Exhibit 10.1

FARM-OUT ASSIGNMENT
OF CORRECTION
(Correcting prior Assignments dated October 4, 2007
and December 10, 2007)

THIS FARM-OUT ASSIGNMENT OF CORRECTION made and entered into this the 18th day
of June, 2008, by and between K & D ENERGY, a Kentucky Partnership, by Partners,
Danny Thomasson, of P. O. Box 360, Bremen, Kentucky 42325, and Keith Conn, 85
Tyson Lane, Dunmore, Kentucky 42339, being all partners in the partnership,
hereinafter ASSIGNOR and KY USA ENERGY, INC., C/O Steve Eversole, 321 Somerset
Road, London, Kentucky 40741, hereinafter ASSIGNEE;
 
WITNESSETH: Whereas, ASSIGNOR owns certain oil and gas leases in West Central,
Kentucky, more specifically described hereinafter and desire to do this Farm-Out
Assignment to ASSIGNEE to form a core basis for a publicly traded company so
that money can be raised to fully develop the project from which ASSIGNOR will
receive a carried working interest and by their signatures below the parties
agree to this Assignment on the following terms and conditions:
 
WITNESSETH: WHEREAS ASSIGNOR executed and delivered to ASSIGNEE a “Farm-Out
Assignment” dated October 4, 2007 and recorded as follows:
 
Christian County, Kentucky Lease Book 43, page 484;
Muhlenberg County, Kentucky Lease Book 94, page 697;
Todd County, Kentucky Lease Book 22, page 700;

and a “Supplemental Farm-Out Assignment” dated December 10, 2007 and recorded as
follows:
 
Christian County, Kentucky Lease Book 43, page 514;
Muhlenberg County, Kentucky Lease Book 95, page 27;
Todd County, Kentucky Lease Book 22, page 705; and,

WHEREAS, Paragraph #5 of the above Farm-Out Assignment dated October 4, 2007
incorrectly indicates a first right to drill oil above the New Albany Shale
(Devonian) is being assigned to ASSIGNEE with a reversion to ASSIGNOR of any
undrilled locations above the New Albany Shale that appear favorable. This
correction is being executed to delete all rights of production for oil and gas
above the New Albany Shale. ASSIGNEE is receiving the rights to produce the New
Albany Shale and all deeper formations for both oil and gas; and,
 

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WHEREAS some requirements for the original Farm-Out Assignment have already been
met, such as payment and extension of the Walker and Lacefield/Taylor Leases,
this Assignment is corrected and re-executed as follows:
 

 
1.
ASSIGNOR does hereby Farm-Out Seventy-Five Percent Net Revenue Interest (75%
N.R.I.) In and to 2099 acres, comprised of nine (9) separate mineral leases, to
ASSIGNEE. The farm-out interest is hereby granted as One Hundred Percent Working
Interest (100% W.I.); thereby ASSIGNEE will pay 100% of the drilling,
completion, and operation costs to earn their 75% NRI.

 
2.
The purchase price for the subject leaseholds has been delivered to ASSIGNOR’S
Bank Account of choice via wire-transfer (EFT).

 
3.
ASSIGNEE must continue drilling to retain their Farmed-In rights. They must
drill a minimum of twelve (12) New Albany Shale wells per year, until all
locations have been developed on the available acreage, to maintain their
rights.

 
4.
This assignment pertains to the New Albany shale and all formations beneath it
for all hydrocarbons. All formations above the new Albany shale are reserved for
ASSIGNOR. Should conflict ever occur in the development of the leases on matters
such as well location, location of roads, infrastructure and similar matters,
the rights assigned herein shall be superior to the rights retained by ASSIGNOR.

 
5.
ASSIGNEE will have the option to contract ASSIGNOR for management of drilling
and completion operations, and shall receive $10,000.00 per well for this
service, due at the commencement of drilling activities.

 
6.
ASSIGNOR shall have the right to sell gas from any of its pre-existing gas wells
on the project acreage, including the new Slinker #1 well, into the natural gas
gathering line network that ASSIGNEE will construct without being assessed any
fees, including but not limited to transportation, compression, or scrubbing of
said gas. This right shall also extend to any shallow wells drilled in the
future by ASSIGNOR at its own expense.

 

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7.
ASSIGNEE shall maintain General Liability Insurance at all times during the
project, and shall name as Additionally Insured: ASSIGNOR and its successors and
assigns in these leases, as well as Mr. Danny Thomasson and Mr. Marvin K. Conn
as individuals. The General Liability Insurance policy shall provide the
following minimum coverage limits: General Aggregate $2 Million; General
Liability $1 Million; Products and Completed Operations $1 Million;
Environmental Spills & Cleanup $1 Million; and Medical Payments $10,000.

 
8.
ASSIGNEE shall be responsible for all legal work associated with obtaining a
Title Opinion for the subject leaseholds.

 
9.
ASSIGNEE shall assume responsibility for all land and crop damages arising from
drilling or production activities such as road & location construction, spills,
etc.

 
10.
ASSIGNEE shall assume responsibility for the maintenance of the leasehold
property and infrastructure including roads, gates, etc.; insofar as said
maintenance shall extend only to that leasehold infrastructure that will be
utilized or created as a result of this agreement. This clause shall take affect
on the date of closing of this agreement and the leasehold infrastructure, with
all pre-existing structures and improvements shall be transferred “as-is” on
that day.

NOW, THEREFORE, for and in consideration of the above terms and conditions, and
one dollar ($1.00) plus other good and valuable considerations, the receipt and
sufficiency of which are acknowledged, the ASSIGNOR does hereby bargain,
transfer and assign to ASSIGNEE the following described Oil and Gas Leases:
 
Lease Name
County
Lease Book/Page
Date
Acreage
         
Lakefield/Taylor
Muhlenberg
94/83 & 94/452
10/18/07
130
& 94/734
       
Freda/Jeff Johnston
Todd
22/697
10/08/07
323
Freda/Jeff Johnston
Christian
43/464
10/08/07
326
Milda Walker (William Walker)
Todd
22/672
4/25/07
184
Michael Slinker
Muhlenberg
94/332 (Lease)
       
94/537 (Extension)
6/30/06
187
Billy Johnston
Christian
43/137
7/1/04
130
Billy Johnston
Todd
22/430
7/1/04
 
Golden Eagle/Walter
Todd
22/258 & 22/318
4/16/01
80
Francis/Grace
Christian
41/263
10/21/92
200
Hunter/Wells
Christian
41/23 & 41/19 &
 
543
   
41/19
   

 

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TO HAVE AND TO HOLD unto ASSIGNEE, its successors and assigns, a 75% Net Revenue
Interest as the 100% Working Interest in above described leases, subject to all
the aforesaid terms and conditions, as well as all terms and conditions in the
original leases with only such Warranty of title as ASSIGNOR actually possesses.
 
ASSIGNOR does warrant that there are no undisclosed material defects in the
above leases of which ASSIGNOR is aware and the ASSIGNOR has taken no action or
made no omissions in actions that would render any of the above leases invalid
or of no effect.
 
ASSIGNEE by signature below acknowledges the changes in the original assignment
set out herein. 
 
WITNESS the signatures of the parties hereto on this the 18th day of June, 2008.

K & D ENERGY, Assignor
   
BY:
 
 
DANNY THOMASSON, Partner
   
BY:
 
 
KEITH CONN, Partner
       
KY USA ENERGY, INC., Assignee
   
BY:
 
 
STEVE EVERSOLE, President

 
COMMONWEALTH OF KENTUCKY

COUNTY OF____________________

SIGNED AND ACKNOWLEDGED to before me by K & D ENERGY, Assignor, by and through
its partner, DANNY THOMASSON, who personally appeared before me and known to me
or satisfactorily identified by me, to be his free act and deed, on this the
_____ day of June, 2008.
 

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NOTARY PUBLIC - State at Large - KY
 
My Commission Expires:
   

 
COMMONWEALTH OF KENTUCKY

COUNTY OF ______________

SIGNED AND ACKNOWLEDGED to before me by K & D ENERGY, Assignor, by and through
its partner, KEITH CONN, who personally appeared before me and known to me or
satisfactorily identified by me, to be his free act and deed, on this the
_______ day of June, 2008.
 

 
NOTARY PUBLIC - State at Large - KY
 
My Commission Expires:
   

 
COMMONWEALTH OF KENTUCKY

COUNTY OF ______________
 
SIGNED AND ACKNOWLEDGED to before me by KY USA ENERGY, INC., Assignee, by and
through STEVE EVERSOLE, President, who personally appeared before me or
satisfactorily identified by me, to be the corporation’s free act and deed, on
this the ____ day of June, 2008.
 

 
NOTARY PUBLIC - State at Large - KY
 
My Commission Expires:
   

 
THIS INSTRUMENT PREPARED BY:

BASIL LAW FIRM
231 West Main Street
Glasgow, Kentucky 42141
Phone: 270-651-9822
Facsimile: 270-651-8026
 

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DANNY J. BASIL
Attorney at Law

BONNIE’S DOCS/OIL & GAS FOLDER/KYUSA(FARMOUT ASSIGNMENT)
REVISED 6/18/08 @ 3:00 P.M. (CDT) 
 

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