms of the Novation and Assignment,
the Buyer shall enter into an Amended and Restated Pledge Agreement with the
Edsels (the “Amended and Restated Pledge Agreement”) pursuant to which, among
other items:
 
(a)     The Buyer shall assume and release the Seller of all the obligations and
liabilities under the Pledge Agreement;
 
(b)     The Edsels shall agree to the assumption and release of the obligations
and liabilities of the Seller under the Promissory Note and the Pledge Agreement
by the Buyer; and
 
(c)     The Edsels shall agree that at such time as all accrued and unpaid
interest, together with at least fifty percent (50%) of the original principal
amount of the Note, have been indefeasibly paid to Edsels as payments on the
Note (the “Vesting Date”), from the Vesting Date and thereafter as each payment
of principal is made by Buyer to Edsels under the Note, a corresponding
undivided portion or percentage of all Company Oil and Gas Properties, as
defined in the Novation Agreement, shall vest in Buyer and be released from the
transfer restrictions under the terms of the Amended and Restated Pledge
Agreement (the “Vested Assets”), such that the Buyer may transfer, assign or
 
 
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otherwise convey the Vested Assets or that if an Event of Default (as defined in
the Promissory Note) occurs and the Edsels exercise or intend to exercise its
remedies hereunder, Buyer and Edsels shall take such actions and execute such
documents as are reasonably necessary to cause the Company to execute an
assignment (the “Vested Asset Assignment”), to assign the Vested Assets (i) 10%
to High Plains in exchange for termination of the Retained Profits Interests and
(ii) the balance to Buyer.
 
2.4.          Registration and Resale Restrictions
 
The Parties acknowledge and agree that none of the Consideration Shares have
been or will be registered under the Securities Act or any state securities
laws.  Accordingly,
 
(a)     The Consideration Shares are being issued pursuant to exemptions from
the registration requirements of the Securities Act available under Rule 506 of
Regulation D and/or Section 4(2) of the Securities Act and exemptions from
registration under applicable state securities laws; and
 
(b)     The Consideration Shares will be deemed “restricted securities” as
defined under Rule 144(a)(3) of the Securities Act and upon the original
issuance thereof, and until such time as the same is no longer required under
the Securities Act or applicable state securities laws, the certificates
representing the Consideration Shares shall bear the following legend:
 
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH
RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, OR (C) WITHIN THE UNITED
STATES IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT OR
(2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF APPLICABLE.
 
2.5.          Second Amendment to LLC Agreement.  Concurrently with the
execution of this Agreement, the Parties shall enter into the Second Amendment
to LLC Agreement to provide for, among other items:
 
(a)     The retention by the Buyer to the Seller of the Retained Profits
Interest;
 
(b)     Subject to the terms of the Amended and Restated Pledge Agreement and
the Buyer First Right, the termination of the Retained Profits Interest and
assignment by the Buyer to the Seller of the Seller Retained Interest following
full payment and satisfaction of the obligations to the Edsels under the
Promissory Note and the Amended and Restated Pledge Agreement;
 
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(c)     The cancellation of the certificates representing the Seller Interest
issued to, and in the name of, the Seller and the re-issuance of the
certificates representing the Seller Interest to, and in the name of, the Buyer;
and
 
(d)     The appointment of Jeff Johnson as manager of the Company until such
time as the obligations to the Edsels under the Promissory Note and the Amended
and Restated Pledge Agreement are satisfied.
 
2.6.          Closing.  Subject to the conditions contained in Article Eight,
and to the other conditions contained in this Agreement, the closing of the sale
and purchase of the Seller Interest (the “Closing”) will take place at the
offices of the Dorsey & Whitney LLP, 1400 Wewatta Street, Suite 400, Denver,
Colorado 80202 (or remotely via the electronic or other exchange of documents
and signature pages), at 10:00 a.m., local time on June 10, 2011 (but effective
for all purposes on and as of the Effective Date), or such other time and date
as the Parties and the Edsels may agree to in writing (the time and date of the
Closing is herein referred to as the “Closing Date”).  At the Closing:
 
(a)     The Seller will deliver to the Buyer (i) the Assignment,
(ii) certificates representing the Seller Interest, issued in accordance with
the Second Amendment to LLC Agreement, duly endorsed for transfer to the Buyer,
(iii) the Novation and Assignment, and (iv) a duly executed Seller Closing
Certificate (attached to which shall be the items contemplated thereby,
including properly approved board resolutions approving the Transaction);
 
(b)     The Buyer will pay $1,000,000 in cash to the Edsels as the June 1, 2011
installment payment due under the Promissory Note, payable at the Closing by
delivery of a cashier’s check or by wire transfer of immediately available funds
in accordance with Edsel’s written instructions;
 
(c)     The Buyer will deliver to the Seller (i) the Consideration Shares,
(ii) the Assumption, and (iii) a duly executed Buyer Closing Certificate
(attached to which shall be the items contemplated thereby, including properly
approved board resolutions approving the Transaction);
 
(d)     The Seller will deliver (i) all Consents required to be obtained from or
provided to third-Persons necessary for the consummation of the Transaction,
including, but without limitation, the Edsel Consent and all Governmental
Approvals and (ii) the Amended and Restated Pledge Agreement executed and
delivered by the Edsels;
 
(e)     The Managers and the Members of the Company will execute the Second
Amendment to LLC Agreement evidencing, among other things, the Retained Profits
Interests of the Seller, the obligations related to the Vested Assets and
Retained Seller Interest, appointment of Jeff Johnson as manager and other
obligations as set forth in this Agreement;
 
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(f)     The Buyer will execute the Amended and Restated Pledge Agreement and
acknowledgment of the Novation and Assignment;
 
(g)     The Seller and the Buyer will execute and deliver a Cross-Receipt, dated
as of the Closing Date, pursuant to which the Buyer will acknowledge receipt of
an Assignment related to the Seller Interest sold to the Buyer at the Closing
and certificates representing the Seller Interest from the Seller, and the
Seller will acknowledge receipt of the Purchase Consideration and Assumption
from the Buyer; and
 
(h)     Jeff Johnson will consent to serving as manager of the Company and as a
non-executive member of the Buyer’s Board of Directors.
 
(i)     The Company shall deliver a certificate representing the Seller Interest
registered in the name of the Buyer.
 
(j)     The Buyer will deliver to the Edsels the certificate representing the
Seller Interest duly endorsed for transfer to Secured Party or accompanied by
duly executed Membership Interest powers as required in Section 4(a) of the
Amended and Restated Pledge Agreement.
 
(k)     The Buyer will undertake to pay Pimuro the Pimuro Fees in accordance to
the Pimuro Instructions attached here as Exhibit J.
 
ARTICLE THREE

 
REPRESENTATIONS AND WARRANTIES OF THE SELLER
 
The Seller represents and warrants to, and covenants with, the Buyer as follows:
 
3.1.          Organization, Existence, and Good Standing.  The Buyer is a
limited liability company duly organized, validly existing, and in good standing
under the Laws of the State of Nevada.
 
3.2.          Authority and Authorization.  The Seller has the requisite legal
power and capacity to execute and deliver this Agreement and the other
Transaction Documents executed or to be executed by the Seller, to perform the
Seller’s obligations hereunder and thereunder, and to consummate the
Transaction, and for which no Consent of any Governmental Authority or other
Person is required that has not been obtained, and no filing or other
notification to any Governmental Authority or other Person is required that has
not been properly completed.  This Agreement and the other Transaction Documents
executed or to be executed by the Seller constitute (or when executed, will
constitute) the valid and legally binding obligations of the Seller, enforceable
in accordance with their terms, subject only to the application of Debtor Relief
Laws and general principles of equity.
 
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3.3.          No Conflicts.  The execution and delivery of this Agreement and
the other Transaction Documents executed or to be executed by the Seller and the
consummation of the Transaction does not and will not contravene, conflict with,
or result in any violation of or default under any mortgage, indenture, lease,
members’ agreement, loan or credit agreement, or other Contract, applicable Law,
or Governmental Approval applicable to the Seller, or any of the properties of
the Seller, or any Order of any Governmental Authority that affects or binds the
Seller.  No Governmental Approval is required on the part of the Seller in
connection with the execution and delivery of this Agreement and the other
Transaction Documents executed or to be executed by the Seller or in connection
with the consummation of the Transaction.  Moreover, the execution, delivery,
and performance of this Agreement and the other Transaction Documents executed
or to be executed by the Seller and the consummation of the Transaction by the
Seller do not require the Consent of any creditor of the Seller, or of any other
Person, other than such Consents as have been, or prior to the Closing will be,
obtained.
 
3.4.          Title to the Seller Interest.  The Seller owns all of the Seller
Interest, free and clear of all Liens (whether such Liens are or are not
perfected under the Uniform Commercial Code in effect in Texas or other
applicable Laws) other than Permitted Liens, the Promissory Note, the Security
Agreement, and the Profits Interest (and, to the extent applicable to the Seller
Interest, Permitted Encumbrances).
 
3.5.          Contracts Related to the Company Oil and Gas
Properties.  Schedule 2 contains a list of the Company Oil and Gas Properties in
which the Company owns or holds a working interest.  Except as described in
Schedule 2, none of the Company Oil and Gas Properties is subject to any
Contract to which the Company is a party, or by which the Company is bound, that
requires the Company to bear any of the costs associated with the operations of
such Company Oil and Gas Properties.
 
3.6.          Litigation.  There is no Litigation to which the Seller is, or is
threatened to be, a party pending or, to the Knowledge of the Seller, threatened
that involves or could involve the validity of this Agreement or of any action
taken or to be taken by the Seller in connection with this Agreement or the
Transaction.
 
3.7.          The Company.  With respect to the Company, the Seller represents
and warrants to the Buyer as follows:
 
(a)     Organization.  The Company is duly organized, validly existing, and in
good standing under the Laws of the State of Texas, and the Company is duly
qualified to transact business in each jurisdiction where the nature and extent
of its business and properties (both owned and leased) requires
qualification.  The Company possesses all requisite authority and power, and, to
the Knowledge of the Seller, all Licenses, including all Governmental Approvals,
to own, lease, or operate its properties and assets and to conduct the Business
as it is now conducted.
 
(b)     Capitalization.  All Company Interests are owned by the Seller.
 
(c)     Current Financials.  True, correct, and complete copies of the Current
Financials have been delivered to the Buyer.  The Current Financials (i) are in
accordance
 
 
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with the books and records and accounting methods of the Company, (ii) present
fairly the financial position and results of operations of the Company in all
material respects as of the dates and for the periods indicated, and (iii) have
been prepared in accordance with cash accounting principles consistently applied
throughout the periods involved, except as noted therein.  To the Knowledge of
the Seller, the Company has no Debts except for Debts reflected or reserved
against in the Current Financials and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof.
 
(d)     Taxes.
 
(i)     The Company has filed or caused to be filed on a timely basis all Tax
Returns that are or were required to be filed by or with respect to the Company,
pursuant to applicable Laws.  The Seller has delivered to the Buyer copies of
all Tax Returns filed by the Company during the three years preceding the
Effective Date.  To the Knowledge of the Seller, all such Tax Returns filed by
the Company are true, correct, and complete.  To the Knowledge of the Seller,
the Company has paid, or made provision for the payment of, all Taxes that have
or may have become due pursuant to such Tax Returns or otherwise, or pursuant to
any assessment received by the Company.
 
(ii)     To the Knowledge of the Seller, the charges, accruals, and reserves, if
any, with respect to Taxes on the books of the Company are adequate and are at
least equal to the Company’s liability for Taxes.  To the Knowledge of the
Seller, there exists no proposed Tax assessment against the Company.  To the
Knowledge of the Seller, all Taxes that the Company is or was required by Law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the appropriate Governmental Authority or other
Person.
 
(iii)     The Seller has no Knowledge of any action or audit currently proposed,
threatened, or pending against, or with respect to, the Company in respect of
any Taxes.  To the Knowledge of the Seller, the Company is not the beneficiary
of any extension of time within which to file any Tax Return, nor has the
Company made (or had made on its behalf) any requests for such
extensions.  Except for Liens of non-delinquent ad valorem real or personal
property Taxes, to the Knowledge of the Seller, there are no Liens on any of the
assets of the Company with respect to Taxes.
 
(iv)     There is no dispute or claim concerning any liability for Taxes with
respect to the Company for which notice has been provided, or which, to the
Knowledge of the Seller, is asserted or threatened.
 
(e)     Compliance with Laws.  To the Knowledge of the Seller, (i) the Company
is in compliance in all material respects with each Law that is or was
applicable to the Company or to the conduct or operation of the Business or the
ownership, development, or operation of the Company Oil and Gas Properties,
(ii) no event has occurred or circumstance exists that (with or without notice
or lapse of time, or both) (x) may constitute or result in a violation by the
Company of, or a failure on the part of the Company to comply with, any Law, or
(y) may give rise to any obligation on the part of the Company to undertake, or
to bear all or any portion of the cost of, any remedial action of any nature,
and (iii) the Company has not received any notice or other communication
(whether written or oral) from any Governmental Authority or any other Person
regarding (x) any
 
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actual, alleged, possible, or potential violation of, or failure to comply with,
any Law, or (y) any actual, alleged, possible, or potential obligation on the
part of the Company to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature.
 
(f)     Litigation.  There is no actual pending Litigation (i) that has been
commenced by or against the Company or that otherwise relates to or may affect
the Business, or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, this
Agreement or the Transaction.  To the Knowledge of the Seller, (x) no such
Litigation has been threatened and (y) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Litigation.
 
(g)     Company Oil and Gas Properties.  Schedule 1 contains an accurate and
complete list and description of the Company Oil and Gas Properties and the
Company’s ownership interest in any to the Company Oil and Gas Properties as of
the Effective Date.  To the Knowledge of the Seller, the Company owns all of the
Company Oil and Gas Properties free and clear of all Liens other than Permitted
Encumbrances.  All leases that are included in the Company Oil and Gas
Properties are, to the Knowledge of the Seller, in full force and effect and the
parties thereto are in compliance in all material respects with their
obligations thereunder.  To the Knowledge of the Seller, none of the Company Oil
and Gas Properties are subject to any preemptive or preferential rights of
purchase by any third-party.  To the Knowledge of the Seller, none of the
Company Oil and Gas Properties are subject to (or have related to them) any area
of mutual interest provisions or agreements. To the Knowledge of the Seller, all
operations by third-parties on or in respect of the Company Oil and Gas
Properties have been conducted in accordance with good oil and gas industry
practices and in compliance in all material respects with all applicable Laws.
There are no audits currently being conducted or, to the Knowledge of Seller,
imminent under any of the joint operating agreements that govern the Company Oil
and Gas Properties.  No investigations or reviews by any Governmental Authority
with respect to the Company Oil and Gas Properties are pending or, to the
Knowledge of Seller, threatened. No condemnation or eminent domain proceedings
affecting any of the Company Oil and Gas Properties are pending or, to the
Knowledge of Seller, threatened by any Governmental Authority.  Seller has
delivered to Buyer copies of any and all documents, opinions, reports and
materials in the possession of Seller or the Company relating to the Company’s
ownership of the Company Oil and Gas Properties.  To the knowledge of Seller,
the Title Report is a true and accurate report on all material Company Oil and
Gas Properties owned by the Company and contains no material omissions as of the
Closing Date.
 
3.8.          Misleading Statements.  No representation or warranty by the
Seller in this Agreement or in any written statement or certificate furnished or
to be furnished to the Buyer
 
 
 
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pursuant to this Agreement or in connection with the Transaction, when taken
together, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
made not misleading.
 
3.9.          Brokers, Finders, etc.  Pimuro is a consultant to the Seller who
advised the Seller with regard to the Transaction and this Agreement and the
Pimuro Fees constitutes all all fees, commissions, or expenses payable to Pimuro
relating to such consulting arrangement between the Seller and Pimuro.  Upon
payment of the Pimuro Fees by Buyer in accordance with Section 2.2(g) of this
Agreement, no further fees, commissions, or expenses relating to such consulting
arrangement will be payable to Pimuro.  Seller agrees to, and does hereby,
indemnify the Seller and its Affiliates from and against any and all claims,
liabilities, or obligations with respect to all fees, commissions, or expenses
asserted by Pimuro or any other Person on the basis of any act, statement,
agreement, or commitment alleged to have been made by the Buyer with respect to
any such fee, commission, or expense.
 
ARTICLE FOUR

 
REPRESENTATIONS AND WARRANTIES OF THE BUYER
 
The Buyer represents and warrants to the Seller as follows:
 
4.1.          Organization, Existence, and Good Standing.  The Buyer is a
limited liability company duly organized, validly existing, and in good standing
under the Laws of the State of Nevada.
 
4.2.          Authority for Agreements.  The Buyer has the requisite legal power
and authority to execute and deliver this Agreement and the other Transaction
Documents executed or to be executed by the Buyer, to perform the obligations of
the Buyer hereunder and thereunder, and to consummate the Transaction, all of
which have been duly authorized and approved by all necessary company action and
for which no Consent of any Person or Governmental Authority is required that
has not been obtained, and no filing with or other notification to any Person or
Governmental Authority is required that has not been properly completed.  This
Agreement and the other Transaction Documents executed or to be executed by the
Buyer constitute (or when executed, will constitute) the valid and legally
binding obligations of the Buyer, enforceable in accordance with their
respective terms, subject only to the application of Debtor Relief Laws and
general principles of equity.  The security interest to be assumed by the Buyer
in favor of the Edsels in the Seller Interest pursuant to the Security
Agreement, when the Security Agreement is assigned by the Seller and assumed by
the Buyer and all actions required thereunder in respect of the perfection of
such security interest have been taken, will be a valid, first priority,
perfected security interest in the Seller Interest subject to no other Liens of
any kind.
 
4.3.          No Conflicts.  The execution and delivery of this Agreement and
the other Transaction Documents executed or to be executed by the Buyer and the
consummation of the Transaction does not and will not contravene, conflict with,
or result in any violation of or default under any provision of the
Organizational Documents of the Buyer, or any resolution adopted by the members
or the board of managers of the Buyer, or any mortgage, indenture, lease,
members’ agreement, loan or credit agreement, or other Contract, applicable Law,
or
 
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Governmental Approval applicable to the Buyer.  No Governmental Approval is
required on the part of the Buyer in connection with the execution and delivery
of this Agreement and the other Transaction Documents executed or to be executed
by the Buyer or in connection with the consummation of the Transaction.  The
execution, delivery, and performance of this Agreement and the other Transaction
Documents executed or to be executed by the Buyer and the consummation of the
Transaction by the Buyer do not require the Consent of any creditor of the Buyer
or of any other Person, other than such Consents as have been, or prior to the
Closing will be, obtained.
 
4.4.          Litigation.  There is no Litigation to which the Buyer is, or is
threatened to be, a party pending or, to the Knowledge of the Buyer threatened
that involves or could involve the validity of this Agreement or of any action
taken or to be taken by the Buyer in connection with this Agreement or the
Transaction.
 
4.5.          Knowledge and Access to Information.  The Buyer (a) has conducted
a due diligence investigation of the Company and the Business sufficient, in the
judgment of the Buyer, to reach an informed decision concerning the Transaction
and its decision to proceed with the Transaction, (b) has been solely
responsible for its due diligence investigation, and its analysis, concerning
the merits and risks attributable to its purchase of the Seller Interest, (c) is
not relying, and has not relied, on any information, analysis, or assessment
provided at any time to the Buyer by the Seller or Representatives of the Seller
in connection with the Buyer’s purchase of the Seller Interest, (d) has had
sufficient access to the records and properties of the Company and the Business,
in connection with its due diligence investigation and otherwise, to reach an
informed decision concerning the Transaction and its decision to proceed with
the Transaction, and (e) possesses full and complete information, knowledge, and
awareness of the Company and the Business, including, but without limitation,
the properties, financial condition, operations, and prospects of the
Company.  The Buyer accepts all risks, including all financial risks, associated
with the purchase and ownership of the Seller Interest and the operation of the
Company and the Business conducted by the Company.  In furtherance of the
foregoing, the Buyer confirms that, except as expressly provided in this
Agreement, the Seller has made no representations whatsoever concerning the
financial condition, operations, and prospects of the Company and the Business
conducted by the Company and that the Buyer possesses or has had ample
opportunity to acquire all information about the financial condition,
operations, and prospects of the Company and the Business conducted by the
Company as it desired.
 
4.6.          Investment Intent.  The Buyer is acquiring the Seller Interest for
its own account and not with a view to its distribution within the meaning of
Section 2(11) of the Securities Act.
 
4.7.          Consideration Shares.  The Consideration Shares when issued in
accordance with the terms of this Agreement shall be duly authorized, validly
issued, fully paid and non-assessable securities of the Buyer.
 
4.8.          Brokers, Finders, etc..  All negotiations relating to this
Agreement and the Transaction have been carried on without the participation of
any Person acting on behalf of the Buyer in such manner as to give rise to any
valid claim against the Seller for any brokerage or finder’s commission, fee, or
similar compensation.  The Buyer agrees to, and does hereby,
 
 
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indemnify the Seller and its Affiliates from and against any and all claims,
liabilities, or obligations with respect to all fees, commissions, or expenses
asserted by any Person on the basis of any act, statement, agreement, or
commitment alleged to have been made by the Buyer with respect to any such fee,
commission, or expense

 
ARTICLE FIVE

 
COVENANTS OF THE SELLER
 
5.1.          No Solicitation.  From the Effective Date to the Closing Date (or
the earlier termination of this Agreement in accordance with the terms hereof),
the Seller will not solicit or encourage any inquiries or proposals for, or
enter into any substantive discussions with respect to, the acquisition of the
Seller Interest.
 
5.2.          Required Consents.  As soon as practicable after the Effective
Date, the Seller will make all filings required by Law or Contract to be made by
it in order to consummate the Transaction.  Between the Effective Date and the
Closing Date, the Seller will cooperate with the Buyer with respect to all
filings that the Buyer elects to make or is required by Law or Contract to make
in connection with the Transaction, and cooperate with the Buyer in obtaining
all Consents required to be obtained by or on the part of the Buyer in order to
consummate the Transaction.
 
5.3.          Notification.  Between the Effective Date and the Closing Date,
the Seller promptly will notify the Buyer in writing if the Seller becomes aware
of any fact or condition that causes or constitutes a Breach of any of the
Seller’s representations and warranties as of the Effective Date, or if the
Seller becomes aware of the occurrence of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of the occurrence or discovery of such fact or
condition.  Should any such fact or condition require any change in any Schedule
if such Schedule were prepared on or as of the date of the occurrence or
discovery of any such fact or condition, the Seller promptly will deliver to the
Buyer a supplement to, or amendment of, such Schedule specifying such
change.  During the same period, the Seller promptly will notify the Buyer in
writing of the occurrence of any Breach of any covenant of the Seller in this
Article Five or of the occurrence of any event that makes, or may make, the
satisfaction of the conditions contained in Article Eight impossible or
unlikely.
 
5.4.          Reasonable Efforts  Between the Effective Date and the Closing
Date, the Seller will use commercially reasonable efforts to cause the
conditions contained in Article Eight to be satisfied.
 
5.5.          Delivery of Documents and Other Papers; Proprietary Data, Record
Retention.
 
(a)     Seller has delivered to Buyer copies of any and all documents, opinions,
reports and materials in the possession of Seller or the Company relating to the
Company’s ownership of the Company Oil and Gas Properties.
 
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(b)     At the Closing, the Seller will deliver to the Buyer all Documents and
Other Papers relating to the Seller Interest in the possession of the Seller.
 
(c)     In the event and for so long as any Party is contesting or defending
against any Litigation asserted by a third-Person (including any Governmental
Authority) in connection with (i) any transaction contemplated by this Agreement
or (ii) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving the Business, the other
Party will to the extent reasonably practicable cooperate with the contesting or
defending Party and its counsel in the contest or defense, and provide such
testimony and access to its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (except to the extent the contesting or defending
Party is entitled to indemnification therefor under Article Seven); provided,
that nothing herein requires any Party to retain any books and records other
than in the Ordinary Course of Business of such Party or as otherwise required
or contemplated by this Agreement or applicable Laws.
 
5.6.          Further Assurances.  At any time at the request of the Buyer, the
Seller promptly will execute, acknowledge, and deliver, or cause to be executed,
acknowledged, and delivered, to the Buyer such instruments of transfer,
assignment, and conveyance, and other documents, in form and substance
satisfactory to the Buyer, as will be necessary to vest in, or assure, the Buyer
all Right, title, and interest in and to the Seller Interest, free and clear of
all Liens other than Permitted Liens (including the release of all Liens of
record), and will use its best efforts to cause to be taken such other action as
the Buyer at any time reasonably may require to more effectively implement and
carry into effect the Transaction.
 
 
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5.7.          Nondisclosure of Confidential Information.  The Seller agrees
that, from and after the Closing Date, the Seller will hold in confidence and
will not directly or indirectly at any time reveal, report, publish, disclose,
or transfer to any Person other than the Buyer any Confidential Information of
the Company, the Buyer, or Affiliates of the Company or the Buyer known to or in
the possession of the Seller, or utilize any of such Confidential Information
for any purpose.
 
5.8.          Buyer First Right
 
  The Seller hereby grants to the Buyer a limited right of first refusal with
respect to the Retained Profits Interest and the Seller Retained Interest in
accordance with this Section 5.8 as follows:
 
(a)     Each time the Seller proposes to offer any interests in either the
Retained Profits Interest or the Seller Retained Interest, pursuant to a bona
fide third party offer to purchase all or a portion of the Retained Profits
Interest or the Seller Retained Interest, as applicable (the “Offered
Interests”), the Seller shall deliver written notice in accordance with this
Section 5.8 (the “Seller Notice”) to the Buyer stating (a) its bona fide
intention to sell the Offered Interests (b) a description of the Offered
Interests, and (c) the terms and conditions, including the price and closing
date, at which it proposes to offer the Offered Interests to the bona fide third
party.
 
(b)     The Buyer may elect within 20 days after the Seller Notice is given to
purchase the Offered Interests, at the price and on the terms specified in the
Seller Notice, by giving written notice within such 20-day period to the
Company, whereupon Buyer shall be irrevocably bound to purchase the Offered
Interests at the price and on the terms set forth in the Seller Notice on the
date specified for the closing in the Seller Notice, or, if no date is
specified, a date no fewer than 20 days and no more than 30 days after the
Seller Notice is given.
 
5.9.          Eagle Ford Lease Conveyance
 
  The Seller and Buyer hereby agree to negotiate in goodfaith the assignment and
conveyance to Buyer of the rights and interests that the Seller, or any of its
affiliates, may hereafter acquire in one or more Eagle Ford Leases, as may
mutually be agreed, in consideration for 1,000,000 shares of common stock of the
Buyer.  The Buyer will pay the consideration upon due execution and deliver of
such Eagle Ford Leases.
 
 
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5.10.          Title Opinion Bring-Down
 
  The Seller agrees to cause bring downs to the Title Reports issued to the
Buyer to be issued for the benefit of the Buyer within 60 days of the Closing
Date.
 
ARTICLE SIX

 
COVENANTS OF THE BUYER
 
6.1.          Governmental Approvals.  As promptly as practicable after the
Effective Date, the Buyer will make all filings required by Law to be made by it
to consummate the Transaction.  Between the Effective Date and the Closing Date,
the Buyer will (a) cooperate with the Seller with respect to all filings that
the Seller elects to make or is required by Law or Contract to make in
connection with the Transaction and (b) cooperate with the Seller in obtaining
all Consents required to be obtained by or on the part of the Seller in order to
consummate the Transaction.
 
6.2.          Access to Tax Information.  After the Closing Date and for a
period of five years thereafter, the Buyer will, and will cause the Company to,
consult in good faith and cooperate fully with the Seller and the Seller’s
accountants and other Representatives regarding Tax matters related to the
period preceding the Closing and will cause the Company to make available to the
Seller and any Governmental Authority, as may be reasonably requested by the
Seller, all information, records, and documents relating to Tax liabilities or
potential Tax liabilities of the Seller for the period preceding the Closing.
 
6.3.          Confidentiality.  The Buyer acknowledges that the information
concerning the Company and the Business received or to be received prior to the
Closing Date by the Buyer pursuant to and in connection with this Agreement is
Confidential Information and for its use only, and the Buyer will refrain from
reproducing, disclosing, or disseminating such information to any Persons other
than its Representatives and their respective employees, Affiliates, agents, and
attorneys unless the Seller or the Company has made such information available
to the public generally or is required by Governmental Authority to disclose
such information publicly.  If this Agreement is terminated and the Transaction
is not consummated, the Buyer will return to the Seller all Confidential
Information of the Company, in tangible form, in the possession of the Buyer at
the date of termination.
 
 
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6.4.          Reasonable Efforts.  Between the Effective Date and the Closing
Date, the Buyer will use its commercially reasonable efforts to cause the
conditions contained in Article Eight to be satisfied.
 
6.5.          Perfection of the Security Interest Created by the Security
Agreement.  The Buyer covenants with the Seller that for so long as the
Promissory Note and the other obligations secured by the security interest in
the Seller Interest created by the Amended and Restated Pledge Agreement and the
assets of the Company created by the Company Security Agreement remain
outstanding, the Buyer will take all actions reasonably requested by the Seller
or the Edsels, as applicable, for the purpose of confirming and maintaining the
priority and perfection of the Liens created under the Amended and Restated
Pledge Agreement and the Company Security Agreement as first and prior, fully
perfected, Liens in and to the collateral described in the Amended and Restated
Pledge Agreement and the Company Security Agreement, as applicable.
 
6.6.          Recording of Retained Interests
 
  The Buyer covenants to the Seller that the Buyer will, upon written request of
Seller, take all action necessary and appropriate to record, register, and
evidence the Retained Profits Interest and the Seller Retained Interest, as
Vested Interests in accordance with Section 2.3(c), as applicable, in a manner
consistent with the terms and conditions set forth in this Agreement.
 
 
ARTICLE SEVEN

 
INDEMNIFICATION
 
7.1.          Survival.  All representations and warranties of the Parties in
this Agreement or any other Transaction Document will survive the Closing and
will expire on the last day of the Applicable Period; provided, that the
Fundamental Representations will survive beyond the end of the Applicable Period
for the applicable statute of limitations; and all covenants and obligations of
the Parties in this Agreement or any other Transaction Document will survive the
Closing.
 
7.2.          Indemnification by the Seller.  The Seller hereby agrees to
indemnify, defend, and hold harmless the Buyer and the Buyer’s Representatives,
owners, controlling Persons, and Affiliates (collectively, the “Buyer
Indemnified Parties”) from and against, and to pay to the Buyer Indemnified
Parties the amount of, all Damages arising, directly or indirectly, from,
asserted against, or incurred by reason of, resulting in any manner from, or
relating in any manner to:
 
(a)     any Breach by the Seller of any representation or warranty made by the
Seller in this Agreement or any other Transaction Document;
 
(b)     any Breach by the Seller of any covenant or obligation of the Seller in
this Agreement or any other Transaction Document; or
 
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(c)     any claim by any Person for any brokerage or finder’s fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with the Seller in connection with
the Transaction.
 
7.3.          Indemnification by the Buyer.  The Buyer hereby agrees to
indemnify, defend, and hold harmless the Seller and the Seller’s
Representatives, owners, controlling Persons, and Affiliates (collectively, the
“Seller Indemnified Parties”) from and against, and to pay to the Seller
Indemnified Parties the amount of, all Damages arising, directly or indirectly,
from, asserted against, or incurred by reason of; resulting in any manner from,
or relating in any manner to:
 
(a)     any Breach by the Buyer of any representation or warranty made by the
Buyer in this Agreement or any other Transaction Document;
 
(b)     the occurrence of any “Default,” as that term is defined in the
Promissory Note, or of an “Event of Default,” as that term is defined in the
Security Agreement;
 
(c)     any Breach by the Buyer of any covenant or obligation of the Buyer in
this Agreement or any other Transaction Document; or
 
(d)     any claim by any Person for any brokerage or finder’s fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with the Buyer in connection with
the Transaction.
 
7.4.          Limitation of Damages; Materiality.
 
(a)     Limitations.  An Indemnifying Party will be liable for Damages only to
the extent of the net amount of Damages.  The net amount of Damages will be the
gross amount of Damages reduced by the aggregate value or amount of any money,
other assets, or properties (including proceeds of insurance, related claims,
cross claims, counterclaims, and the like and any material federal, state,
local, or foreign Tax benefits calculated on a net after-Tax effect for any
loss, expense, or damage based upon the Tax calculation) actually realized or
received by the Indemnified Party in connection therewith; provided, however, in
no event will the Indemnified Party’s acceptance of any money, other assets, or
properties as partial compensation or indemnification from any source for the
amount of its Damages prevent the Indemnified Party from seeking compensation or
indemnification from any source for the rest of the entire amount of its
Damages.  Except as provided in Section 7.4(b), an Indemnified Party will be
entitled to all Damages from an Indemnifying Party to which such Indemnified
Party is entitled under this Article Seven without limitation.
 
 
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(b)     Materiality.
 
(i)     The Buyer Indemnified Parties will not be entitled to assert any claim
for indemnification under Section 7.2(a) with respect to Breaches of
representations and warranties made or given by the Seller unless and until all
indemnifiable Damages suffered by the Buyer Indemnified Parties, in the
aggregate, exceed a deductible amount of $100,000.00, and then only to the
extent of all indemnifiable Damages in excess of such amount.
 
(ii)     The Seller Indemnified Parties will not be entitled to assert any claim
for indemnification under Section 7.3(a) with respect to breaches of
representations and warranties made or given by the Buyer unless and until all
indemnifiable Damages suffered by the Seller Indemnified Parties, in the
aggregate, exceed a deductible amount of $100,000.00, and then only to the
extent of all indemnifiable Damages in excess of such amount.
 
(iii)     The Seller will not have any obligation to indemnify the Buyer
Indemnified Parties from and against indemnifiable Damages attributable to the
Breach of any representation or warranty made or given by the Seller in this
Agreement or any other Transaction Document in excess of an aggregate ceiling of
an amount equal to the lesser of (x) 25% of all principal paid under the
Promissory Note prior to the date on which a claim for indemnification hereunder
is made or (y) $2,000,000.00 (after which point the Seller will not have any
obligation to indemnify the Buyer Indemnified Parties from and against such
further Damages), except (and notwithstanding the foregoing limitation) that
there will be no limit to the amount of indemnifiable Damages for which the
Seller will be responsible to the Buyer Indemnified Parties to the extent all or
any portion of the Damages suffered by the Buyer Indemnified Parties are
attributable to (x) the Breach by the Seller of a Fundamental Representation or
(y) fraudulent acts or omissions, intentional misrepresentations, intentional
concealment of a material matter, intentionally wrongful actions or omissions,
or criminal conduct on the part of the Seller.
 
(iv)     The Buyer will not have any obligation to indemnify the Seller
Indemnified Parties from and against indemnifiable Damages attributable to the
Breach of any representation or warranty made or given by the Buyer in this
Agreement or any other Transaction Document in excess of an aggregate ceiling of
an amount equal to the lesser of (x) 25% of all principal paid under the
Promissory Note prior to the date on which a claim for indemnification hereunder
is made or (y) $2,000,000.00 (after which point the Buyer will not have any
obligation to indemnify the Seller Indemnified Parties from and against such
further Damages), except (and notwithstanding the foregoing limitation) that
there will be no limit to the amount of indemnifiable Damages for which the
Buyer will be responsible to the Seller Indemnified Parties that are
attributable to (x) the Breach by the Buyer of a Fundamental Representation or
(y) fraudulent acts or omissions, intentional misrepresentations, intentional
concealment of a material matter, intentionally wrongful actions or omissions,
or criminal conduct on the part of the Buyer.
 
 
 
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(v)     The provisions of this Section 7.4(b) are not intended to, and shall not
have any effect on, any claims for indemnification related to (i) the Breach by
a Party of any covenant or agreement of such Party contained in this Agreement,
in the Promissory Note, in the Security Agreement, or any other Transaction
Document, or (ii) any claim for Damages asserted against a Party by any
third-party, regardless of the basis for such third-party claim.
 
7.5.          Conditions of Indemnification.
 
(a)     If any claim or demand for which an Indemnifying Party would be liable
to an Indemnified Party hereunder is asserted against or sought to be collected
from an Indemnified Party by a third-Person, the Indemnified Party will promptly
notify the Indemnifying Party of such claim or demand, specifying the nature of
such claim or demand and the amount or the estimated amount thereof to the
extent then feasible (which estimate will not be conclusive of the final amount
of such claim or demand) (the “Claim Notice”).  The Indemnifying Party will then
have 45 Business Days from the date on which the Claim Notice is given (the
“Notice Period”) to notify the Indemnified Party (i) whether or not the
Indemnifying Party disputes the liability to the Indemnified Party hereunder
with respect to such claim or demand, and (ii) notwithstanding such dispute,
whether or not the Indemnifying Party desires, at its sole cost and expense, to
defend the Indemnified Party against such claim or demand.
 
(b)     Pending the resolution of any dispute by the Indemnifying Party of its
liability with respect to any such claim or demand, such claim or demand will
not be settled without the prior written consent of the Indemnified Party, which
consent will not be unreasonably withheld, delayed, or conditioned.
 
(c)     If the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against such claim
or demand, then, except as hereinafter provided, the Indemnifying Party will
have the right to defend the Indemnified Party by appropriate proceedings, which
will be promptly settled or prosecuted to a final conclusion in such a manner as
to avoid any risk that the Indemnified Party will become subject to liability
for any other matters; provided, however, that the Indemnifying Party will not,
without the prior written consent of the Indemnified Party, consent to the entry
of any judgment against the Indemnified Party or enter into any settlement or
compromise that does not include, as an unconditional term thereof, a release by
the claimant or plaintiff of the Indemnified Party (such release to be in form
and substance satisfactory to the Indemnified Party) from all liability in
respect of such claim or demand.  The Indemnifying Party will be entitled to
select legal counsel for the defense of such claim or demand, with the approval
of the Indemnified Party, which approval will not be unreasonably withheld,
delayed, or conditioned.  If the Indemnified Party desires to participate in,
but not control, any such defense or settlement of such claim or demand, it may
do so at its sole cost and expense, and in such event, the Indemnified Party and
its counsel will be provided access to all such files, records,
 
 
 
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and other materials as the Indemnified Party may request in order to assure its
ability to participate.  If, in the reasonable judgment of the Indemnified
Party, any such claim or demand or the litigation or resolution of any such
claim or demand involves an issue or matter that could have a Material Adverse
Effect on the business, operations, assets, properties, or prospects of the
Indemnified Party, including the administration of any Tax returns and
responsibilities under Tax Laws of the Indemnified Party, then the Indemnified
Party will have the Right to control the defense or settlement of any such claim
or demand, and the costs and expenses of such defense or settlement will be
included as part of the indemnification obligations of the Indemnifying Party
hereunder; provided, however, that the Indemnified Party will not settle any
such claim or demand without the prior written consent of the Indemnifying Party
(which consent will not be unreasonably withheld, delayed, or conditioned).  If
the Indemnified Party should elect to exercise such Right to control the defense
or settlement, the Indemnifying Party will have the Right to participate in, but
not control, the defense or settlement of such claim or demand at its sole cost
and expense.
 
(d)     If the Indemnifying Party elects not to defend the Indemnified Party
against such claim or demand, whether by not giving the Indemnified Party timely
notice as provided above or otherwise, then the amount of any such claim or
demand (together with all fees and expenses, including attorneys’ fees, incurred
by the Indemnified Party as a consequence of the Indemnifying Party’s failure to
defend the Indemnified Party), or if the same be defended by the Indemnified
Party, then that portion thereof as to which such defense is unsuccessful, will
conclusively be deemed to be a liability of the Indemnifying Party hereunder,
unless the Indemnifying Party disputes its liability to the Indemnified Party
hereunder.
 
(e)     If the Indemnified Party shall have a claim against the Indemnifying
Party hereunder that does not involve a claim or demand being asserted against
or sought to be collected from it by a third-Person, the Indemnified Party will
promptly send a Claim Notice with respect to such claim to the Indemnifying
Party.  If the Indemnifying Party does not notify the Indemnified Party within
the Notice Period that it disputes such claim, the amount of such claim will
conclusively be deemed a liability of the Indemnifying Party hereunder.
 
7.6.          Payment of Indemnity.  Upon determination of liability under
Section 7.2 or Section 7.3, and subject to the limitations set forth in
Section 7.4 and Section 7.5, the appropriate Indemnifying Party will pay to the
appropriate Indemnified Party the amount of all Damages payable in respect of
the claim giving rise to such liability within 20 Business Days after the
determination of the amount of such Damages attributable to such claim, and the
Indemnifying Party will be subrogated to the Rights of the Indemnified Party
against any Person with respect to the subject matter of such claim.
 
7.7.          Expiration of Indemnification Rights.  Except as otherwise
expressly provided in this Section 7.7 or elsewhere in this Agreement, the
Rights of the Indemnified Parties to indemnification under Section 7.2 or
Section 7.3, as applicable, will expire and be of no further effect after the
last day of the Applicable Period, and accordingly no Indemnified Party may seek
indemnification under this Agreement after the last day of the Applicable
Period.  The foregoing
 
 
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notwithstanding, none of the provisions set forth in this Agreement, including
but not limited to the provisions contained in this Section 7.7, shall be deemed
to limit the time period during which a claim based on a Party’s fraudulent
acts, fraudulent omissions, criminal conduct, or acts of intentional wrongdoing,
may be brought.
 
7.8.          Indemnification Rights Exclusive.  The Indemnification Rights of
the Parties (and the Indemnified Parties) under this Article Seven are the
exclusive Rights of each Party (and each Indemnified Party) for monetary damages
or in equity, or otherwise, for any Breach of this Agreement; provided that a
Party, at its election, may seek injunctive or similar relief for the breach of
a covenant contained in Article Five or Six, as applicable, on the part of the
other Party; and provided further, that the Seller, at its election, may
exercise any Rights of any kind to which it may be entitled under the Promissory
Note, the Security Agreement, or applicable Law with respect to any “Default”
under the Promissory Note or “Event of Default” under the Security Agreement,
without limitation.
 
ARTICLE EIGHT
 
CONDITIONS PRECEDENT
 
8.1.          Conditions to Obligations of Each Party.  The obligations of the
Seller and the Buyer to consummate the Transaction will be subject to the
fulfillment on or prior to the Closing Date of the conditions set forth in
Section 2.3 (including the delivery of all documents, certificates, instruments,
and opinions described therein) and to the conditions set forth in this
Article Eight.
 
8.2.          Conditions to Obligations of the Buyer.  The obligation of the
Buyer to consummate the Transaction will be subject to the fulfillment (or
waiver by the Buyer) on or prior to the Closing Date of the following additional
conditions:
 
(a)     The representations and warranties of the Seller contained in
Article Three shall be true and correct on and as of the Effective Date and
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except as
affected by the Transaction.  The Seller shall have duly performed and complied
in all material respects with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.  The Seller will have delivered to the Buyer a Seller Closing Certificate,
dated the Closing Date, to the effect set forth above in this Section 8.2(a).
 
(b)     All company and other proceedings of the Seller and the Company in
connection with the Transaction contemplated by this Agreement, and all
documents and instruments incident thereto, shall be reasonably satisfactory in
substance and form to the Buyer, and the Buyer shall have received all such
documents and instruments, or copies thereof, certified if requested, in respect
of such company and other proceedings as may be reasonably requested by the
Buyer.
 
 
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(c)     All Consents, if any, of any Governmental Authority or any other Person
that are required in connection with the Transaction shall have been duly
obtained and shall be effective on and as of the Closing Date.  No stop order
enjoining the consummation of the Transaction shall have been issued and no
proceedings for such purpose shall be pending or, to the Knowledge of the Seller
and the Buyer, threatened by or before any Governmental Authority.  At the time
of the Closing, the sale of the Seller Interest to the Buyer shall be legally
permitted by all Laws to which the Seller and the Buyer are subject.  Moreover,
no Litigation shall have been instituted or threatened before any Governmental
Authority that challenges the validity or legality of the Transaction.
 
(d)     The Seller shall cause to be delivered a bring down to the Title Report
dated as of the Closing Date.
 
8.3. Conditions to Obligations of the Seller.  The obligation of the Seller to
consummate the Transaction shall be subject to the fulfillment (or waiver by the
Seller) on or prior to the Closing Date of the following additional conditions:
 
(a)     The representations and warranties of the Buyer contained in
Article Four shall be true and correct on and as of the Effective Date and shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as though made on and as of the Closing Date, except as affected
by the Transaction.  The Buyer shall have duly performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with by it prior to or on the Closing Date.  The
Buyer shall have delivered to the Seller a Buyer Closing Certificate, dated the
Closing Date and signed by an authorized officer of the Buyer, to the effect set
forth above in this Section 8.3(a).
 
(b)     All company and other proceedings of the Buyer in connection with the
Transaction, and all documents and instruments incident thereto, shall be
reasonably satisfactory in substance and form to the Seller, and the Seller
shall have received all such documents and instruments, or copies thereof;
certified if requested, in respect of such company and other proceedings as may
be reasonably requested by the Seller.
 
(c)     All Consents, if any, of any Governmental Authority or any other Person,
including the Edsel Consent, that are required in connection with the
Transaction shall have been duly obtained and shall be effective on and as of
the Closing Date.  No stop order enjoining the consummation of the Transaction
shall have been issued and no proceedings for such purpose shall be pending or,
to the Knowledge of the Seller and the Buyer, threatened by or before any
Governmental Authority.  At the time of the Closing, the sale of the Seller
Interest to the Buyer shall be legally permitted by all Laws to which the Seller
and the Buyer are subject.  Moreover, no Litigation shall have been instituted
or threatened before any Governmental Authority that challenges the validity or
legality of the Transaction.
 
 
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ARTICLE NINE

 
TERMINATION
 
9.1.          Termination.  This Agreement and the Transaction may be terminated
on or before the Closing Date as follows:
 
(a)     By the mutual written agreement of the Buyer and the Seller;
 
(b)     By the Buyer if a Breach of any provision of this Agreement has been
committed by the Seller and such Breach has not been waived by the Buyer;
 
(c)     By the Seller if a Breach of any provision of this Agreement has been
committed by the Buyer and such Breach has not been waived by the Seller;
 
(d)     By the Buyer if any of the conditions to the obligations of the Buyer
set forth in Section 2.3 or Section 8.2 has not been satisfied as of the Closing
Date (other than through the failure of the Buyer to comply with the Buyer’s
obligations under this Agreement) and the Buyer has not waived such condition on
or before the Closing Date;
 
(e)     By the Seller if any of the conditions to the obligations of the Seller
set forth in Section 2.3 or Section 8.3 has not been satisfied as of the Closing
Date (other than through the failure of the Seller to comply with the Seller’s
obligations under this Agreement) and the Seller has not waived such condition
on or before the Closing Date; or
 
(f)     By the Buyer or the Seller, if the Transaction has not been consummated
by June 10, 2011, unless extend by the Parties, for any reason other than a
Breach by the terminating Party.
 
9.2.          Effect of Termination.  Each Party’s Right of termination under
Section 9.1 is in addition to any other Rights it may have under this Agreement
or otherwise, and the exercise of a Right of termination will not be deemed to
be an election of remedies.  If this Agreement is terminated pursuant to
Section 9.1, all further obligations of the Parties under this Agreement will
terminate; provided, however, that if this Agreement is terminated by either
Party because of the Breach of this Agreement by the other Party, or because one
or more of the conditions of the terminating Party’s obligations under this
Agreement is not satisfied as a result of the other Party’s failure to comply
with its obligations under this Agreement, the terminating Party’s Right to
pursue all legal or equitable remedies will survive such termination unimpaired.
 
 
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9.3.          Notice of Termination.  The Parties may exercise their respective
Rights of termination under Section 9.1 by the delivery of written notice of
termination to the other Party at any time prior to the completion of the
Closing.
 
ARTICLE TEN

 
MISCELLANEOUS
 
10.1.          Expenses.  Except as set forth below in this Section 10.1, the
Seller, on the one hand, and the Buyer, on the other hand, will bear its
respective expenses, costs, and fees (including, without limitation, attorneys’
fees) in connection with the Transaction, including the preparation,
negotiation, and execution of this Agreement and the other Transaction Documents
and compliance herewith and therewith, whether or not the Transaction is
consummated.  In the event of termination of this Agreement, the obligation of
each Party to pay its own expenses will be subject to any Rights of such Party
arising from a Breach of this Agreement by the other Party.
 
10.2.          Severability.  If any provision of this Agreement is inoperative
or unenforceable for any reason, such circumstance will not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever.  The
invalidity of any one or more phrases, sentences, clauses, paragraphs, Sections,
or Subsections of this Agreement will not affect the remaining portions of this
Agreement.
 
10.3.          Notices.  All notices, requests, demands, and other
communications made in connection with this Agreement must be in writing and
will be deemed to have been duly given when delivered by (a) first-class,
registered, or certified mail, return receipt requested, postage prepaid, or (b)
transmitted by courier, hand delivery, or facsimile, addressed to the respective
Parties as follows:
 
If to the Buyer:
Digital Valleys Corp.
Attn: David Brow
1100 Dexter Ave. North
Suite 100
Seattle, Washington 98109
Facsimile:
 
With a copy (which
will not constitute
notice) to:
Facsimile:
Dorsey & Whitney LLP
Attn: Kenneth Sam
1400 Wewatta Street
Suite 400
Denver, Colorado 80202
Facsimile:  (303) 629-3450
 

 
 
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If to the Seller or
 the Company:
High Plains Oil, LLC
Attn:  Jeff Johnson
8916 Estribo Circle
Benbrook, Texas 76126
Facsimile:
 
with copy (which
will not constitute
notice) to:
 
 
 

Any notice that is addressed and mailed in the manner herein provided will be
conclusively presumed to have been given to the Party to which it is addressed
and will be deemed effective at the close of business, local time of the
recipient, on the third day after the date it is so placed in the mail.  Any
notice that is delivered by courier, hand delivery, or facsimile shall be deemed
given at the time of actual receipt.  However, if an attempt to give notice by
facsimile transmission fails because of any problem with the recipient’s
designated facsimile number or facsimile equipment, such notice will
nevertheless be considered to have been received at the time such transmission
was attempted if it is also sent that day by guaranteed overnight delivery to
the recipient for receipt on the following day and received on such following
day.  In any case, such notices, requests, demands, and other communications
will be sent to such other addresses as either Party will notify the other by
notice given in the manner described above.
 
10.4.          Headings.  The headings contained in this Agreement are for
purposes of convenience only and will not affect the meaning or interpretation
of this Agreement.
 
10.5.          Entire Agreement.  This Agreement, including the Exhibits and
Schedules appended hereto, constitutes the entire agreement and supersedes all
prior agreements and understandings, whether written or oral, between or among
the Parties with respect to the subject matter hereof.
 
10.6.          Counterparts; Signature Pages.  This Agreement may be executed in
any number of counterparts, each of which will be deemed an original and all of
which will together constitute one and the same instrument.  Any signature page
delivered by facsimile machine or electronic mail (including any pdf format)
shall be binding to the same extent as an original signature page.  Any Party
that delivers a signature page by facsimile machine or electronic mail agrees to
deliver promptly upon request an original counterpart signature page to any
Party that makes such request.
 
 
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10.7.          Governing Law; Venue.
 
(a)     Governing Law.  THIS AGREEMENT AND EACH OTHER TRANSACTION DOCUMENT IS
BEING EXECUTED AND DELIVERED, AND IS INTENDED TO BE PERFORMED, IN THE STATE OF
TEXAS, AND THE LAWS (OTHER THAN CONFLICT OF LAWS PROVISIONS THEREOF) OF THE
STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND
DUTIES OF THE PARTIES AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND
INTERPRETATION OF THIS AGREEMENT AND EACH OTHER TRANSACTION DOCUMENT.
 
(b)     Venue.  The Buyer and the Seller hereby irrevocably submit to the
jurisdiction of the courts of the State of Texas and the state courts of the
United States of America located in Travis County, Texas solely in respect of
the interpretation and enforcement of the provisions of this Agreement and of
the documents referred to in this Agreement and hereby waive, and agree not to
assert, as a defense in any action, suit, or proceeding for the interpretation
or enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit, or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any of such documents may not be enforced in or by said courts, and
the Parties hereto irrevocably agree that all claims with respect to such action
proceeding will be heard and determined in such a Texas State court.  The Buyer
and the Seller hereby consent to and grant any such court jurisdiction over the
person of such Parties and over the subject matter of any such dispute.
 
10.8.          Binding Effect.  This Agreement will be binding upon and inure to
the benefit of the Parties hereto and their respective successors and permitted
assigns.
 
10.9.          Assignment.  This Agreement will not be assignable by either
Party hereto without the prior written consent of the other Party hereto.
 
10.10.          No Third Party Beneficiaries.  Nothing in this Agreement will
confer any Rights upon any Person other than the Parties hereto (and the
Indemnified Parties, to the extent provided in Article Seven), and their
respective successors and permitted assigns.
 
10.11.          Amendment; Waivers.  No amendment, modification, or discharge of
this Agreement, and no waiver hereunder, will be valid or binding unless set
forth in writing and duly executed by the Party against whom enforcement of the
amendment, modification, discharge, or waiver is sought.  Neither the waiver by
any of the Parties hereto of a Breach of any of the provisions of this
Agreement, nor the failure by any of the Parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any Right
hereunder, will be construed as a waiver of any other Breach of a similar
nature, or as a waiver of any of such provisions or Rights hereunder.
 
10.12.          Time of the Essence.  With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
 
 
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10.13.          Negotiated Transaction.  The provisions of this Agreement were
negotiated by the Parties hereto, and this Agreement will be deemed to have been
drafted by all of the Parties hereto.
 
10.14. Attorney’s Fees.  In the event that either Party is required to obtain
the services of an attorney in order to enforce any Right or obligation under
this Agreement or any other Transaction Document, the prevailing Party shall be
entitled to recover reasonable attorney’s fees and court costs from the other
Party.
 
[Signature Page Follows]
 
 
 
 
 
 
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EXECUTED to be effective on and as of the Effective Date, notwithstanding that
this Agreement and other Transaction Documents may be executed and delivered on
a later date.
 
 
 

  THE BUYER:
 
DIGITAL VALLEYS CORP.

By:    ___________________________________
Printed Name:  ____________________________  
Title:   __________________________________
          THE SELLER:
 
HIGH PLAINS OIL, LLC

By:    ___________________________________
Printed Name:  ___________________________  
Title:   __________________________________
          THE COMPANY:
 
JHE HOLDINGS, LLC

By:    ___________________________________
Printed Name:  ___________________________  
Title:   __________________________________
   

 

 

[Signature Page to Membership Interest Purchase Agreement]
 

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