PURCHASE, SALE AND JOINT EXPLORATION AGREEMENT

between

Rangeford Resources, Inc. (“Purchaser”)

and

Black Gold Kansas Production, LLC, ( “Seller”)

January 2014

i

Exhibits

A

Schedule 1:

Leases

Schedule 1A:

Wells

Schedule 2:

Contracts

Schedule 3:

Allocated Value

B

Form of Assignment, Bill of Sale and Conveyance

C

Escrow Agreement

D

Form 601

ii

PURCHASE, SALE AND JOINT EXPLORATION AGREEMENT

This Purchase, Sale and Joint Exploration Agreement (this “Agreement”) is made
and entered into as of the day of January, 2014, by and between Rangeford
Resources, Inc., a Nevada corporation and (“Purchaser”), and Black Gold Kansas
Production, LLC, a Texas limited liability company (“Seller”).

Recitals

A.

Seller desires to sell to Purchaser, and Purchaser desires to purchase from
Seller, the Assets (as defined below), all upon the terms and conditions
hereinafter set forth.

B.

Purchaser and Seller (together, the “Parties” and each, a “Party”) desire to
make certain representations, warranties, covenants and agreements in connection
with such sale and purchase and also to prescribe various conditions thereto.

In consideration of the recitals and the mutual covenants and agreements set
forth in this Agreement, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1

Defined Terms

.  As used in this Agreement, each of the following terms has the meaning given
in this Section 1.1 or in the Section referred to below:

“Affiliate” means, with respect to any Person, each other Person that directly
or indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with such Person.

“Agreement” means this Purchase and Sale Agreement, as amended, supplemented or
modified from time to time.

“Allocated Values” means the allocation of values for all of the Assets shown on
Exhibit A, Schedule 3. Exhibit A, Schedule 3 is sometimes referred to herein as
the “Allocated Value Schedule.”

“Arbitrator” has the meaning specified in Section 5.9.

“Assets” has the meaning specified in Section 2.2.

“Assignment” has the meaning specified in Section 8.7(a).

“Assumed Obligations” has the meaning specified in Section 10.1.

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“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in Tulsa, Oklahoma, are authorized or required by law to close.

“Casualty Loss” has the meaning specified in Section 11.3.

“CERCLA” has the meaning specified in this Section 1.1 in the definition of the
term Environmental Law.

“Claims” has the meaning specified in Section 10.5.

“Clean Air Act” has the meaning specified in this Section 1.1 in the definition
of the term Environmental Law.

“Closing” means the closing and consummation of the transactions contemplated by
this Agreement.

“Closing Date” means January, 2014 or such other date on which Purchaser and
Seller may mutually agree, subject to delay as provided in Sections 5.4, 5.7 and
5.8.

“Code” means the Internal Revenue Code of 1986, as amended.

“Confidentiality Agreement” means the Confidentiality Agreement dated [▲], 2014,
between Seller and [Purchaser or relevant Affiliate] relating to Seller’s
furnishing of information to Purchaser in connection with Purchaser’s evaluation
of the Assets.

“Consent” has the meaning specified in Section 5.10(a).

“Contracts” has the meaning specified in Section 2.2(d).

“Cure Period” has the meaning specified in Section 5.5(b).

“Deductible” has the meaning specified in Section 10.10.

“Designated Accountant” means Bobby J. Walker, CPA, or if such firm is unable or
unwilling to serve, such other independent accounting firm not used by Seller or
Purchaser as is mutually appointed by Purchaser and Seller.

“Earnest Money” has the meaning specified in Section 2.5.

“Earnest Money Retention Event” means either (a) Purchaser’s failure or refusal
to close the transactions contemplated by this Agreement on the Closing Date at
a time when (i) each of the conditions contained in Sections 7.1 and 7.2
(excluding Seller’s performance of its obligations at the Closing) has been
either fulfilled in all material respects or waived and (ii) Seller is ready,
willing and able to perform in all material respects its obligations at the
Closing, or (b) Seller’s termination of this Agreement pursuant to Section
9.1(d).

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“Effective Time” means 7:00 a.m. local time at the location of the Assets on [ 
], 2014. “Environmental Defect” means a condition, occurrence, event or activity
on or related to the Assets (i) any surface or mineral lease obligation, whether
an express or implied obligation, relating to natural resources, conservation,
the environment, or the emission, release, storage, treatment, disposal,
transportation, handling, or management of industrial or solid waste, hazardous
waste, hazardous or toxic substances, chemicals or pollutants, petroleum,
including, without limitation, crude oil, natural gas, natural gas liquids, or
liquefied natural gas, and any wastes associated with the exploration and
production of oil and gas which violates Environmental Law.

“Environmental Defect Notice” has the meaning specified in Section 5.8(a).

“Environmental Defect Value” has the meaning specified in Section 5.8(b).

“Environmental Disputes” has the meaning specified in Section 5.8(d).

“Environmental Law” means any present and future law, common law, ordinance or
regulation of any Governmental Authority, as well as any order, decree, permit,
judgment or injunction issued, promulgated, approved or entered thereunder,
relating to the environment, health and safety, Hazardous Material (including
the use, handling, transportation, production, disposal, discharge, release or
storage thereof), industrial hygiene, the environmental conditions on, under, or
about any real property owned, leased or operated by Seller and included in the
Assets, including soil, groundwater, and indoor and ambient air conditions or
the reporting or remediation of environmental contamination. Environmental Laws
include the Clean Air Act, as amended (the “Clean Air Act”), the Federal Water
Pollution Control Act, as amended, the Rivers and Harbors Act of 1899, as
amended, the Safe Drinking Water Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended (“CERCLA”),
the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Resource Conservation and Recovery Act of 1976, as amended (“RCRA”), the
Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic
Substances Control Act, as amended, the Hazardous Materials Transportation Act,
as amended, and any other Law whose purpose is to conserve or protect human
health, the environment, air quality, wildlife or natural resources.

“Environmental Obligations” has the meaning specified in Section 10.4.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time and the regulations promulgated thereunder.

“Escrow Account” means the account maintained by the Escrow Agent pursuant to
the Escrow Agreement.

“Escrow Agent” means [▲].

“Escrow Agreement” means an Escrow Agreement among Purchaser, Seller and the
Escrow Agent substantially in the form of Exhibit C.

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“Excluded Assets” has the meaning specified in Section 2.3.

“Expiration Date” has the meaning specified in Section 10.11.

“Final Settlement Date” has the meaning specified in Section 8.4(a).

“Final Settlement Statement” has the meaning specified in Section 8.4(a).

“Governmental Authority” means any national, state, county or municipal
government, domestic or foreign, any agency, board, bureau, commission, court,
department or other instrumentality of any such government, or any arbitrator in
any case that has jurisdiction over any of the Parties or any of their
respective properties or assets.

“Hazardous Material” means (a) any “hazardous substance,” as defined by CERCLA;
(b) any “hazardous waste” or “solid waste,” in either case as defined by RCRA;
(c) any solid, hazardous, dangerous or toxic chemical, material, waste or
substance, within the meaning of and regulated by any Environmental Law; (d) any
asbestos-containing materials in any form or condition; (e) any polychlorinated
biphenyls in any form or condition; (f) Hydrocarbons or any fractions or
byproducts thereof; or (g) any air pollutant which is so designated by the U.S.
Environmental Protection Agency as authorized by the Clean Air Act.

“Hydrocarbons” has the meaning specified in Section 2.2(a).

“Interest Addition” has the meaning specified in Section 5.6.

“Interim Operating Expenses” has the meaning specified in Section 8.2(a)(iv).

“Inventory” has the meaning specified in Section 8.2(a)(v).

“Lands” has the meaning specified in Section 2.2(a).

“Laws” has the meaning specified in Section 10.1(c).

“Leases” and “Lease” have the respective meanings specified in Section 2.2(a).

“Lien” means any lien, mortgage, security interest, pledge, deposit,
restriction, burden, encumbrance, rights of a vendor under any title retention
or conditional sale agreement, or lease or other arrangement substantially
equivalent thereto, but does not include any production payment obligation.

Liens created by supplies , workmen and operators arising by operation of law in
the ordinary course of business or by a written agreement existing as of the
date hereof and necessary or incident to the exploration, development, operation
and maintenance of Hydrocarbon properties and related facilities and assets for
sums not yet due or being contested in good faith by appropriate proceedings;
(c) Liens incurred in the ordinary course of business in connection with
worker’s compensation, unemployment insurance and other social security
legislation (other than ERISA) which would not, individually or

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in the aggregate, result in a Material Adverse Effect on Seller; (d) Liens
incurred in the ordinary course of business to secure the performance of bids,
tenders, trade contracts, leases, statutory obligations, surety and appeal
bonds, performance and repayment bonds and other obligations of a like nature;
(e) Liens, easements, rights-of-way, restrictions, servitudes, permits,
conditions, covenants, exceptions, reservations and other similar encumbrances
incurred in the ordinary course of business or existing on property that do not
impair the value of the Assets or interfere with Seller’s right to ownership,
use or operation of the Assets; (f) Liens created or arising by operation of law
to secure a Party’s obligations as a purchaser of oil and gas; (g) all rights to
consent by, required notices to, filings with, or other actions by Governmental
Authorities to the extent customarily obtained subsequent to closing; (h)
farmout, carried working interest, joint operating, participation, unitization,
geologist retainer, royalty, overriding royalty, sales and similar agreements
relating to the exploration or development of, or production from, Hydrocarbon
properties entered into in the ordinary course of business, provided the effect
there “Material Adverse Effect” means (a) when used with respect to Seller, a
result or consequence that would materially and adversely affect the value of
the Assets, or would materially and adversely affect Seller’s ability to perform
its obligations hereunder or consummate the transactions contemplated hereby or
prevent or materially delay the performance of this Agreement; and (b) when used
with respect to Purchaser, a result or consequence that would materially and
adversely affect Purchaser’s ability to realize the value of the ownership, use
and operation of the Assets or perform its obligations hereunder or consummate
the transactions contemplated hereby or prevent or materially delay the
performance of this Agreement; provided, however, the term Material Adverse
Effect shall exclude any effect resulting from or related to changes or
developments involving (i) general conditions applicable to the economy of the
United States or the State of Kansas , (ii) conditions affecting the oil and gas
industry generally or in the State of Kansas , (iii) capital market conditions
in the United States, (iv) conditions or effects resulting from the announcement
of the existence of this Agreement, (v) conditions relating to commodity prices,
or (vi) changes in Laws or the interpretation thereof.

 “Net Revenue Interest” means a fractional or percentage interest in and to all
Hydrocarbons produced from or allocated to an Asset (insofar as such
Hydrocarbons are attributable to the Identified Zone for such Asset) after
deduction of all third party royalties, overriding royalties, and other burdens
and payments out of production that burden such fractional or percentage
interest.

“NORM” has the meaning specified in Section 11.2.

“Notice Date” means ___ January, 2014.

“Notice of Disagreement” has the meaning specified in Section 8.4(a).

“Parties” and “Party” have the respective meanings specified in the Recitals to
this Agreement.

“Permits” has the meaning specified in Section 2.2(e).

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“Permitted Encumbrances” means: (a) Liens for taxes, assessments or other
governmental charges or levies if the same shall not at the particular time in
question be due and delinquent or are being contested in good faith by
appropriate proceedings; (b) Liens of carriers, warehousemen, mechanics,
laborers, materialmen, landlords, vendors of on the Working Interest and Net
Revenue Interest has been properly reflected on Exhibit A, Schedule 3 (c )
Preferential Rights and Third-Party Consents subject to Article 5.10; ( d ) the
terms and provisions of all Leases to the extent such terms and provisions have
no effect on the Working Interest or Net Revenue Interests; ( e ) valid,
subsisting and applicable laws, rules and orders of any Governmental
Authorities; ( f ) Liens arising under the Seller Credit Agreement (it being
understood that the release of such Liens is a condition to the Closing as
provided in Section 7.2(c)); ( g ) claims at issue in any pending litigation
disclosed on Schedule 3.5 and (p) any Liens, defects, irregularities or
deficiencies arising on account of the acts or omissions of Purchaser or its
Affiliates, or the representatives or agents of either.

“Person” (whether or not capitalized) means any natural person, corporation,
company, limited or general partnership, joint stock company, joint venture,
association, limited liability company, trust, bank, trust company, land trust,
business trust or other entity or organization, whether or not a Governmental
Authority.

“Plugging and Abandonment Obligations” has the meaning specified in Section
10.3.

“Preferential Rights” has the meaning specified in Section 3.4.

“Production Imbalances” means gas imbalances and make-up obligations related to
the Assets regardless of whether such imbalances or make-up obligations arise
before or after the Effective Time, at the wellhead, pipeline, gathering system
or other location, and regardless of whether the same arise under contract or
otherwise.

“Purchase Price” has the meaning specified in Section 2.4.

“Purchase Price Allocations and Adjustments” has the meaning specified in
Section 8.2(c).

“Purchaser” has the meaning specified in the opening paragraph of this
Agreement.

“Purchaser Indemnified Parties” has the meaning specified in Section 10.8.

“Purchaser’s Knowledge” has the meaning specified in Section 4.5.

“RCRA” has the meaning specified in this Section 1.1 in the definition of the
term Environmental Law.

“Records” has the meaning specified in Section 2.2(g).

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“Representatives” means, with respect to any Person, the Affiliates of such
Person and the officers, directors, managers, members, shareholders, agents,
contractors and employees of such Person and of each Affiliate of such Person.

“Responsible Officer” means, with respect to any entity, the Chief Executive
Officer, President, Chief Operating Officer, Chief Financial Officer or any Vice
President of such entity or, if such entity is a limited partnership, of the
general partner of such entity.

“Seller” has the meaning specified in the opening paragraph of this Agreement.

 “Seller’s Knowledge” has the meaning specified in Section 3.4.

“Statement” has the meaning specified in Section 8.3.

“Straddle Period” has the meaning specified in Section 8.6.

“Subject Defect” has the meaning specified in Section 5.5.

“Subject Interests” and “Subject Interest” have the respective meanings
specified in Section 2.2(a).

“Suspended Proceeds” means all proceeds of production from the Assets that
Seller is holding as of the Closing Date owing to any Person having a royalty,
overriding royalty, leasehold cost bearing or working interest, net profits
interest, production payment, or other interest in respect of the production of
Hydrocarbons attributable to the Assets before the Closing Date.

“Third-Party Consent” means the consent or approval of any Person, or
Governmental Authority, other than Seller or Purchaser.

“Title Defect” means:  (a) Seller’s interest in an Asset is subject to a Lien
other than a Permitted Encumbrance; (b) the Net Revenue Interest of Seller in
the Identified Zone of an Asset is less than the Net Revenue Interest shown in
Exhibit A, Schedule 3 in no event shall either a Permitted Encumbrance or  an
individual Title Defect having a Title Defect Value of less than $10,000
constitute a Title Defect for purposes of this Agreement.  In evaluating whether
an encumbrance, encroachment, irregularity, defect in or objection to title
constitutes a Title Defect, due consideration shall be given to the length of
time that the Assets affected thereby have been producing Hydrocarbons, whether
such Assets are in “pay status” and whether such defect is of the type expected
to be encountered in the area involved and is customarily acceptable to prudent
operators and interest owners. (As used herein, “pay status” means payments
being made by a third party for the production from the Assets without indemnity
from the seller of production except such indemnities as are customarily
included in division orders, transfer orders, product purchase agreements and
similar instruments commonly used in connection with the payment of proceeds
from production.) In no event shall any of the following constitute Title
Defects: defects that have been cured by possession under applicable statutes of
limitation; failure to recite marital status in documents; lack of heirship or

9

succession proceedings; failure to subordinate mortgages granted by a mineral
lessor; lack of survey; failure to record releases of lien, production payments
or mortgages that have expired of their own terms; failure to obtain or record
releases of prior oil and gas leases that have expired in accordance with their
terms; defects arising out of lack of corporate or other entity authorization of
any party other than Seller, unless Purchaser provides evidence that the action
was not authorized and provides affirmative evidence that such failure results
in another person’s superior claim of title; any delay in delivering an
assignment earned under a farmout, participation or similar agreement unless
there is evidence that the farmor or other third party record title holder has
refused to deliver such assignment; defects arising from any change in Laws
after the execution date of this Agreement; Leases that are subject to
termination upon expiration of their primary term at any time after the
Effective Date; and pooling orders included in the Leases that are subject to
termination upon their expiration.  

“Title Defect Notice” has the meaning specified in Section 5.3.

“Title Defect Value” means, with respect to a Title Defect, the amount of the
downward adjustment to the Purchase Price on account of such Title Defect, which
amount shall in no event exceed the value allocated on the Allocated Value
Schedule to  of the Asset affected by such Title Defect.  

“Title Disputes” has the meaning specified in Section 5.4.

“Wells” and “Well” have the respective meanings specified in Section 2.2(b).

“Working Interest” means a fraction or percentage of the costs and expenses
associated with the maintenance, exploration, development, operation and
abandonment of an Asset.

1.2

References and Titles.  All references in this Agreement to Exhibits, Schedules,
Articles, Sections, subsections and other subdivisions refer to the
corresponding Exhibits, Schedules, Articles, Sections, subsections and other
subdivisions of or to this Agreement unless expressly provided otherwise.
Exhibits and Schedules referred to herein are attached to and by this reference
incorporated herein for all purposes. Titles appearing at the beginning of any
Articles, Sections, subsections or other subdivisions of this Agreement are for
convenience only, do not constitute any part of this Agreement, and shall be
disregarded in construing the language hereof. The words “this Agreement,”
“herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer
to this Agreement as a whole and not to any particular subdivision unless
expressly so limited. The words “this Article,” “this Section” and “this
subsection,” and words of similar import, refer only to the Article, Section or
subsection hereof in which such words occur. The word “or” is not exclusive, and
the word “including” (in its various forms) means including without limitation.
Pronouns in masculine, feminine or neuter genders shall be construed to state
and include any other gender, and words, terms and titles (including terms
defined herein) in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. As used in the
representations and warranties contained in this Agreement, the

10

phrase “to the knowledge” of the representing Party refers to the actual
knowledge, without a duty of further inquiry, of a Responsible Officer of such
representing Party. Disclosure of a matter on a Schedule hereto shall not be
deemed a determination by a Party that such matter is material for purposes of
this Agreement. All references to dollar amounts herein refer to United States
dollars.  If the date specified in this Agreement for giving any notice or
taking any action is not a Business Day (or if the period during which any
notice is required to be given or any action taken expires on a date that is not
a Business Day), then the date for giving such notice or taking such action (and
the expiration of such period during which notice is required to be given or
action taken) shall be the next day that is a Business Day.

ARTICLE II

PURCHASE AND SALE

2.1

Agreement to Purchase and Sell

.  Subject to and in accordance with the terms and conditions of this Agreement,
Purchaser agrees to purchase the Assets from Seller, and Seller agrees to sell
the Assets to Purchaser.

2.2

Assets

.  Subject to Section 2.3, the term “Assets” means that percentage working and
net revenue interest in and to the Bronson Xenia oilfield identified as follows:
:

(a)

an undivided sixty percent (60%) working interest delivering a forty eight
percent (48%) in and to the George lease, containing one hundred ninety (190
acres) in Bourbon County, Kansas, with four (4) wells connected to tank
batteries of 990 barrels storage capacity, gravel roads, electric meters,
electric line and power poles, flow lines and pumping units, rods and down hole
pumps on location, with electric lines trenched for the George #5 and #6 to be
drilled (“George Lease”).

(b)

an undivided seventy-five percent (75%) working interest, delivering a sixty
percent (60%) net revenue interest in and two 2,950 + acres in Bourbon and Allen
Counties, Kansas, with additional leasing in progress and existing leases having
a primary terms ranging from 2 to 5 years with all but one having 2 to 5 year
extension options ( “ 2,950 Acres”).

(c)

a like undivided interest in and to all wells, whether producing, shut in or
abandoned, and whether for production, injection or disposal, or otherwise
associated with the Subject Interests, including those described in Exhibit A,
Schedule, 2 (collectively, the “Wells” and each a “Well”); (collectively, the
“Leases” and each a “Lease”) and any overriding royalty interests, royalty
interests, non-working or carried interests, operating rights, mineral rights
and other rights and interests described on Exhibit A, Schedule 1 together with
the lands covered thereby or pooled or unitized therewith (the “Lands”),
together with (i) all rights with respect to any pooled, communitized or
unitized interest by virtue of any Leases and Lands and (ii) all

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production of oil, gas, associated liquids and other hydrocarbons (collectively
“Hydrocarbons”) after the Effective Time from the Leases and the Lands, and from
any such pool or unit and allocated to any such Leases and Lands (the Leases,
the Lands, and the rights described in clause (i) above, and the Hydrocarbons
described in clause (ii) above, being collectively referred to as the “Subject
Interests” or, singularly, a “Subject Interest”);

(d)

a like undivided interest in and to all equipment, machinery, fixtures, spare
parts, inventory, communications equipment, telemetry and production measurement
equipment, and other personal property (including Seller’s leasehold interests
therein subject to any necessary consents to assignment) used in connection with
the operation of the Subject Interests or the Wells or in connection with the
production, storage, treatment, compression, gathering, transportation, sale, or
disposal of Hydrocarbons produced from or attributable to the Subject Interests
or the Wells, and any water, byproducts or waste produced therefrom or therewith
or otherwise attributable thereto, and all wellhead equipment, pumps, pumping
units, flowlines, gathering systems, pipe, tanks, treatment facilities,
injection facilities, disposal facilities, compression facilities and other
materials, supplies, buildings, trailers and offices used in connection with the
Subject Interests, the Wells and the other matters described in this definition
(collectively, “Assets”);

(e)

to the extent assignable or transferable, a like undivided interest in and to
all (i) all easements, rights-of-way, servitudes, licenses, permits, surface
leases, surface use agreements and other rights or agreements related to the use
of the surface and subsurface, in each case to the extent used in connection
with the operation of the Subject Interests or the Wells; (ii) all contracts,
agreements, drilling contracts, equipment leases, production sales and marketing
contracts, farmout and farmin agreements, operating agreements, service
agreements, unit agreements, gas gathering and transportation agreements and
other contracts, agreements and arrangements, relating to the Subject Interests,
the Wells and the other matters described in this definition of Assets, (iii)
equipment leases and rental contracts, service agreements, supply agreements and
other contracts, agreements and arrangements relating to the Subject Interests,
the Wells and the other matters described in this definition of Assets, (the
agreements identified in clauses (i), (ii) and (iii) above being, collectively
described in Exhibit A, Schedule 3, the “Contracts”);

(f)

to the extent assignable or transferable, all permits, licenses, franchises,
consents, approvals and other similar rights and privileges, in each case to the
extent used in connection with the operation of the Subject Interests or the
Wells (the “Permits”);

(g)

all Production Imbalances; and

(h)

a like undivided interest in and to all books, records, files and databases,
(ii) to the extent assignable or transferable, copies of all maps and

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well logs and data, and (iii) muniments of title, reports and similar documents
and materials, in each case to the extent directly relating to the foregoing
interests and in the possession or control of Seller (the “Records”).

The total consideration for the purchase, sale and conveyance of the Assets to
Purchaser and Purchaser’s assumption of the those Assets an undivided share of
liabilities provided for in this Agreement, is Purchaser’s payment to Seller of
the sum of one million five thousand, one hundred fifty nine dollars and twenty
one hundredths No/100 Dollars ($1,05,159.20) (the “Purchase Price”), as adjusted
in accordance with the provisions of this Agreement.  

2.4

Earnest Money

.  Contemporaneously with the execution of this Agreement, Purchaser shall pay
to the Seller in escrow the sum of ten thousand dollars ( $ 10,000)  (together
with the interest or other earnings thereon, the “Earnest Money”) pursuant to
the Escrow Agreement. In the event the Closing occurs, the Earnest Money shall
be credited against the Purchase Price as provided in Section 8.8(a).  If the
Closing does not occur, the Parties shall  deal with the Earnest Money in
accordance with this Section 2.5.  In the event an Earnest Money Retention Event
occurs, Seller shall retain the Earnest Money which shall serve as liquidated
damages in lieu of all other damages (and as Seller’s sole remedy in such
event). The Parties hereby acknowledge that the extent of damages to Seller
occasioned by such Earnest Money Retention Event would be impossible or
extremely impractical to ascertain and that the amount of the Earnest Money is a
fair and reasonable estimate of such damages under the circumstances. In the
event the Closing does not occur because Seller cannot deliver good and
defensible title to the Assets. The Earnest Money shall be refunded to
Purchaser.

2.5

Ownership of Assets

.  If the transactions contemplated hereby are consummated in accordance with
the terms and provisions hereof, the ownership of the Assets shall be
transferred from Seller to Purchaser on the Closing Date, but effective for all
purposes as of the Effective Time except as otherwise required by Law.

2.6

Purchase Price Allocation for Tax Purposes

.  For the purpose of making the requisite filings under Section 1060 of the
Code and the regulations thereunder and for the calculation of any sales or
other transfer taxes due in connection with the transactions contemplated
hereby, Seller and Purchaser agree to allocate the Purchase Price (as adjusted
pursuant to the provisions hereof) and any liabilities assumed by Purchaser
under this Agreement entirely as provided in Exhibit A, Schedule 3.  

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Purchaser as follows:

3.1

Organization

.  Seller (a) is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Texas, (b) has the requisite
power and authority to own, lease and operate its properties and to conduct its
business as it is presently being conducted, and (c) is duly qualified to do
business as a foreign limited liability company and is in good standing in the
State of Kansas.

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3.2

Authority and Enforceability

.  Seller has the requisite limited liability company power and authority to
enter into and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary limited liability company action on the part of
Seller, and no other limited liability company proceedings on the part of Seller
are necessary to authorize the execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Seller and (assuming that this
Agreement constitutes a valid and binding obligation of Purchaser) constitutes a
valid and binding obligation of Seller enforceable against it in accordance with
its terms.

3.3

No Violations

.  The execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated hereby and compliance by Seller with the
provisions hereof will not, conflict with, result in any violation of or default
(with or without notice or lapse of time or both) under, give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation of any Lien on any of the
Assets under, any provision of: (a) its certificate of formation or limited
liability company agreement; (b) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or other
agreement or instrument applicable to Seller; or (c) assuming the consents,
approvals, authorizations, permits, filings and notifications referred to in
Section 3.4 are duly and timely obtained or made, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Seller or the Assets,
other than, in the case of clause (b) or (c) above, any such conflict,
violation, default, right, loss or Lien that: (x) would not have a Material
Adverse Effect on Seller, individually or in the aggregate, or (y) is a
Third-Party Consent but is not a Consent.

3.4

Consents, Approvals and Preferential Rights

.  Except as set forth in Schedule 3.4: (a) no consent, approval, order or
authorization of, registration, declaration or filing with, or permit from, any
Governmental Authority is required by or with respect to Seller in connection
with the execution and delivery of this Agreement by Seller or the consummation
by Seller of the transactions contemplated hereby, except for any such consent,
approval, order, authorization, registration, declaration, filing or permit (i)
which the failure to obtain or make would not, individually or in the aggregate,
have a Material Adverse Effect on Seller or (ii) which is customarily obtained
or made after the Closing, (b) to the actual knowledge (without further
investigation) as of the date hereof of the personnel of Seller, no Consent is
required by or with respect to Seller in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, and (c) to Seller’s Knowledge, the Assets are not subject to any third
party preferential purchase rights, rights of first refusal, or similar rights
for which a waiver must be obtained in order for Seller to consummate the
transactions contemplated by this Agreement without violating or breaching a
duty or obligation of Seller (“Preferential Rights”).

3.5

Litigation

.  Except as set forth in Schedule 3.5: (a) no litigation, arbitration,
investigation or other proceeding is pending or, to Seller’s Knowledge,

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threatened against Seller relating to any of the Assets before any court,
arbitrator or Governmental Authority; and (b) Seller is not subject to any
outstanding injunction, judgment, order, decree or ruling relating to the Assets
(other than routine oil and gas field regulatory orders). There is no
litigation, proceeding or investigation pending or, to Seller’s Knowledge,
threatened against or affecting Seller that questions the validity or
enforceability of this Agreement or any other document, instrument or agreement
to be executed and delivered by Seller in connection with the transactions
contemplated hereby.

3.6

Taxes

.  During the period of Seller’s ownership of the Assets up to the Effective
Time, to Seller’s Knowledge, all material ad valorem, property, severance,
excise and similar taxes and assessments based on or measured by the value of
the Assets or the production of Hydrocarbons or the receipt of proceeds with
respect to such Assets that have become due and payable have been paid.  None of
the Assets is subject to any tax partnership agreement or provisions requiring a
partnership income tax return to be filed under Subchapter K of Chapter 1 of
Subtitle A of the Code.

3.7

Compliance with Laws and Permits

.  To Seller’s Knowledge, Seller is not in violation of, or in default under,
and no event has occurred that (with notice or the lapse of time or both) would
constitute a violation of or default under any Law or judgment of any
Governmental Authority applicable to the Assets except for any violation or
default that would not, individually or in the aggregate, have a Material
Adverse Effect on Seller. Seller has obtained and holds all permits, licenses,
variances, exemptions, orders, franchises, approvals and authorizations of
Governmental Authorities necessary for the lawful conduct of its business with
respect to the Assets or the lawful ownership, use and operation of the Assets,
except for any thereof which the failure to obtain or hold would not,
individually or in the aggregate, have a Material Adverse Effect on Seller.
Anything in this Section 3.7 to the contrary notwithstanding, Seller makes no
representations or warranties with respect to its compliance with Environmental
Laws, it being understood that Article V sets forth Purchaser’s sole remedies
related thereto.

3.8

Brokers

.  No broker, finder, investment banker or other Person is or will be, in
connection with the transactions contemplated by this Agreement, entitled to any
brokerage, finder’s or other fee or compensation based on any arrangement or
agreement made by or on behalf of Seller or any of its Affiliates for which
Purchaser will have any obligation or liability.

3.9

Bankruptcy

.  There are no bankruptcy, reorganization or arrangement proceedings pending,
being contemplated by or, to Seller’s Knowledge, threatened against Seller.

3.10

Oil and Gas Operations

.  To Seller’s Knowledge, all Wells owned or operated by Seller have been
drilled, completed, operated and (if produced) produced in accordance with
generally accepted oil and gas field practices and in compliance in all material
respects with applicable oil and gas leases and pooling and unit agreements .
 To Seller’s Knowledge:

15

(a)

with respect to the Leases, unit agreements, pooling agreements, communitization
agreements and other documents creating interests comprising the Assets: (i)
Seller has fulfilled all requirements in all material respects for filings,
certificates, disclosures of parties in interest, and other similar matters
contained in such leases or other documents (or otherwise applicable thereto by
law, rule or regulation) and is fully qualified to own and hold all such Leases
and other interests; (ii) there are no provisions applicable to such Leases and
other documents which increase the royalty share of the lessor or overriding
royalties thereunder that are not reflected in the interests set forth in
Exhibit A, Schedule 1; and (iii) upon the establishment and maintenance of
production in commercial quantities, such leases and other interests shall be in
full force and effect over the economic life of the property involved and do not
have terms fixed by a certain number of years;

(b)

proceeds from the sale of Hydrocarbons produced from the Assets are being
received by Seller in a timely manner in accordance with applicable Law and are
not being held in suspense for any reason (except for amounts held in suspense
in the ordinary course of business); and

(c)

Except as set forth on Schedule 3.4, no Person has any call upon, option to
purchase, preferential right to purchase or similar rights with respect to the
Assets or to the production therefrom.

3.11

Royalties

.  To Seller’s Knowledge, Seller has not been and is not in breach of any
payment obligations under any of the Leases where such breach would result in
automatic termination of any such Lease.

3.12

Capital Expenditures

.  Except as set forth in Schedule 3.10, as of the date of this Agreement Seller
has not committed to any new wells or workover operations with respect to the
Assets.

3.13

Contracts

.  Except for the Contracts described in Exhibit A, Schedule 3 and except for
the transactions contemplated by this Agreement, the Assets do not include, to
Seller’s Knowledge: (a) any farmout or farmin agreement with remaining drilling
or assignment obligations on the part of Seller, (b) any contract that would
obligate Purchaser to drill additional wells or conduct other material
development operations after the Closing, (c) any contract that provides for an
area of mutual interest, (d) any contract that contains a non-compete agreement
or otherwise purports to restrict, limit or prohibit the manner in which, or the
locations in which, Seller may conduct its business, (e) any contract involving
the transportation and/or processing of production that would not be cancelable
by Seller or Purchaser after Closing upon notice of thirty (30) days or less
without liability for further payment other than nominal penalty (including
those providing for volumetric or monetary commitments or indemnification
therefor or for dedication of future production), or (f) any contract providing
for any call upon, option to purchase or similar rights with respect to the
Assets or to the production therefrom or the processing thereof.  Neither
Seller, nor to Seller’s Knowledge, any other Person is in default in any
material respect under any of the Contracts.  To Seller’s

16

Knowledge, all of the Contracts are in full force and effect in all material
respects.  No written notice of default or breach has been received or delivered
by Seller under any Contract, the resolution of which is outstanding as of the
date hereof, and there are no current notices received by Seller of the exercise
of any premature termination, price redetermination, market-out, or curtailment
under any Contract.  

3.14

Affiliate Transactions

.  There are no transactions or Contracts affecting any of the Assets between
Seller and any Affiliate of Seller that will continue beyond the Closing.  

3.15

Access

.  Seller has a legal right of access to all of the Leases and Wells, and
following the Closing Purchaser will have a legal right of access to all of the
Leases and Wells.

3.16

Payments for Production

.  Seller is not obligated by virtue of a take-or-pay payment, advance payment,
or other similar payment to deliver Hydrocarbons, or proceeds from the sale
thereof, attributable to Seller’s interest in the Assets at some future time
without receiving payment therefor at or after the time of delivery.  

3.17

Hedges

.  There are no futures, options, swaps or other derivatives with respect to the
sale of Hydrocarbons from the Assets that are currently binding on the Assets or
will be binding on the Assets after Closing.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Seller as follows:

4.1

Organization

.  Purchaser (a) is a Nevada corporation, duly organized, validly existing and
in good standing under the laws of the State of Nevada, (b) has the requisite
power and authority to own, lease and operate its properties and to conduct its
business as it is presently being conducted, and (c) is duly qualified to do
business as a foreign company, and is in good standing, in the State of Kansas.

4.2

Authority and Enforceability

.  Purchaser has the requisite corporate power and authority to enter into and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary entity action on the part of Purchaser, and no other entity
proceedings on the part of Purchaser are necessary to authorize the execution or
delivery of this Agreement or the consummation of the transactions contemplated
hereby.  This Agreement has been duly and validly executed and delivered by
Purchaser and (assuming that this Agreement constitutes a valid and binding
obligation of Seller) constitutes a valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms.

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4.3

No Violations

.  The execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated hereby and compliance by Purchaser with the
provisions hereof will not, conflict with, result in any violation of or default
(with or without notice or lapse of time or both) under, give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation of any Lien on any of the
properties or assets of Purchaser under, any provision of: (a) the certificate
of incorporation or certificate of formation or by-laws or other governing
documents of Purchaser; (b) any loan or credit agreement, note, bond, mortgage,
indenture, lease, permit, concession, franchise, license or other agreement or
instrument applicable to Purchaser; or (c) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in Section
4.4 are duly and timely obtained or made, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Purchaser or any of its
properties or assets, other than, in the case of clause (b) or (c) above, any
such conflict, violation, default, right, loss or Lien that, individually or in
the aggregate, would not have a Material Adverse Effect on Purchaser.

4.4

Consents and Approvals

.  No consent, approval, order or authorization of, registration, declaration or
filing with, or permit from, any Governmental Authority is required by or with
respect to Purchaser in connection with the execution and delivery of this
Agreement by Purchaser or the consummation by Purchaser of the transactions
contemplated hereby, except any such consent, approval, order, authorization,
registration, declaration, filing or permit which the failure to obtain or make
would not, individually or in the aggregate, have a Material Adverse Effect on
Purchaser. No Third-Party Consent is required by or with respect to Purchaser in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for any Third-Party Consent
which the failure to obtain would not, individually or in the aggregate, have a
Material Adverse Effect on Purchaser.

4.5

Litigation

.  There is no litigation, proceeding or investigation pending or, to the actual
knowledge (without further investigation) as of the date hereof of the personnel
of Purchaser listed on Exhibit D-2 (“Purchaser’s Knowledge”), threatened against
or affecting Purchaser that questions the validity or enforceability of this
Agreement or any other document, instrument or agreement to be executed and
delivered by Purchaser in connection with the transactions contemplated hereby.

4.6

Funding

.  Purchaser has available funds, or immediately available capacity under
committed credit facilities, in an aggregate amount sufficient to pay (a) all
amounts required to be paid by Purchaser under this Agreement, and (b) all
expenses which have been or will be incurred by Purchaser in connection with
this Agreement and the transactions contemplated hereby.

4.7

Investment Intent

.  Purchaser is acquiring the Assets by virtue of the transactions contemplated
hereby for its own account for investment and not with an intent to sell or make
a distribution thereof within the meaning of the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any other applicable
securities laws.

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4.8

Independent Evaluation

.  Purchaser is sophisticated in the evaluation, purchase, ownership and
operation of oil and gas properties and related facilities.  In making the
decision to enter into this Agreement and to consummate the transactions
contemplated hereby: (a) Purchaser has conducted or will have conducted, to its
satisfaction, its own independent investigation of the condition and operation
of the Assets; and (b) Purchaser has solely relied on and will solely rely on
(i) its own independent due diligence investigation of the Assets, (ii) the
provisions of this Agreement, and (iii) its own expertise and legal, land, tax,
engineering, and other professional counsel concerning this transaction, the
Assets, and the value thereof.

4.9

Brokers

.  No broker, finder, investment banker or other Person is or will be, in
connection with the transactions contemplated by this Agreement, entitled to any
brokerage, finder’s or other fee or compensation based on any arrangement or
agreement made by or on behalf of Purchaser or any of its Affiliates for which
Seller will have any obligation or liability.

4.10

Bankruptcy

. There are no bankruptcy, reorganization or arrangement proceedings pending,
being contemplated by or, to Purchaser’s Knowledge, threatened against
Purchaser.

4.11

Qualification

. Seller and its affiliates is and will continue to be qualified to serve as
operator of oil and gas properties in the State of Kansas , including meeting
all bonding requirements.

ARTICLE V

PURCHASER’S DUE DILIGENCE

5.1

General

.  Prior to the Closing, Purchaser shall have the right to inspect at the
offices of Seller in Southlake, Texas, during normal business hours and upon
reasonable advance notice to Seller, copies or originals (as determined by
Seller) of all files, records and data related to the Assets that are in the
possession of Seller, provided, that access to certain of such files, records
and data may be made available on a website created for such purpose.
Notwithstanding the foregoing, Seller shall not be under any obligation to
furnish Purchaser any data or information which is subject to third-party
restrictions or attorney-client privilege, excluding title opinions.  Prior to
the Closing, Purchaser shall also have the right to make or perform at any
reasonable time(s), at its own risk, cost and expense, inspections of the
Assets, including the well sites, equipment and facilities included therein;
provided, however, that Purchaser must make previous arrangements with Seller
for each such inspection; and provided, further, that each such inspection shall
be limited to a visual inspection of the Assets, it being understood that no
sampling or other invasive inspections thereof may be conducted without Seller’s
prior written consent.  Purchaser acknowledges that the permission of the
operator (if other than Seller) or another third party may be required before
Purchaser will be able to inspect portions of the Assets and that such
permission must be obtained prior to the

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inspection of such portions. PURCHASER SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS
SELLER AND ITS REPRESENTATIVES, EMPLOYEES, CONTRACTORS AND AGENTS FROM ANY AND
ALL LIABILITIES, CLAIMS, CAUSES OF ACTION, INJURIES TO PURCHASER’S EMPLOYEES,
AGENTS, CONTRACTORS, SUBCONTRACTORS OR INVITEES OR TO PURCHASER’S PROPERTY,
AND/OR INJURY TO SELLER’S PROPERTY, REPRESENTATIVES, EMPLOYEES, AGENTS OR
CONTRACTORS WHICH MAY ARISE OUT OF PURCHASER’S INSPECTIONS EXCEPT THOSE
PROXIMATELY CAUSED BY SELLER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT).  The
foregoing indemnity shall continue in full force and effect notwithstanding any
termination of this Agreement.  Purchaser agrees to provide to Seller, upon
request, a copy of any and all environmental assessments of the Assets conducted
by or on behalf of Purchaser, including any reports, data, and conclusions, and
to maintain the confidentiality of the information set forth therein until the
Closing except to the extent disclosure is required under applicable law. In the
event that this Agreement is terminated, Purchaser agrees to continue to
maintain the confidentiality of such information (irrespective of the
termination of the Confidentiality Agreement) except to the extent disclosure is
required under applicable Law. Purchaser agrees to comply with the rules,
regulations and instructions issued by Seller and other operators or third
parties regarding the actions of Purchaser and its agents while upon, entering
or leaving the Assets.

5.2

Title Matters

.  Without limiting the generality of Section 5.1, Seller shall make available
to Purchaser at the offices of Seller in Southlake, Texas, at all reasonable
times prior to the Closing such title files, land files, title opinions and
other title data as Seller has in its possession pertaining to the Assets.

5.3

Title Defects

.  In the event Purchaser discovers a Title Defect that it intends to assert
hereunder, Purchaser shall notify Seller in good faith of such Title Defect as
soon after such Title Defect is discovered as is reasonably practicable, and in
any event, on or before the Notice Date.  To be effective, each such notice
shall set forth Purchaser’s basis for the assertion of such Title Defect
(including supporting documentation therefor), Purchaser’s requirement(s) to
cure such Title Defect and Purchaser’s proposed Title Defect Value thereof (each
notice satisfying the requirements of this sentence being referred to herein as
a “Title Defect Notice”). Anything herein to the contrary notwithstanding:

(a)

Purchaser may not assert any Title Defect after the Notice Date,

(b)

this Article V sets forth Purchaser’s sole remedy for Title Defects

(c)

Purchaser may only assert a Title Defect pursuant to a valid Title Defect
Notice, and

(d)

the Purchase Price will only be adjusted for one or more Title Defects

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5.4

Remedies for Title Defects

.  Upon timely delivery of a Title Defect Notice, Purchaser and Seller shall
meet and use commercially reasonable efforts to agree on the validity thereof
and, if valid, the Title Defect Value thereof.  If, prior to Closing, Purchaser
and Seller have not agreed on the validity of one or more Title Defects asserted
in accordance with this Article V or on the Title Defect Value(s) thereof or, if
applicable, Seller cannot cure such Title Defect(s) to the reasonable
satisfaction of Purchaser prior to Closing, with respect to each such Title
Defect, either (a) Seller may elect to exclude the Assets affected by one or
more of such Title Defects from the transactions contemplated hereby, in which
event the Purchase Price shall be reduced by the Allocated Values thereof, (b)
Seller may elect to attempt to cure one or more of such Title Defect(s) in
accordance with Section 5.5, or (c) the dispute(s) with respect to Title Defects
affecting Assets that Seller does not so elect to exclude or attempt to cure
(“Title Disputes”) shall be submitted to arbitration pursuant to the provisions
of Section 5.9 and, at the election of Seller, the Closing may be delayed until
such arbitration is concluded. Anything in this Agreement to the contrary
notwithstanding, Seller may, upon notice to Purchaser, delay the Closing Date
for a period of up to thirty (30) days in the event that Seller believes in good
faith that it can cure any Title Defect asserted by Purchaser.   

5.5

Curative Provisions

.  The following shall apply with respect to each Title Defect that Seller
elects to attempt to cure pursuant to Section 5.4(b) (each a “Subject Defect”):

(a)

The Assets affected by each Subject Defect shall be conveyed to Purchaser at the
Closing; an amount equal to the Title Defect Value of each Subject Defect (as
asserted in good faith by Purchaser, unless the Parties have otherwise agreed
upon an amount) shall be deducted from amounts otherwise payable at the Closing
under Section 8.2(b)(iii); and at the Closing, Purchaser shall deposit such
amount into the Escrow Account pursuant to the Escrow Agreement pending the
curing or resolution of the applicable Subject Defect.

(b)

Seller shall have a one hundred eighty (180) day period after the Closing within
which to attempt to cure the Subject Defects; provided, that, if Seller’s
curative efforts with respect to a Subject Defect require the initiation of
proceedings before a Governmental Authority, such one hundred eighty (180) day
period with respect thereto shall be extended for so long as such proceedings
are diligently pursued in good faith by Seller until such proceedings are
concluded pursuant to a final, non-appealable judgment or are otherwise finally
resolved (the applicable cure period being hereinafter referred to as the “Cure
Period”); provided, in no event, shall the Cure Period exceed three hundred
sixty five (365) days. Purchaser agrees to cooperate at Seller’s cost and
expense with Seller in connection with its curative efforts, including in
connection with any proceedings before a Governmental Authority.

(c)

In the event that Seller believes in good faith that it has cured a Subject
Defect within the Cure Period, Seller shall submit such curative efforts to
Purchaser for approval (which approval shall not be unreasonably

21

withheld). Purchaser shall be deemed to have approved such curative efforts in
the event Purchaser does not notify Seller of its objection to the same (and the
reasons therefor) within ten (10) days after Purchaser’s receipt thereof.  In
the event Purchaser so objects, Seller shall have an additional period of ten
(10) days within which to perform additional curative efforts to satisfy
Purchaser’s objections (and the Cure Period applicable thereto shall be extended
accordingly).  In any event: (i) except with respect to curative efforts that
Purchaser has been deemed to have approved, each Party retains the right to
dispute whether or not a Subject Defect has been cured and whether or not a
Subject Defect constitutes a Title Defect, and (ii) any such dispute shall be
resolved in accordance with the dispute resolution procedures set forth in
Section 5.9, which dispute resolution procedures must be initiated on or before
ten (10) days after the end of the Cure Period.

(d)

Except for each Subject Defect that is submitted to arbitration pursuant to
Section 5.5(c) (in which event the amount deposited in escrow with respect
thereto, if any, shall remain in escrow pending resolution of the applicable
Subject Defect), with respect to each Subject Defect that has neither been cured
to Purchaser’s reasonable satisfaction prior to the expiration of the Cure
Period or waived by Purchaser: (i) the Parties shall instruct the Escrow Agent
to pay the amount deposited into escrow on account thereof to Purchaser, subject
to the limitations set forth in Section 5.3; and (ii) Purchaser shall reconvey
the portion of the Assets that are subject to such Subject Defect to Seller
without warranty of title, except as to matters arising by, through or under
Purchaser; provided, that, in the event Purchaser is not able to convey such
portion to Seller without conveying additional portions of the Assets to Seller,
Seller shall have the option to either (x) require Purchaser to reconvey all
such required portions of the Assets to Seller, in which event Seller shall pay
to Purchaser the Allocated Value of such portions (less the amount paid to
Purchaser pursuant to clause (i)), or (y) waive any rights to any reconveyance
with respect thereto.  In connection with any such reconveyance, the Parties
shall account to one another to place each Party in the position it would have
been if the original conveyance had not taken place.

(e)

With respect to each Subject Defect that has been cured and conveyed to
Purchaser in accordance with the provisions hereof prior to the expiration of
the Cure Period, the Parties shall instruct the Escrow Agent to pay the amount
deposited into escrow on account thereof to Seller.

5.6

Interest Additions

.  As soon as practicable after Purchaser has knowledge thereof, Purchaser shall
notify Seller of any Net Revenue Interest in an Asset that is greater than that
shown on Exhibit A, Schedule 1 for such Asset (each, an “Interest Addition”), it
being understood that Interest Additions shall include the effect of forced
pooling elections and non-consent elections.  Seller may request an upward
adjustment in the Purchase Price by notifying Purchaser of an Interest Addition
(which may be an Interest Addition revealed by Purchaser above) on or before the
Notice Date. Any such notice shall set forth Seller’s basis for the assertion of
such Interest Addition and Seller’s

22

proposed upward adjustment to the Purchase Price on account thereof. Anything
herein to the contrary notwithstanding: (a) Seller may not assert any Interest
Addition after the Notice Date, (b) this Article V sets forth Seller’s sole
remedy for Interest Additions; and (c) the Purchase Price may only be adjusted
for one or more Interest Additions to the extent the cumulative amount of upward
adjustments to the Purchase Price on account thereof is less than or equal to
the cumulative amount of downward adjustments to the Purchase Price on account
of Title Defects.

5.7

Remedies for Interest Additions

.  Upon timely delivery of a notice by Seller of an Interest Addition, Purchaser
and Seller shall meet and use commercially reasonable efforts to agree on the
validity thereof and the amount of any required adjustment to the Purchase
Price.  If, prior to the Closing, Purchaser and Seller have not agreed on the
validity of one or more Interest Additions asserted in accordance with this
Article V or on the amount of an adjustment to the Purchase Price on account
thereof, with respect to each such Interest Addition, either (a) Seller may
elect to exclude the Assets affected by one or more of such Interest Additions
from the transactions contemplated hereby, in which event the Purchase Price
shall be reduced by the Allocated Values thereof, or (b) the dispute(s) with
respect to Interest Additions shall be considered Title Disputes and shall be
submitted to arbitration pursuant to the provisions of Section 5.9 and, at the
election of Seller, the Closing may be delayed until such arbitration is
concluded.  

5.8

Environmental Defects

.  

(a)

In the event Purchaser discovers an Environmental Defect, Purchaser shall in
good faith give notice thereof to Seller as soon after such Environmental Defect
is discovered as is reasonably practicable, and in any event, on or before the
Notice Date.  To be effective, each notice of an Environmental Defect must set
forth Purchaser’s reasonable good faith estimate of the Environmental Defect
Value of such Environmental Defect (and the calculation thereof) and must
describe such Environmental Defect in reasonably specific detail, including: the
written, good faith conclusion of Purchaser (or its consultant) that shows that
it is more likely than not that an Environmental Defect exists; a separate
specific citation of the provisions of Environmental Laws alleged to be violated
and the related facts that substantiate such violation; identification of the
specific Assets affected by such Environmental Defect, including a site plan
showing the location of all sampling events, boring logs and other field notes
describing the sampling methods utilized and the field conditions observed,
chain-of-custody documentation and laboratory reports; and identification of the
procedures recommended to correct such Environmental Defect (each notice
satisfying the requirements of this sentence being referred to herein as an
“Environmental Defect Notice”).

(b)

Purchaser and Seller shall, after each Environmental Defect Notice is delivered,
meet and use commercially reasonable efforts to agree on the validity thereof
and the amount of any required adjustment to the Purchase Price, it being
understood that the amount of any such adjustment with respect to an

23

Environmental Defect (the “Environmental Defect Value”) will be the  cost of
remediating the affected Asset to bring it into compliance with Environmental
Laws in a commercially reasonable manner and assuming that the affected Asset
will continue to be used as an oil and gas property. If the Environmental Defect
Value asserted by Purchaser in an Environmental Defect Notice is greater than
the Allocated Value of the Asset affected thereby, Seller may elect to remove
such Asset from the transactions contemplated hereby, in which event the
Purchase Price shall be reduced by the Allocated Value thereof.

(c)

Anything herein to the contrary notwithstanding:

(i)

Purchaser may not assert any Environmental Defect after the Notice Date,

(ii)

this Article V sets forth Purchaser’s sole remedy for Environmental Defects or
any other environmental matter

(iii)

Purchaser may only assert an Environmental Defect pursuant to a valid
Environmental Defect Notice,  

(iv)

the Purchase Price will be adjusted for one or more Environmental Defects, and.

(d)

If, prior to the Closing, Purchaser and Seller have not agreed on the validity
of one or more Environmental Defects asserted in accordance with this Section
5.8 or on the amount of the Environmental Defect Values thereof, with respect to
each such Environmental Defect, either (i) Seller may elect to exclude the
Assets affected by one or more of such Environmental Defects from the
transactions contemplated hereby, in which event the Purchase Price shall be
reduced by the Allocated Values thereof, or (ii) the dispute(s) with respect to
Environmental Defects affecting Assets that Seller does not so elect to exclude
(“Environmental Disputes”) shall be submitted to arbitration pursuant to the
provisions of Section 5.9 and, at the election of Seller, the Closing may be
delayed until such arbitration is concluded; provided that it is understood that
at any time Seller may elect to accept an Environmental Defect and the
Environmental Defect Value asserted with respect thereto in full settlement for
such Environmental Defect.  

5.9

Arbitration

.  Title Disputes shall be submitted for resolution in accordance with this
Section 5.9 to an attorney with at least ten (10) years of experience in oil and
gas title matters in the State of Kansas, and Environmental Disputes shall be
submitted for resolution in accordance with this Section 5.9 to an attorney with
at least ten (10) years of experience in oil and gas environmental matters in
the State of Kansas (in each case, the “Arbitrator”). Seller and Purchaser shall
attempt to agree upon an Arbitrator.  In the event that Seller and Purchaser are
not able to agree on an Arbitrator within ten (10) days after the date on which
either Party determines to submit a Title Dispute or Environmental Dispute to
arbitration, either Seller or Purchaser may request

24

that the American Arbitration Association appoint the Arbitrator.  The fees and
expenses of any Arbitrator shall be paid by the losing party.  Each of Seller
and Purchaser shall submit a written statement of its position to the Arbitrator
with respect to the Title Dispute or Environmental Dispute (as applicable) not
later than the tenth (10th) day after the Arbitrator is appointed.  The
Arbitrator shall render his or her decision within fifteen (15) days after the
Arbitrator is appointed.  The decision of the Arbitrator shall be conclusive and
binding on Seller and Purchaser and shall be enforceable against any Party in a
court of competent jurisdiction.  Anything in this Section 5.9 or the other
provisions of this Agreement to the contrary notwithstanding, to the extent that
all Title Disputes and Environmental Disputes have not been resolved prior to
the Closing by arbitration or otherwise: (a) the Assets affected by such
unresolved Title Defects and Environmental Defects shall be conveyed to
Purchaser at the Closing; (b) an amount equal to (i) the aggregate Title Defect
Values (as asserted in good faith by Purchaser, unless the Parties have
otherwise agreed upon an amount) of the Assets (or portion thereof) affected by
such unresolved Title Disputes and (ii) the aggregate Allocated Values of the
Assets affected by such unresolved Environmental Disputes shall be deducted from
amounts otherwise payable at the Closing under Section 8.2(b)(iii); (c) at the
Closing, Purchaser shall deposit such amounts into the Escrow Account pursuant
to the Escrow Agreement pending resolution of such Title Disputes and
Environmental Disputes; and (d) as each such Title Dispute or Environmental
Dispute is resolved by the Arbitrator or by agreement of Purchaser and Seller,
Purchaser and Seller shall instruct the Escrow Agent to make payments from
amounts deposited in the Escrow Account on account of such resolved Title
Dispute or Environmental Dispute (and any interest or other earnings thereon):
(i) to Purchaser if and to the extent resolved in favor of Purchaser, and (ii)
otherwise, to Seller. In connection with any determination of an Environmental
Dispute by an Arbitrator pursuant to this Section 5.9, it is understood that:
(x) neither Party may  introduce or otherwise use information obtained by
Purchaser after the date of the Environmental Defect Notice with respect to the
Environmental Defect in dispute or its Environmental Defect Value, and in no
event may the Arbitrator consider or give weight to any such information, (y)
Neither Party may assert any violation of Environmental Law that is not
specified in the Environmental Defect Notice with respect to the Environmental
Defect in dispute, and (z) the Environmental Defect Value of an Environmental
Defect may not exceed the amount thereof asserted in the Environmental Defect
Notice with respect thereto.

5.10

Consents to Assignment and Preferential Rights

.

(a)

Seller shall exercise commercially reasonable efforts, but without any
obligation to incur unreasonable costs and expenses in connection therewith, to
obtain all Third-Party Consents applicable to the assignment or transfer of any
of the Assets, which are required in connection with the assignment of any
Assets to Purchaser (each a “Consent”) and waivers of all Preferential Rights.
 IN NO EVENT shall there be included in the Assignment at Closing any Asset (or
part thereof) that is subject to a Consent to Assign which provides that the
transfer of the Asset without consent or waiver shall or may result in (i) a
termination or  impairment of any rights in relation to the affected Asset or
(ii) a termination impairment of the assignment thereof, as to the affected

25

Asset or otherwise in the event that such Consent to Assign has not been
satisfied (or otherwise rendered of no further force and effect) as of the
Closing.

(b)

In the event that a Consent has not been satisfied (or otherwise rendered of no
force or effect) prior to Closing, the Asset (or portion thereof) affected
thereby shall be deemed to be subject to a Title Defect and excluded from the
transactions contemplated hereby and the Purchase Price shall be adjusted
downward by the Allocated Value of the excluded portion of the affected Asset;
provided, however, Seller shall use commercially reasonable efforts to satisfy
(or cause to be satisfied) such Consent within three (3) months of Closing.  If
such Consent is so satisfied, Seller shall give notice to Purchaser as soon as
possible after Seller learns that such Consent has been satisfied, but in no
event later than three (3) months after the Closing Date, and Purchaser shall
have the obligation to purchase the Asset (or portion thereof) affected by such
Consent from Seller and Seller shall have the obligation to sell such Asset (or
portion thereof) to Purchaser for the Allocated Value thereof, subject to the
terms and conditions of this Agreement as if the transaction had occurred at
Closing. In the event such Consent with respect to any Asset (or portion
thereof) is not satisfied within three (3) months after the Closing Date, then
Purchaser may, in its sole discretion, proceed with a closing on such affected
Asset (or portion thereof) in which case Purchaser shall be deemed to have
waived any objection (and shall be obligated to indemnify Seller for all Claims)
with respect to non-compliance with such Consent with respect to such affected
Asset (or portion thereof).

(c)

Seller shall promptly give notices to all third parties holding any Preferential
Rights and shall respect to non-compliance with such Consent with respect to
such affected Asset (or portion thereof).use commercially reasonable efforts,
but without any obligation to incur unreasonable cost or expense, to obtain
waivers of, or comply with, any such Preferential Rights. If any Preferential
Rights are exercised prior to Closing, the portion of the Assets affected
thereby shall be excluded from the transactions contemplated hereby, and the
Purchase Price shall be adjusted downward by the Allocated Value of the excluded
portion of the affected Assets. Seller will not be liable to Purchaser if any
Preferential Rights are exercised, except for the Purchase Price adjustment
herein provided.  If before Closing, any Preferential Right has not been waived
or exercised in accordance with the terms, and the time period for such exercise
has not expired, the Parties shall proceed to Closing as to the portion of the
Assets affected thereby.  After Closing, if (i) any holder of Preferential
Rights has alleged or alleges improper notice of sale, (ii) Seller or Purchaser
discover, or any third party alleges, the existence of additional Preferential
Rights, or (iii) the time period for exercise of any Preferential Right did not
expire before Closing, Seller and Purchaser will attempt to obtain waivers of
such Preferential Rights. Purchaser shall be entitled to receive (and Seller
hereby assigns to Purchaser all of Seller’s rights to) all proceeds to be
received by Seller from such third party, in connection with the sale, due to an
exercise of Preferential Rights, of any portion of the Assets Purchaser was to
receive under this Agreement. Purchaser’s receipt

26

of proceeds from the sale of the affected Assets shall be Purchaser’s sole
remedy if Preferential Rights are established and exercised after Closing.

ARTICLE VI

INTERIM MATTERS AND OPERATIONS

6.1

Operation of the Assets

.

(a)

From and after the date of execution of this Agreement, and subject to the
provisions of applicable operating and other agreements, Seller shall (i) use
commercially reasonable efforts during the period prior to the Closing, to
operate and administer the Assets in a manner consistent with its past
practices, (ii) make payment of all costs and expenses attributable to the
ownership or operation of the Assets and relating to the period prior to the
transfer of operations of the Assets, (iii) carry on its business with respect
to the Assets in substantially the same manner as before execution of this
Agreement, and (iv) use commercially reasonable efforts to preserve in full
force and effect all Leases, Permits and Contracts that relate to the Assets in
a manner consistent with its past practices.  From and after the date of
execution of this Agreement, it is understood that Seller may take the actions
set forth in Schedule 3.10 (if any).

(b)

Purchaser acknowledges that Seller owns undivided interests in some or all of
the Assets, and Purchaser agrees that the acts or omissions of the other working
interests owners shall not constitute a violation of the provisions of this
Article VI, nor shall any action required by a vote of working interest owners
constitute such a violation so long as Seller has voted its interest in a manner
that complies with the provisions of this Article VI;

(c)

Seller shall operate, or if Seller is not the operator, use commercially
reasonable efforts to ensure that the operator operates the Assets and produces
Hydrocarbons therefrom in its ordinary course of business and in accordance with
applicable industry standards and the terms and conditions of all applicable
Contracts and Laws

6.2

Purchaser’s Qualification

.  At Closing, Purchaser shall be qualified and shall meet all requirements,
including bonding requirements, to be a non-operating owner of the Assets.

6.3

Additional Arrangements

.  Subject to the terms and conditions herein provided, each of the Parties
shall take, or cause to be taken, all action and shall do, or cause to be done,
all things necessary, appropriate or desirable under any applicable Laws or
under applicable governing agreements to consummate and make effective the
transactions contemplated by this Agreement, including using reasonable efforts
to obtain all necessary waivers, consents and approvals and effecting all
necessary registrations and filings. Each of the Parties shall take, or cause to
be taken, all action or shall do, or

27

cause to be done, all things necessary, appropriate or desirable to cause the
covenants and conditions applicable to the transactions contemplated hereby to
be performed or satisfied as soon as practicable.

6.4

Public Announcements

.  Seller and Purchaser shall consult with each other before either of them
issues any press release or otherwise makes any public statement with respect to
the transactions contemplated by this Agreement, and no Party shall issue any
press release or make any such public statement prior to obtaining the approval
of the other Party (not to be unreasonably withheld); provided, however, that
such approval shall not be required where such release or announcement is
required to be made by a Party under applicable law, so long as the other Party
is provided the opportunity to review and comment on such release in advance.

6.5

Notification of Certain Matters

.  Seller shall give prompt notice to Purchaser of Seller’s Knowledge prior to
the Closing of: (a) any representation or warranty contained in Article III
being untrue or inaccurate in any material respect when made, (b) the occurrence
of any event or development that would cause (or could reasonably be expected to
cause) any representation or warranty contained in Article III to be untrue or
inaccurate in any material respect on the Closing Date, (c) any failure of
Seller to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by Seller hereunder, and/or (d) any representation
and warranty contained in Article IV being or becoming untrue or inaccurate in
any material respect when made or as of a later date. Purchaser shall give
prompt notice to Seller of Purchaser’s Knowledge prior to the Closing of: (w)
any representation or warranty contained in Article IV being untrue or
inaccurate in any material respect when made, (x) the occurrence of any event or
development that would cause (or could reasonably be expected to cause) any
representation or warranty contained in Article IV to be untrue or inaccurate in
any material respect on the Closing Date, (y) any failure of Purchaser to comply
with or satisfy any covenant, condition, or agreement to be complied with or
satisfied by it hereunder, and/or (z) any representation and warranty contained
in Article III being or becoming untrue or inaccurate in any material respect
when made or as of a later date.  No disclosure by any Party pursuant to this
Section 6.5, however, shall be deemed to amend or supplement the Schedules
hereto or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.  Neither Party shall be entitled to make a claim under this
Agreement (including pursuant to Article X) or otherwise with respect to any
matter for which such Party fails to provide a notice in accordance with clause
(d) or clause (z) of this Section 6.5 (as applicable).

6.6

Payment of Expenses

. Each Party shall pay its own expenses incident to preparing for, entering into
and carrying out this Agreement and the consummation of the transactions
contemplated hereby, whether or not Closing occurs.

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ARTICLE VII

CONDITIONS

7.1

Conditions to Each Party’s Obligation to Proceed with Closing

.  The respective obligations of each Party to proceed with Closing shall be
subject to the satisfaction, at or prior to the Closing, of the following
conditions:

(a)

Approvals.  All filings required to be made prior to the Closing with, and all
consents, approvals, permits and authorizations required to be obtained prior to
the Closing from, any Governmental Authority in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by the Parties shall have been made or obtained (as the case
may be), except where the failure to obtain such consents, approvals, permits
and authorizations would not be reasonably likely to result in a Material
Adverse Effect on Purchaser (assuming Closing has taken place) or to materially
adversely affect the consummation of the transactions contemplated by this
Agreement.

(b)

No Injunctions or Restraints.  No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the transactions contemplated by this Agreement shall be in effect.

7.2

Conditions to Obligations of Purchaser

.  The obligations of Purchaser to proceed with Closing are subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by Purchaser:

(a)

Representations and Warranties.  The representations and warranties of Seller
set forth in Article III shall be true and correct in all material respects as
of the Closing Date as though made on and as of that time (except that any such
representations and warranties which expressly relate only to an earlier date
shall be true and correct on the Closing Date as of such earlier date), and
Purchaser shall have received a certificate signed by a Responsible Officer of
Seller to such effect.

(b)

Performance of Covenants and Agreements by Seller.  Seller shall have performed
in all material respects all covenants and agreements required to be performed
by it under this Agreement at or prior to the Closing Date, and Purchaser shall
have received a certificate signed by a Responsible Officer of Seller to such
effect.

(c)

Seller Credit Agreement. Seller shall have delivered to Purchaser recordable
releases and terminations covering all Liens on the Assets arising under the
Seller Credit Agreement.

29

7.3

Conditions to Obligations of Seller

.  The obligations of Seller to proceed with Closing are subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by Seller:

(a)

Representations and Warranties.  The representations and warranties of Purchaser
set forth in Article IV shall be true and correct in all material respects as of
the Closing Date as though made on and as of that time (except that any such
representations and warranties which expressly relate only to an earlier date
shall be true and correct on the Closing Date as of such earlier date), and
Seller shall have received a certificate signed by a Responsible Officer of
Purchaser to such effect.

(b)

Performance of Covenants and Agreements by Purchaser.  Purchaser shall have
performed in all material respects all covenants and agreements required to be
performed by it under this Agreement at or prior to the Closing Date, and Seller
shall have received a certificate signed by a Responsible Officer of Purchaser
to such effect.  Purchaser shall agree in writing to participate, to the extent
of the working interest acquired pursuant to the terms of this agreement in the
development of the Assets subject to the terms of this Agreement.

ARTICLE VIII

CLOSING

8.1

Time and Place of the Closing

.  If the conditions referred to in Article VII have been satisfied or waived in
writing, the Closing shall take place at the offices of
______________________________________________ at _________________ a.m.
(Prevailing Central Time) on the Closing Date.  Time is of the essence in the
performance of this Agreement.  All events of Closing shall each be deemed to
have occurred simultaneously with the other, regardless of when actually
occurring, and each shall be a condition precedent to the other.  If the Closing
occurs, all conditions of Closing shall be deemed to have been satisfied or
waived (but Seller’s and Purchaser’s representations and warranties shall not be
waived and shall survive the Closing subject to the limitations set forth in
this Agreement). In no event shall Closing be deemed to have occurred prior to
the time that Seller has confirmed receipt of the amounts contemplated by
Sections 8.8(a) and 8.8(b).

8.2

Allocation of Costs and Expenses and Adjustments to Purchase Price at the
Closing

.  

(a)

At the Closing, the Purchase Price shall be increased by the following amounts
(without duplication):

(i)

the amount of all (A) paid ad valorem, property, production or similar taxes and
assessments based upon or measured by the ownership of the Assets, insofar as
such taxes

30

relate to periods of time from and after the Effective Time, have been paid by
Seller;

(ii)

the amount of all expenses, including operating and capital expenditures,
incurred and paid by or on behalf of Seller in connection with ownership,
operation and use of the Assets attributable to the period from and after the
Effective Time (with the incurrence of expenditures for tangible property being
determined based upon the time at which such property is placed in service);

(iii)

all royalties, rentals, insurance premiums (including property and business
interruption coverage) and other charges attributable to the Assets for the
period of from and after the Effective Time to the extent paid by or on behalf
of Seller;

(iv)

expenses incurred under applicable operating agreements including any overhead
charges allowable under the applicable accounting procedure (COPAS) where Seller
is non-operator attributable to the Assets for the period of from and after the
Effective Time to the extent paid by or on behalf of Seller (the costs and
expenses for which Seller shall receive an upward adjustment to the Purchase
Price pursuant to clauses (i) through (iii) inclusive, shall be referred to as
the “Interim Operating Expenses”);

(v)

the value of all merchantable oil, gas and natural gas liquids in storage or in
the pipelines as of the Effective Time that is credited to the Assets (the
“Inventory”), such value to be the actual price received for such oil, gas or
natural gas liquids upon the first sale thereof, or absent a sale, then such
value shall be based upon the average market price posted in the area for oil,
gas or natural gas liquids of similar quality and grade in effect as of the
Effective Time less all applicable royalties, production and ad valorem taxes,
gravity adjustments and transportation expenses necessary to market such
production, provided that Seller and Purchaser will accept Seller’s tank gauge
readings, meter tickets or other inventory records of the Inventory as of the
time of Seller’s measurement thereof on the date on which the Effective Time
occurs, for the purposes of determining the volume of the Inventory as of the
Effective Time under this Agreement;

(vi)

the amount of sales tax to be paid in connection with the sale of the Assets,
which amount shall be remitted to the appropriate tax authorities by Seller;

31

(vii)

the amount of overhead charges allowable under the applicable accounting
procedure (COPAS) where Seller is operator attributable to the Assets for the
period of from and after the Effective Time; and

(viii)

any other amount provided for in this Agreement or agreed upon in writing by
Purchaser and Seller.

(b)

At the Closing, the Purchase Price shall be decreased by the following amounts
(without duplication):

(i)

an amount equal to the sales proceeds (net of applicable severance and
production taxes) paid by the first purchaser of the Hydrocarbons produced,
saved and sold from the Subject Interests from the Effective Time to the Closing
Date, which Purchase Price Allocations and Adjustments shall (A) for purposes of
the pre-Closing Statement, be based upon actual amounts, if available, and upon
such estimates as are reasonably agreed upon by the Parties, to the extent
actual amounts are not known at Closing, and (B) for purposes of the Final
Settlement Statement, be based upon actual amounts;

(ii)

the Allocated Value of any Asset excluded from the purchase and sale
contemplated herein pursuant to the provisions of Article V;

(iii)

all downward Purchase Price adjustments in connection with Title Defects and
Environmental Defects determined in accordance with Article V; and

(iv)

any other amount provided for in this Agreement or agreed upon in writing by
Purchaser and Seller.

(c)

The allocations of costs and expenses and/or adjustments described in Sections
8.2(a) and (b) are referred to herein as the “Purchase Price Allocations and
Adjustments.”

8.3

Closing Adjustments and Allocations Statement

.  On or before the third (3rd) Business Day prior to the Closing Date, Seller
shall prepare and deliver to Purchaser a statement of the estimated Purchase
Price Allocations and Adjustments (the “Statement”), which Statement shall be
based upon the then most currently available data and information in order to
make the adjustments as provided in Section 8.2.

8.4

Post-Closing Allocations and Adjustments to Purchase Price

.

(a)

On or before ninety (90) days after the Closing Date, Seller shall prepare and
deliver to Purchaser a revised Statement (“Final Settlement

32

Statement”) setting forth the actual Purchase Price Allocations and Adjustments.
 Each Party shall provide the other such data and information as may be
reasonably requested to permit Seller to prepare the Final Settlement Statement
or to permit Purchaser to perform or cause to be performed an audit of the Final
Settlement Statement. The  Final Settlement Statement shall become final and
binding upon the parties on the thirtieth (30th) day following receipt thereof
by Purchaser (the “Final Settlement Date”) unless Purchaser gives written notice
of its disagreement (a “Notice of Disagreement”) to Seller prior to such date.
Any Notice of Disagreement shall specify in reasonable detail the dollar amount
and the nature and basis of any disagreement so asserted.  If a Notice of
Disagreement is received by Seller in a timely manner, then the Parties shall
resolve the dispute evidenced by the Notice of Disagreement by mutual agreement,
or otherwise in accordance with Section 8.4(b).

(b)

If Purchaser and Seller have not agreed on the Final Settlement Statement before
the thirtieth (30th) day after Purchaser’s receipt thereof, the Final Settlement
Statement shall be determined by the Designated Accountant.  The Designated
Accountant’s determination of the Final Settlement Statement shall be
conclusive. One-half (1/2) of the Designated Accountant’s fees associated with
the determination of the Final Settlement Statement shall be paid by each Party.
 Purchaser and Seller shall use reasonable efforts to cause the Designated
Accountant to render a final determination within thirty (30) days of the
receipt of such submission.

(c)

If the amount of the adjusted Purchase Price as set forth on the Final
Settlement Statement exceeds the amount of the estimated Purchase Price paid at
the Closing, then Purchaser shall pay in immediately available funds to Seller
the amount by which the Purchase Price as set forth on the Final Settlement
Statement exceeds the amount of the estimated Purchase Price paid at the
Closing.  If the amount of the adjusted Purchase Price as set forth on the Final
Settlement Statement is less than the amount of the estimated Purchase Price
paid at the Closing, then Seller shall pay in immediately available funds to
Purchaser the amount by which the Purchase Price as set forth on the Final
Settlement Statement is less than the amount of the estimated Purchase Price
paid at the Closing.  All such payments required to be made under this Section
8.4(c) shall be made within five (5) Business Days after the Final Settlement
Date or, in the event a Notice of Disagreement is delivered to Seller, within
five (5) Business Days after Seller and Purchaser mutually agree or the
Designated Accountant renders a determination on the Final Settlement Statement.

(d)

Pursuant to Section 8.2(b), the Purchase Price is to be reduced by the value of
Hydrocarbons produced during the period from the Effective Time to the Closing
Date.  If Purchaser shall receive any revenues attributable to such Hydrocarbons
for any reason, Purchaser shall promptly remit same in immediately available
funds to Seller.  Likewise, if Seller shall for any reason receive any of the
proceeds of sale of Hydrocarbons produced and saved from the Assets and
attributable to the period from and after the Closing Date or

33

any other revenues attributable to the ownership or operation of the Assets from
and after the Effective Time, Seller shall promptly remit same in immediately
available funds to Purchaser.

(e)

Except as otherwise provided in this Agreement, any costs and expenses,
including taxes (other than taxes on gross income, net income or gross receipts)
relating to the Assets which are not reflected in the Final Settlement Statement
shall be treated as follows:

(i)

All costs and expenses relating to the Assets for which Seller is responsible
shall be the sole obligation of Seller and Seller shall promptly pay, or if paid
by Purchaser, promptly reimburse Purchaser in immediately available funds for
and indemnify, defend, and hold Purchaser harmless from and against the same;
and

(ii)

All costs and expenses relating to the Assets for which Purchaser is responsible
shall be the sole obligation of Purchaser and Purchaser shall promptly pay, or
if paid by Seller, promptly reimburse Seller in immediately available funds for
and indemnify, defend and hold Seller harmless from and against the same.

8.5

Transfer Taxes

.  All sales, use and other taxes (other than taxes on gross income, net income
or gross receipts) and duties, levies or other governmental charges incurred by
or imposed with respect to the property transfers undertaken pursuant to this
Agreement (including any interest or penalties with respect thereto) shall be
the responsibility of, and shall be paid by, Purchaser to the extent not
remitted by Sellers pursuant to Section 8.2(a).  Seller and Purchaser agree to
cooperate in establishing that the requirements of any applicable exemption from
such taxes have been satisfied.

8.6

Ad Valorem and Similar Taxes

.  Ad valorem, personal property and similar taxes imposed with respect to a
period which begins before and ends on or after the Effective Time (a “Straddle
Period”) shall be prorated based on the number of days in such Straddle Period
before and on or after the Effective Time. Seller’s share of such taxes shall be
equal to the amount of such taxes for the Straddle Period multiplied by a
fraction, the numerator of which is the number of days in such Straddle Period
before the Effective Time, and the denominator of which is the total number of
days in the Straddle Period. Purchaser’s share of such taxes shall be equal to
the amount of such taxes for the Straddle Period multiplied by a fraction, the
numerator of which is the number of days in such Straddle Period on or after the
Effective Time (with the Effective Time being included in the number of days
after the Effective Time), and the denominator of which is the total number of
days in the Straddle Period. If either Party pays such taxes for which the other
Party is responsible, and the amount of such payment is not taken into account
as an adjustment to the Purchase Price under Section 8.2, then upon receipt of
evidence of payment the nonpaying Party will reimburse the paying Party promptly
for the nonpaying Party’s share of such taxes.

34

8.7

Actions of Seller at the Closing and Post Closing

.  At the Closing, Seller shall:

(a)

execute the Statement evidencing the amounts to be wire transferred into the
account of Seller at Closing;

(b)

execute and deliver to Purchaser letters in lieu of transfer or division orders
as may be reasonably requested by Purchaser no less than five (5) Business Days
prior to the Closing Date directing all purchasers of production from the
Subject Interests to make payment of proceeds attributable to such production to
Purchaser from and after the later of the Closing Date;

(c)

deliver to Purchaser possession of its proportionate share of the Assets;

(d)

execute and deliver to Purchaser an affidavit attesting to its non-foreign
status and meeting the requirements of Section 1445(b)(2) of the Code and the
regulations thereunder;

(e)

execute and deliver such documentation as may be required to be submitted in
connection with the remittance of sales tax pursuant to Section 8.2(a)(vii); and

(f)

execute, acknowledge and deliver any other agreements provided for herein or
necessary or desirable to effectuate the transactions contemplated hereby.

(g)

Within ten (10) business days of Closing, execute, acknowledge and deliver to
Purchaser an Assignment, Bill of Sale and Conveyance in the form of Exhibit B
(the “Assignment”), effective as of the Effective Time, and such other
conveyances, assignments, transfers, bills of sale and other instruments (in
form and substance mutually agreed upon by Purchaser and Seller) as may be
necessary or desirable to convey the Assets to Purchaser;

8.8

Actions of Purchaser at the Closing

.  At the Closing, Purchaser shall:

(a)

pay the Purchase Price (as adjusted pursuant to the provisions hereof and net of
(i) the Earnest Money and (ii) an amount equal to all Suspended Proceeds held by
Seller relating to the Assets for which Purchaser has assumed responsibility
under Section 10.1) in immediately available funds pursuant to wire transfer
instructions to be provided by Seller to Purchaser;

(b)

execute the Statement evidencing the amounts to be wire transferred into the
account of Seller at Closing;

(c)

take possession its proportionate share of the Assets;

35

(d)

execute, acknowledge and deliver the Assignment and any other agreements
provided for herein or necessary or desirable to effectuate the transactions
contemplated hereby.

8.9

Assignment; Recordation; Further Assurances

.

(a)

The Assignment shall be without representation or warranty of title, express or
implied, except that Seller shall specially warrant and agree to defend the
title to the Assets against the lawful claims and demands of all persons
claiming the same, or any part thereof, but limited to claims arising by,
through, or under Seller but not otherwise, subject to and excepting all
Permitted Encumbrances.  The damages recoverable for a breach of such limited
warranty of title with respect to any Asset shall not exceed the Allocated Value
of the relevant Asset.

(b)

Promptly following the Closing, Purchaser shall cause the documents identified
in Section 7.2(c) and the Assignment to be recorded or filed in the appropriate
real property or other applicable records, and Purchaser shall promptly provide
Seller copies of all such recorded or filed instruments. Purchaser shall be
responsible for all applicable recording fees.

(c)

Subject to such additional period of time as Seller reasonably requires to use
the Records in the conduct of operations after Closing, Seller shall make the
Records available to Purchaser to review and copy be during normal business
hours within thirty (30) days after the Closing, to the extent the Records are
in the possession of Seller and are not subject to contractual restrictions on
transferability.

(d)

After the Closing Date, each Party, at the request of the other Party and
without additional consideration, shall execute and deliver, or shall cause to
be executed and delivered, from time to time such further instruments of
conveyance and transfer and shall take such other action as the other Party may
reasonably request to convey and deliver the Assets to Purchaser and to
accomplish the orderly transfer of the Assets to Purchaser in the manner
contemplated by this Agreement.  After the Closing, the Parties will cooperate
to have all proceeds received attributable to the Assets to be paid to the
proper Party hereunder and to have all expenditures to be made with respect to
the Assets be made by the proper Party hereunder.

ARTICLE IX

TERMINATION

9.1

Termination Rights

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

(a)

By mutual written consent of Purchaser and Seller;

36

(b)

By either Purchaser or Seller if (i) the Closing has not occurred by January,
2014 or such later date to which the Closing Date has been delayed pursuant to
Section 5.4, 5.7 or 5.8 (provided, however, that the right to terminate this
Agreement pursuant to this clause (i) shall not be available to any Party whose
breach of any representation or warranty or failure to perform any covenant or
agreement under this Agreement has been the cause of or resulted in the failure
of Closing to occur on or before such date); or (ii) any Governmental Authority
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting Closing;

(c)

By Purchaser if (i) there has been a material breach of the representations and
warranties made by Seller in Article III (provided, however, that Purchaser
shall not be entitled to terminate this Agreement pursuant to this clause (i)
unless Purchaser has given Seller at least fifteen (15) days prior notice of
such breach, Seller has failed to cure such breach within the fifteen (15) day
period following receipt of such  notice, and the condition described in Section
7.2(a), other than the provision thereof relating to the certificate signed by a
Responsible Officer of Seller, would not be satisfied if the Closing were to
occur on the day on which Purchaser gives Seller notice of such termination); or
(ii) Seller has failed to comply in any material respect with any of its
covenants or agreements contained in this Agreement and such failure has not
been, or cannot be, cured within a reasonable time after notice and demand for
cure thereof;

(d)

By Seller if (i) there has been a material breach of the representations and
warranties made by Purchaser in Article IV (provided, however, that Seller shall
not be entitled to terminate this Agreement pursuant to this clause (i) unless
Seller has given Purchaser at least fifteen (15) days prior notice of such
breach, Purchaser has failed to cure such breach within the fifteen (15) day
period following receipt of such notice, and the condition described in Section
7.3(a), other than the provision thereof relating to the certificate signed by a
Responsible Officer of Purchaser, would not be satisfied if the Closing were to
occur on the day on which Seller gives Purchaser notice of such termination); or
(ii) Purchaser has failed to comply in any material respect with any of its
respective covenants or agreements contained in this Agreement, and such failure
has not been, or cannot be, cured within a reasonable time after notice and a
demand for cure thereof;

9.2

Effect of Termination

.  If this Agreement is terminated by either Purchaser or Seller pursuant to the
provisions of Section 9.1: (a) this Agreement shall forthwith become void except
for, and there shall be no further obligation on the part of any Party or its
respective Affiliates, directors, managers, officers, members or stockholders
except pursuant to, the provisions of Sections 2.5, 3.8, 4.9, 5.1 (but with
respect to Section 5.1, only to the extent of the confidentiality and
indemnification provisions contained therein), 6.6 and 6.8 and the
Confidentiality Agreement (which shall continue pursuant to their terms), and
(b) Seller shall be free immediately to enjoy all rights of ownership of the
Assets and to sell, transfer, encumber or otherwise dispose of all or any
portion of the Assets to any party without any restriction under this Agreement;

37

provided, however, that a termination of this Agreement shall not relieve any
Party from any liability for damages incurred as a result of a breach by such
Party of its covenants, agreements or other obligations hereunder occurring
prior to such termination.

ARTICLE X

ASSUMPTION AND INDEMNIFICATION

10.1

Purchaser’s Obligations after Closing

.  Upon and after Closing, except to the extent reflected in one or more upward
Purchase Price Allocations and Adjustments, Purchaser will assume and perform
all the obligations, liabilities and duties relating or with respect to the
ownership of the Assets that are attributable to periods after the Effective
Time, together with the obligations assumed by Purchaser under this Agreement
(collectively, the “Assumed Obligations”). Without limiting the generality of
the foregoing, the Assumed Obligations shall also specifically include:

(a)

Responsibility for the performance of its proportionate share of all express and
implied obligations under the instruments described in Exhibit A, Schedule 3,
together with all other instruments in the chain of title to the Assets, the
Leases, the Contracts, the Permits and all other orders, contracts and
agreements to which the Assets are subject, including the payment of royalties
and overriding royalties, in each case to the extent attributable to the periods
from or after the Effective Time, except to the extent reflected in one or more
of the Purchase Price Allocations and Adjustments;

(b)

Responsibility for compliance with all federal, state and local laws, rules,
regulations, guidances, ordinances, decrees and orders (“Laws”) now or hereafter
in effect pertaining to the Assets, and the procurement and maintenance of all
permits, consents and authorizations of or required by Governmental Authorities
in connection with the Assets, attributable to periods before or after the
Effective Time.

10.2

Seller’s Obligations after Closing

.  After Closing and subject to Sections 10.10 and 10.11, Seller will retain
responsibility for its proportionate share of (a) the payment of all operating
expenses and capital expenditures related to the Assets and attributable to
Seller’s ownership and operation of the Assets, (b) severance, ad valorem and
similar taxes measured by the value of the Assets or measured by the production
of Hydrocarbons applicable to the period prior to the Effective Time, and (c)
third-party claims with respect to payments of lease royalties in respect of the
Leases during Seller’s ownership of the Assets, except as related to Suspended
Proceeds.

10.3

Plugging and Abandonment Obligations

.  Upon and after the Closing, Purchaser assumes full responsibility and
liability for its proportionate share of the plugging and abandonment
obligations related to the four (4) wells on the George Lease.  Environmental
Obligations

.  Purchaser’s Indemnity

.  Purchaser shall release and indemnify, defend and hold Seller and its
Representatives harmless from and against any and all Claims caused by,
resulting from or incidental to the Assumed Obligations

38

(including the Environmental Obligations and the Plugging and Abandonment
Obligations), and any Claims caused by, resulting from or attributable to (a)
any inaccuracy of any representation or warranty of Purchaser set forth in this
Agreement, or (b) any breach of, or failure to perform or satisfy any of the
covenants and obligations of Purchaser hereunder.

10.4

Seller’s Indemnity

.  Subject to Sections 10.10 and 10.11, Seller shall release and indemnify,
defend and hold Purchaser and its Representatives (the “Purchaser Indemnified
Parties”) harmless from and against any and all Claims caused by, resulting from
or incidental to the Retained Obligations, and any Claims caused by or resulting
from (a) any inaccuracy of any representation or warranty of Seller set forth in
this Agreement, or (b) any breach of, or failure to perform or satisfy, any of
the covenants and obligations of Seller hereunder.

10.5

Notices and Defense of Indemnified Claims

.  Each Party shall promptly notify the other Party of any Claim of which it
becomes aware and for which it or any of its Representatives is entitled to
indemnification from the other Party under this Agreement. The indemnifying
Party shall be obligated to defend, at the indemnifying Party’s sole expense,
any litigation or other administrative or adversarial proceeding against the
indemnified Party relating to any Claim for which the indemnifying Party has
agreed to release and indemnify and hold the indemnified Party harmless under
this Agreement. However, the indemnified Party shall have the right to
participate with the indemnifying Party in the defense of any such Claim at its
own expense.

10.6

Survival

.  The representations, warranties, covenants, agreements and indemnities of the
Parties set forth herein shall survive the Closing, and the consummation of the
transactions contemplated hereby; provided, that the representations,
warranties, covenants, and agreements.

ARTICLE XI

DISCLAIMERS AND CASUALTY LOSS

.

11.1

Casualty Loss; Condemnation

.

(a)

Purchaser shall assume all risk of loss with respect to, and any change in the
condition of, the Assets from and after the Closing Date.

(b)

If after the Effective Time and prior to the Closing any part of the Assets
shall be damaged or destroyed by fire or other casualty or if any part of the
Assets shall be taken in condemnation or under the right of eminent domain or if
proceedings for such purposes shall be pending or threatened (“Casualty Loss”),
this Agreement shall remain in full force and effect notwithstanding any such
damage, destruction, taking or proceeding, or the threat thereof, and the

39

Parties shall proceed with the transactions contemplated by this Agreement
notwithstanding such damage, destruction, taking or proceeding

(c)

Notwithstanding Section 11.3(a), in the event of any loss described in Section
11.3(b), at the Closing, Seller shall pay to Purchaser all sums paid to Seller
by third parties by reason of the damage, destruction or taking of such Assets
(up to the Allocated Value thereof) and shall assign, transfer and set over unto
Purchaser all of the rights, title and interest of Seller in and to any claims,
causes of action, unpaid proceeds or other payments from third parties arising
out of such damage, destruction or taking (up to the Allocated Value thereof).
Notwithstanding anything to the contrary in this Section 11.3, Seller shall not
be obligated to carry or maintain any insurance coverage with respect to any of
the Assets other than as required under applicable operating agreements
affecting such Assets.

ARTICLE XII

MISCELLANEOUS

12.1

Amendment

.  This Agreement may not be amended except by a written instrument signed on
behalf of each of the Parties.

12.2

Notices

.  Any notice or other communication required or permitted hereunder shall be in
writing and either delivered personally (effective on the date of transmission
if transmitted before 5:00 p.m. at the location to which transmitted on a
Business Day or upon delivery), by facsimile transmission (effective on the next
Business Day after transmission), by recognized overnight delivery service
(effective on the next Business Day after delivery to the service), or by
registered or certified mail, postage prepaid and return receipt requested
(effective on the fifth Business Day after being so mailed), at the following
addresses or facsimile transmission numbers (or at such other address or
facsimile transmission number for a Party as shall be specified by like notice):

If to Purchaser:

Rangeford Resources, Inc.

5215 North O’Connor Boulevard, Ste 1820

Irving, Texas 75239

Attention:  Colin Richardson

Facsimile:  817-491-4955

With a copy (which shall not constitute notice) to:

Vince D’Antonio

Attention:  

Facsimile:  

40

If to Seller:

Black Gold Kansas Production, LLC

900 Bristol Court

Southlake, Texas 76092

Attention: Stephen G. Nadeau

Facsimile: 817-329-3411

With copies (which shall not constitute notice) to:

_______________________________

Attention:  ______________________

_______________________________

_______________________________

Facsimile:  ______________________

12.3

Counterparts

.  This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the Parties and delivered
to the other Parties, it being understood that all Parties need not sign the
same counterpart.

12.4

Entire Agreement; No Third Party Beneficiaries

.  This Agreement (together with the Confidentiality Agreement and the documents
and instruments delivered by the Parties in connection with this Agreement): (a)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, between or between the Parties with
respect to the subject matter hereof; and (b) except as specifically provided in
Article X, is solely for the benefit of the Parties and their respective
successors, legal representatives and assigns and does not confer on any other
Person any rights or remedies hereunder. The Parties agree that no Party has
made or relied upon any express or implied agreements, representations or
warranties to the other Party, in all cases relating to the transactions
contemplated by this Agreement, which are not expressly set forth in this
Agreement.

12.5

Applicable Law and Venue

.  This Agreement shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof. The Parties irrevocably consent to the personal jurisdiction of
the federal and/or the state courts located in Dallas County, Texas, and
unconditionally agree that any and all claims, disputes and/or controversies
arising out of or related to this Agreement shall be adjudicated in the federal
and/or state courts located in Dallas County, Texas.

.

41

12.6

Severability

.  Any term or provision of this Agreement that is invalid or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction.  If any provision of this Agreement is so broad as to be
unenforceable, such provision shall be interpreted to be only so broad as is
enforceable.

12.7

Assignment

.  Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the Parties (excluding assignments by
operation of law) without the prior written consent of the other Party,  This
Agreement will be binding upon, inure to the benefit of and be enforceable by
the Parties and their respective successors and assigns.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their respective duly authorized representatives, as of the date first written
above.

“Purchaser”

Rangeford Resources, Inc.

By:

      Name:

      Title:

“Seller”

Black Gold Kansas Productions, L.L.C.

By:

      Name:

      Title:

42

Exhibit A, Schedule 1

43

Exhibit A, Schedule 2

44

Exhibit A Schedule 3

45

Exhibit B

Joint Exploration Agreement

In conjunction with the Closing provided in the Agreement, the Parties shall
enter into this JOINT EXPLORATION AGREEMENT

This Joint Exploration Agreement (this "Agreement") entered into as of the  day
of January, 2014, is by and between Rangeford Resources, Inc., a Nevada
corporation ("Rangeford"), and Black Gold Kansas Production, LLC., a Texas
limited liability corporation ("Black Gold "), sets forth the terms and
conditions under which Rangeford and Black Gold, sometimes hereinafter
collectively referred to as the "Parties", and individually each as the Parity
will jointly acquire, explore, develop, and operate certain oil and gas and
related mineral interests and properties from time to time in the Bourbon and
Allen Counties, Kansas pursuant to the provisions of this Agreement.

In consideration of the mutual covenants herein contained, the Parties hereby
agree as follows:

1.  PURPOSE AND TERM

1.1

Purpose.  The purpose of this Agreement is to set forth the understanding of the
Parties and to establish the relationship pursuant to which they will jointly
acquire, explore, develop and product (or plug if necessary) certain oil and gas
leases, fee interests and other oil and gas and related mineral interests and
properties (the "Mineral Interests") within the area depicted on Exhibit "A"
attached hereto and made a part hereof for all purposes ("Agreement Area").  Any
Mineral Interest jointly acquired, explored, developed and produced (or plugged
if necessary) by the Parties to this Agreement during the term of this Agreement
shall be governed by the provisions hereof.  

1.2

Term.  This Agreement shall be for an initial term of three (3) years,
commending on the date hereof, and may be automatically extended for like one
(1) year periods thereafter unless terminated by either of the Parties by the
issuance of written notice to the other party on or before forty-five (45) days
prior to the commencement of any additional one (1) year period or as otherwise
mutually agreed to by the Parties hereto.  It is provided, however, that
notwithstanding a termination under this Section 1.2, the provisions of this
Agreement shall continue in full force as to any Prospect (as hereinafter
defined) created pursuant to Section 3.3 hereof, unless excluded by the
provisions of Sections 3.6 or 4.1 below, or as provided in the operating
agreement attached as Exhibit “B” hereto and made a part hereof for all purposes
(“Operating Agreement”).

1.3

Tax Matters.  For federal income tax purposes, this agreement and the operations
hereunder are regarded as a tax partnership and agree to be bound by the
provisions the tax partnership attached as Exhibit "C" hereto and made a part
hereof for all purposes.  Further, each party hereby elects to be excluded from
the application of all of the provisions of Subchapter "K," Chapter 1, Subtitle
"A", of the Internal Revenue Code of 1986, as amended ("Code"), as permitted and
authorized by Section 761 of the

46

Code and the regulations promulgated thereunder.  Operator is authorized and
directed to execute on behalf of each party hereby affected such evidence of
this election as may be required by the Secretary of the Treasury of the United
States or the Federal Internal Revenue Service, including specifically, but not
by way of limitation, all of the returns, statements, and the data required by
Treasury Regulations §1.761.  Should there be any requirement that each party
hereby affected give further evidence of this election, each such party shall
execute such documents and furnish such other evidence as may be required by the
Federal Internal Revenue Service or as may be necessary to evidence this
election.  No such party shall give any notices or take any other action
inconsistent with the election made hereby.  If any present or future income tax
laws of the state or states in which the Contract Area is located or any future
income tax laws of the United State contain provisions similar to those in
Subchapter "K", Chapter 1, Subtitle "A", of the Code, under which any election
similar to that provided by Section 761 of the Code is permitted, each party
hereby affected shall make such election as may be permitted or required by such
laws.  In making the foregoing election, each such party states that the income
derived by such party from operations hereunder can be adequately determined
without the computation of partnership taxable income.

2.  CONTRIBUTIONS AND COST SHARING

2.1

As part of the Purchase Price provided in the Agreement, Rangeford paid $125,000
to cover the remaining costs of the completion costs of the four (4) wells on
the George Lease as defined in the Agreement.  In addition, Rangeford agrees to
participate in the development of the acreage within the “area of mutual
interest” as described below for the George Lease, subject to the terms of the
Agreement as provided herein and in the Operating Agreement, and pay all costs ,
expenses for the drilling and completing of said wells, with the and income to
be earned and paid in accordance with each Party’s working interest and net
revenue interest share.

2.2

Other Costs and Expenses.  If either Party acquires acreage within the “area of
mutual interest” as described below, for the 2,950 Acres, as defined in the
Agreement, Rangeford shall have the right to participate in such acreage on the
same basis as it acquired its interest in the 2,950 Acres.   Black Gold shall
pay all costs of acquiring additional acreage.  The cost of such acreage shall
be included, on a location by location basis, in the AFE for each of the wells
to be drilled on said acreage.  All wells will be drilled pursuant to the terms
of this Agreement and the Operating Agreement, and all costs and expenses for
the drilling, completing and equipping of the wells on said land to be borne by
Rangeford.  Upon the completion and equipping of said wells, all costs and
expenses thereafter shall be borne and all income shall be received and shared
in proportion to each Party’s working interest and net revenue interest .

2.3

Phase II development.  The Parties presently agree to a drilling, testing and
completion program for twenty (20) wells with the authority for expenditure
(“AFE”), attached as Exhibit “D” hereto and made a part hereof for all purposes
in the amount of two million two hundred thousand dollars ($2,200,000).  It is
presently anticipated that a well will be drilled on five (5) different leases
to hold a maximum amount of acreage,  The separation of such wells will require
the setting of five (5) tank

47

batteries , ( one (1) per lease and each requiring separate electric connections
to each).  The AFE reflects that the five (5) tank batteries, with a capacity of
990 barrels of storage (water tank and gun barrel) will cost fifty thousand
dollars ($50,000) each, for a total cost of two hundred fifty thousand dollars
($250,000).  The electric poles, electric meters and running of electric lines
is estimated to cost ten thousand dollars ($10,000) per lease for a total of
fifty thousand dollars ($50,000).   Upon the completion and equipping of each
said well, all costs and expenses thereafter shall be borne and all income shall
be received and shared in proportion to each Party’s working interest and net
revenue interest.  It is further provided, that the Parties shall meet, no later
than thirty (30) days after the completion of the fifth (5th) such well to
evaluate the economic merits of the program.  At that time, Rangeford shall be
entitled to elect to keep all interests which it has paid for and earned and
discontinue further drilling.

2.4

Review Meetings.  The Parties will meet regularly, at the offices of either
Party, which such meetings to be no less frequently than monthly, to determine
whether the above program needs to be modified in any way.  At such meetings,
there shall be a presentation of geological, geophysical, accounting and land
data in sufficient detail to apprise Rangeford. of the opportunities and costs
it can expect to encounter by continuing this Agreement during the coming month
and year.

3.  EXPLORATION PROCEDURE

3.1

Technical Meetings.  In addition to the Review Meetings described in 2.4 above,
the Parties shall regularly communicate and discuss by phone the geological,
geophysical, accounting and land data to enable the Parties to evaluate and
agree on the exploration activities to be conducted.

3.2

Budgets For Future Years.  To the extent possible, the Technical meetings will
be used by the Parties to discuss geological and geophysical leads, define
prospects, and outline buying areas.  The Parties shall determine the maximum
bonus, delay rental, and minimum primary term pursuant to which leasehold
interests can be acquired and an annual budget shall be agreed upon at least
thirty (30) days prior to the beginning of each calendar year.  The Parties
shall agree on the estimated costs for the coming year specifying, to the extent
possible, the projected costs for the acquisition of seismic, geological and
land data and information.  The Parties shall, to the extent possible, reach an
agreement as to the acquisition, exploration, development and operation of
mineral interests for the coming year.

 

3.3

Designation of Prospects.  The Parties shall at the Annual or Periodic Meetings
or at such other times as are appropriate and practicable designate "prospects".
 The Parties shall mutually agree upon and designate on a map, based upon
geophysics, geology and other relevant facts and information, the area deemed to
comprise each said prospect (the "Prospect") with sufficient leeway in such
designation to allow for the accuracy of the geophysical, gravity and geological
data upon which the designation is predicated.  Each Prospect shall constitute
an area of mutual interest ("Area of Mutual Interest") within which the Parties
shall be entitled to share in the ownership and

48

development of any Mineral Interest acquired by either Party in accordance with
and pursuant to the terms of this Agreement.

3.4

Prospect Cost Estimates.  Upon the designation of a Prospect, Operator shall
prepare and deliver to Rangeford a written estimate of the cost of acquiring
such additional gravity, geophysical and geological data and information as
Operator deems to be necessary, and an estimate of the cost of acquiring leases
in the area comprising such Prospect.

3.5

Acquisition Determination.  Within fifteen (15) days after the designation of a
Prospect, each Party shall make an election by written notice to the other, as
to whether it wishes to participate in the acquisition of the Mineral Interests
comprising said Prospect and additional geophysical, geological, or other data
(collectively, the "Data") further delineating said Prospect.

3.6

Failure to Participate.  In the event one Party desires to participate in the
acquisition of said Mineral Interests and Data, if any, and the other Party does
not desire to participate, the Party desiring not to participate shall
relinquish all rights in the Mineral Interests and Data acquired and such
Mineral Interests and Data shall immediately be excluded from the provisions of
this Agreement.

3.7

Operating Agreements.  If both Parties agree to participate in a Prospect, they
shall, do so pursuant to the terms of the Operating Agreement.

 

3.8

Assignments.  When a Prospect has been designated and a lease acquisition
program agreed upon, Operator shall acquire leasehold interests on behalf of the
Parties and bill Rangeford for its proportionate share of such costs pursuant to
the agreed upon plan of acquisition.  Operator shall assign Rangeford its
undivided interest in the leases so acquired on a regular basis, as soon as is
practicable, but in no event later than sixty (60) days from the date Operator
acquires such leasehold interests. Rangeford shall pay its proportionate share
of such costs within thirty (30) days of receiving an invoice therefor.  

4.  PROSPECT SEISMIC DATA AND INITIAL WELL

4.1

Rights of Proposing Party.  With respect to any Prospect, when either Party
proposes the acquisition of gravity, geophysical or geological data, or
additional Mineral Interests, in addition to those authorized by Section 3.
above ("Additional Data" and "Additional Interests", respectively) and the other
Party fails to consent in writing to the payment of the reasonably necessary
sums therefor within ten (10) days after that Party's receipt of written notice
thereof (the "Consent Period"), the Party consenting to the payment of said sums
shall have the option for the ten (10) days next following the end of the
Consent Period to proceed and such Additional Data or Additional Interests shall
thereafter be excluded from the provisions of this Agreement ("Exclusion
Point").

4.2

Subsequent Rights of Non-Consenting Parties.  It is further agreed, however,
that in the event the Additional Data or Additional Interests are not acquired
or the actual drilling or an Initial Well is not commenced, as the case may be,
within ninety

49

(90) days from said Exclusion Point, the Non-Consenting party shall again have
the option for thirty (30) days from the end of said ninety (90) day period of
reacquiring its previous interest in said Prospect.  Said Non-Consenting Party
may reacquire said interest by reimbursing the other Party for its proportionate
share of all costs it paid to acquire said interests.

 

5.  OWNERSHIP

5.1

Initial Interest.  In the event both Parties participate in the acquisition of
Mineral Interests and the drilling of an Initial Well on a Prospect, the
ownership and costs shall be shared in the following proportions:  Black Gold 25
% ; Rangeford 75 %.

6.  THIRD PARTY SUBMITTALS

6.1

Offer to Other Party.  In the event either Party to this Agreement receives a
prospect submittal from a third party not subject to the terms of this Agreement
("Third Party Submittal") and such Third Party Submittal contains Mineral
Interests located within the Area of Mutual Interest, the Party to this
Agreement receiving such Third Party Submittal shall offer to the other party to
this Agreement the option of participating therein on terms no less favorable
than are available to the party receiving such Third Party Submittal and for the
percentage said party owns (after "payout") in the area of mutual interest
within which it is located in exchange for paying or bearing a like percentage
of all risk and expense of earning said interest.  Should both Parties mutually
agree to share in the Submittal on other than an equal basis, such sharing of
interest shall apply to that Third Party Submittal only.  It is further provided
that in the case of Third Party Submittal which contains acreage which is
crossed or contacted by Existing Data seismic lines, the participation and
ownership therein shall be in the same proportions as provided in Section 5
above.

 

6.2

Notice and Reply.  The Party receiving the Third Party Submittal shall, within
fifteen (15) days of its receipt thereof, send written notice to the other
Party.  Said notice shall contain reasonably full particulars of said Third
Party Submittal to apprise the other Party of the costs, risk, and expense of
the interest to be earned and geological basis upon which said Party can make an
informed determination as to whether to participate in said acquisition.  The
Party receiving said notice shall have ten (10) days from receipt of said
written notice to notify in writing the Party issuing said notice of its
election to participate therein, and specify the percentage of such Third Party
Submittal it will participate with respect to.  Failure of such other party to
notify the notifying party within said ten (10) days of its desire to
participate in said acquisition shall constitute rejection and such other Party
shall have no further rights with respect to such Third Party Submittal.

7.  TRANSFER OF INTERESTS AND RELATIONSHIP OF THE PARTIES

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7.1

Assignability.  Either Party to this Agreement may, with the written consent of
the other Party, which consent shall not be unreasonably withheld, conditioned
or delayed, assign all or a portion of its interest hereunder to a third party.
 All duties, rights, responsibilities and obligations of any such assignor shall
be binding upon the assignee who shall take such assignment subject to the
provisions of this Agreement.  Provided however, that any such assignor shall
remain liable for the performance of all such duties, responsibilities and
obligations notwithstanding any such assignment.

7.2

Relationship.  It is understood that as soon as Mineral Interests are acquired,
the relationship of the Parties shall be that of Tenants in Common and that
nothing herein shall be construed as creating a partnership, joint venture or
any other relationship by which either Party hereto is liable for the
obligations or acts, either of omission or commission, of the other Party
hereto.

8.   MISCELLANEOUS

8.1

Data and Information.  Black Gold shall, at all reasonable times make available
to Rangeford all data and information acquired and/or developed pursuant to the
terms of this Agreement.  Copies of all such data shall be provided to Rangeford
upon reasonable request.

8.2

Governing Law.  This Agreement and all rights and liabilities of the Parties
hereto shall be subject to and governed by the laws of the State of Texas.

8.3

Notice.  Any notice which may be given by any party hereof, unless otherwise
expressly provided herein, shall be deemed to have been properly given if sent
in writing by U.S. certified mail, or the equivalent, return receipt requested,
postage prepaid, by telegram, by telex, or by personal delivery, addressed as
follows:

If to Black Gold:

                      Black Gold Kansas Production , LLC

                      900 Bristol Court

                      Southlake, Texas 76092

If to Rangeford:

                      Rangeford Resources, Inc.

                      5215 North O’Connor Boulevard

                      Suite 1820

         Irving, Texas 75239

8.4

Saving.  Should any provision of this Agreement be held to be illegal, invalid
or unenforceable by a jurisdictional court, the legality validity, and
enforceability of the remaining provisions of this Agreement shall not be
affected thereby, and in lieu of each such illegal, invalid, or unenforceable
provision, there shall be added automatically as a part of this Agreement, a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.

8.5

Counterparts.  This Agreement may be executed in one or more counterparts, or
ratified by any of the Parties hereto, and the document so executed or

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ratified shall each be deemed to be an original copy and all of which together
shall be deemed to be one instrument.

8.6

Headings.  The headings used in this Agreement are used for administrative
purposes only and do not constitute substantive matters to be considered in
construing the terms of this Agreement.

8.7

Binding Agreement.  This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.

IN WITNESS WHEREOF, this Agreement is executed by the Parties hereto as of the
day and year first above written.

ATTEST:

By_____________________

Its: _____________________

ATTEST:  

 

By_____________________

Its: _____________________

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Exhibit “A”

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Exhibit “B”

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Exhibit “C”

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Exhibit “D”

 

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