EXHIBIT
      10.8

     

    FARMOUT
      AND PARTICIPATION AGREEMENT

     

    FARMOR:
      INNEX
      California, Inc., 5240 Tennyson Parkway, Suite 224, Plano, Texas
      75024.

     

    FARMEE:
      Brasada
      Resources LLC, P.O. Box 2701, Bakersfield, California 93303.

     

    NAME
      OF AREA/PROSPECT:
      Eel
      River Project incorporating the Grizzly Bluff Field and Grizzly Bear Area,
      Eel
      River Basin, Humboldt County, California.

     

    This
      Farmout and Participation Agreement (“Agreement”)
      is
      between Farmer and Farmee, and shall be effective as of the date it is executed
      by Farmee as provided in Section 10.

     

    1.  EXHIBITS.

     

    The
      following exhibits are attached hereto and shall be considered part of this
      Agreement:

     

    Exhibit
      A:  General
      Terms and Conditions which shall apply to this Agreement unless they are in
      conflict with the terms and conditions provided in the body of this
      Agreement.

     

    Exhibit
      B-1:  Descriptions
      of lands covered by this Agreement (“Farmout
      Lands”).

     

    Exhibit
      B-2:  Lease
      Schedule describing the oil and gas leases subject to this
      Agreement.

     

    Exhibit
      B-3: Outstanding
      Requests-Lease Due Diligence.

     

    Exhibit
      C:  Operating
      Agreement.

     

    Exhibit
      D: Existing
      Defined Prospects.

     

    Exhibit
      E:  Letter
      of
      Intent.

     

    Exhibit
      F:  Declaration
      of Farmout and Participation Agreement and Operating Agreement.

     

    2.  PHASE
      I.

     

    2.1  
PHASE
      I EARNING WELLS.

     

    (a)  Well
      Specifications.
      Subject
      to rig availability, Farmee shall pay 100% of the costs to drill and complete
      to
      the pipeline connection, if a well is completed as a producer of oil and/or
      gas
      in paying quantities, or to drill and abandon, if a well is not completed as
      a
      producer of oil and/or gas in paying quantities, two wells (“Phase
      I Earning Wells”),
      strictly in compliance with the following well specifications:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (i)  Location:
      Within
      the Grizzly Bear Area of Mutual Interest (“Grizzly Bear AMP), as shown on
      Attachment 2 to Exhibit A to the Operating Agreement, with both wells to be
      at
      locations mutually agreed to between Farmor and Farmee. Notwithstanding
      paragraph 3.2 of Exhibit A (General Terms and Conditions), or otherwise, the
      “drilling unit” for any Anderson zone wells referenced in section 4 of the
      Settlement Agreement, General Release and Amendment to Joint Operating Agreement
      among Forexco, Inc., John M. Stafford, INNEX Energy, LLC, Ammonite Corporation
      and Independence Energy, LLC dated July 1, 2004 (“Settlement
      Agreement”)
      shall
      be limited to said zone insofar as it is within an 800 foot radius from such
      well bore completion. For any other well, the “drilling unit” shall be 160 acres
      (as nearly as practical in the shape of a square) and centered on the deepest
      producing zone in the well, with the well located as nearly as practicable
      in
      the center thereof, or in the event the well is not completed as a producer
      of
      oil and/or gas in paying quantities, 40 acres around bottom hole.

     

    (ii)  Spudding
      Deadline:
      Not
      applicable.

     

    (iii)  Required
      Depths:
      A well
      to 4,500 feet (Anderson zone), and a well to 5,700 feet or deep enough to test
      the Lower Rio Dell 15 sand.

     

    (iv)  Setting
      Casing/Plugging Deadline:
      June
      30, 2006.

     

    2.2  
OTHER
      PHASE I OBLIGATIONS.

     

    (a)  Environmental
      and Permitting Costs.
      Farmee
      shall pay 100% of the cost of obtaining an environmental impact report and
      a
      project development permit and any other related costs and fees (“EIR
      and Permit Costs”).

     

    (b)  2D
      Seismic Costs.
      In the
      event of any purchase of 2D seismic data, Farmee will pay 100% of the costs
      of
      acquisition and reprocessing of existing 2D seismic data (the “2D
      Seismic Costs”).

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (c)  Lease
      Costs.
      Farmee
      shall pay 100% of the costs to maintain Farmor’s existing leases, as shown on
      Exhibit B-2 to this Agreement, from the effective date of this agreement, and
      to
      acquire an additional 1,000 leasehold acres in the Eel River Basin Area of
      Mutual Interest (“Eel
      River Basin AMI”),
      as
      defined in Article XVI.E. of the Operating Agreement, within the Grizzly Bear
      AMI or other defined prospects, as shown on Exhibit D to this Agreement
      (collectively, “Lease
      Maintenance and Acquisition Costs”).
      Farmee shall be entitled to recover, from 75% of oil and gas revenues resulting
      from the working interest production allocable to Farmor from the Phase I
      Earning Wells and any wells drilled subsequent to the Phase I Earning Wells,
      125% of the portion attributable to Farmor’s working interest of the Lease
      Maintenance and Acquisition Costs, the 2D Seismic Costs and the EIR and Permit
      Costs, provided that any such recoveries that would otherwise be allocated
      to
      the recovery of the 3D Seismic Costs, pursuant to Section 3.2(a), shall not
      be
      allocated to the recovery of the Lease Maintenance and Acquisition Costs and
      the
      EIR and Permit Costs, but shall instead be allocated entirely to the recovery
      of
      the 3D Seismic Costs. After Farmee bas recovered 125% of the portion
      attributable to Farmor’s working interest of the Lease Maintenance and
      Acquisition Costs, the 2D Seismic Costs and the EIR and Permit Costs, Farmee
      shall assign to Farmer (i) an undivided 25% of its working interest in all
      leases acquired by Fannies within the Grizzly Bear AMI or (ii) an undivided
      30%
      of its working interest in all leases acquired by Farmee outside the Grizzly
      Bear AMI, pursuant to this Section 2.2(c). The burdens on the leases included
      in
      such assignment shall be no greater than the lessor royalties specified in
      such
      leases plus an overriding royalty interest to Farmer on such leases equal to
      the
      Retained ORRI as defined in Section 5.3. If the leasehold acreage is not
      acquired, the rights to the defined prospects outside the Grizzly Bear AMI
      shall
      revert to Farmer, unless the failure to acquire such acreage is the result
      of an
      event of force majeure, defined as a condition beyond a party’s control such as,
      but not limited to, war, strikes, fires, floods, acts of God, governmental
      restrictions, and/or any other cause beyond the reasonable control of a party.
      In the event that Farmee either (i) fails to fulfill its obligations under
      Section 2.1 and 2.2 or (ii) elects not to drill or fails to drill the Phase
      II
      Earning Well as provided in Section 3.1, Fanner shall have the right to acquire
      all of Farmee’s rights, title and interests in the Farmout Lands and in all
      additional leasehold acres acquired by Farmee in the Eel River Basin AMI,
      excluding leasehold acres, if any, assigned to Farmee pursuant to the drillsite
      acreage assignment described in Section 2.3(b) (collectively, the “Farmee
      Acreage”), in exchange for a cash payment equal to Farmee’s actual costs
      (including lease rentals and brokerage costs) of acquiring the Farmee Acreage.
      If Farmer elects to acquire the Farmee Acreage on these terms, Farmer’s
      obligation pertaining to any unrecovered Lease Maintenance and Acquisition
      Costs, 2D Seismic Costs and EIR and Permit Costs shall be canceled, and Farmee
      shall make an assignment to Farmor of the Farmee Acreage, subject to reserving
      an overriding royalty interest to Farmee equal to 1% of 8/8ths in all oil,
      gas,
      casinghead gas, condensate and other hydrocarbons that are or may be produced
      from any wells drilled on such acreage.

     

    2.3  
PHASE
      I ASSIGNMENTS.

     

    (a)  Earned
      Assignment.
      As soon
      as practicable after Farmer is satisfied that Farmee has complied with all
      of
      its obligations under this Agreement with regard to the Phase I Earning Wells,
      including the well specifications provided in Section 2.1(a), and has reached
      total depth in the second Phase I Earning Well, but regardless of whether a
      Phase I Earning Well is completed as a producer of oil and/or gas in paying
      quantities or is plugged and abandoned as a dry hole, Farmer shall deliver
      to
      Farmee a drill site acreage assignment as described in Section
      2.3(b).

     

    (b)  Drill
      Site Acreage Assignment.
      If a
      drill site acreage assignment is earned, such assignment shall cover an
      undivided 75% of Farmer’s rights, title and interests (excluding any overriding
      royalty interests held by Farmer) in the Farmout Lands, subject to the reserved
      overriding royalty interest described in Section 5, and subject to the following
      area and/or depth limitations:

     

    (i)  Area:
      Limited
      to the “drilling units” for each Phase I Earning Well as defined in paragraph
      3.2 of Exhibit A.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (ii)  Depth:
      Limited
      to the interval between the surface of the ground and the stratigraphic
      equivalent of the total depth drilled in the deepest Phase I Earning
      Well.

     

    3.  
PHASE
      II.

     

    3.1  
PHASE
      II EARNING WELL.

     

    (a)  Farmee’s
      Option.
      If the
      Farmee fulfills its Phase I obligations under Section 2, Farmee shall have
      the
      option, but not the obligation, to drill a “Phase
      II Earning Well.”

     

    (b)  Well
      Specifications.
      Subject
      to rig availability, Farmee shall pay 100% of the costs to drill and complete
      to
      the pipeline connection, if a well is completed as a producer of oil and/or
      gas
      in paying quantities, or to drill and abandon, if a well is not completed as
      a
      producer of oil and/or gas in paying quantities, the Phase II Earning Well
      strictly in compliance with the following well specifications:

     

    (i)  Location:
      Within
      the Grizzly Bear AMI as shown on Attachment 2 to Exhibit A to the Operating
      Agreement, at a location mutually agreed to between Farmor and Farmee.
      Notwithstanding paragraph 3.2 of Exhibit A (General Terms and Conditions),
      or otherwise, the “drilling unit” for any Anderson zone wells referenced in
      section 4 of the Settlement Agreement shall be limited to said zone insofar
      as
      it is within an 800 foot radius from the well bore completion. For any other
      well, the “drilling unit” shall be 160 acres (as nearly as practical in the
      shape of a square) and centered on the deepest producing zone in the well,
      with
      the well located as nearly as practicable in the center thereof, or in the
      event
      the well is not completed as a producer of oil and/or gas in paying quantities,
      40 acres around bottom hole.

     

    (ii)  Spudding
      Deadline:
      December 31, 2006.

     

    (iii)  Required
      Depth:
      At
      Farmee’s sole option, either (1) 4,500 feet (Anderson zone) or (2) 5,700 feet or
      deep enough to test the Lower Rio Dell 15 sand.

     

    (iv)  Completion/Plugging
      Deadline:
      Not
      applicable.

     

    3.2  
OTHER
      PHASE II OBLIGATIONS.

     

    (a)  3D
      Seismic Survey.
      Farmee
      shall pay 100% of the costs of permitting, acquiring and processing one version
      of a 3D seismic survey covering, subject to permit approvals, not less than
      15
      square miles in the Eel River Basin AMI during 2006 (“3D
      Seismic Costs”).
      Farmee shall be responsible for 75% of all seismic interpretation costs and
      any
      seismic reprocessing costs (“Post
      Seismic Costs”),
      and
      partner shall be responsible for 25% of Post Seismic Costs. Farmee shall be
      entitled to recover, from 75% of oil and gas revenues resulting from production
      allocable to Farmer from the Phase II Earning Well and my wells drilled
      subsequent to the Phase II Earning Well, 31.25% (125% of 25%) of the 3D Seismic
      Costs. Farmee shall upon acquisition grant to Farmer a license to the 3D seismic
      data set acquired by Farmee pursuant to this Section 3.2(a), and after the
      point
      in time when Farmee has recovered 31.25% of the 3D Seismic Costs (“3D
      Payout”),
      Farmer shall thereafter own a 25% interest in said seismic data set. During
      the
      period prior to the 3D Payout, Farmer shall have a license to use the 3D seismic
      data set for the mutual benefit of the joint venture contemplated by this
      Agreement, but Farmer shall have no other rights regarding such data, including,
      without limitation, no right to license or sell such data to a third party.
      Any
      sale or transfer of any of the 3D seismic data set to a third party must be
      approved by both Farmor and Farmee, which approval shall not be unreasonably
      withheld, and the third party shall be required to execute a customary
      confidentiality, agreement. Should Farmee sell any of the 3D seismic data prior
      to the 3D Payout, 25% of the proceeds from all such sales shall be credited
      toward Famine’s recovery of 31.25% of the 3D Seismic Costs.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    3.3  
PHASE
      II ASSIGNMENTS.

     

    (a)  Earned
      Assignments.
      As soon
      as practicable after (i) Farmer is satisfied that Farmee has complied with
      all
      of its obligations under this Agreement with regard to the Phase II Earning
      Well, including the well specifications provided in Section 3.1(b), and has
      reached total depth on the Phase II Earning Well, but regardless of whether
      the
      Phase II Earning Well is completed as a producer of oil and/or gas in paying
      quantities or is plugged and abandoned as a dry hole, and (ii) Farmor and Farmee
      have received a fully processed version of the 3D seismic survey described
      in
      Section 3.2, partner shall deliver to Farmee a drill site acreage assignment
      as
      described in Section 3.3(b) and an additional acreage assignment as described
      in
      Section 3.3(c).

     

    (b)  Drill
      Site Acreage Assignment.
      If a
      drill site acreage assignment is earned under Section 3.3(a), such assignment
      shall cover an undivided 75% of Farmor’s rights, title and interests (excluding
      any overriding royalty interests held by Farmer) in the Farmout Lands, subject
      to the reserved overriding royalty interest described in Section 5, and subject
      to the following area and/or depth limitations:

     

    (i)  Area:
      Limited
      to the “drilling unit” for the Phase II Earning Well as defined in paragraph 3.2
      of Exhibit A.

     

    (ii)  Depth:
      Limited
      to the interval between the surface of the ground down to the base of the Lower
      Rio Dell (“LRD”)
      formation, defined as the equivalent of the shale at a measured depth of 5,700
      feet in the Standard Vicenus #1 well.

     

    (c)  Additional
      Acreage Assignment.
      If an
      additional acreage assignment is earned under Section 3.3(a), the assignment
      shall cover an undivided 75% of Farmor’s rights, title and interests (excluding
      any overriding royalty interests held by Partner) in the Farmout Lands not
      covered by the drill site acreage assignments described in Sections 2.3(b)
      and
      3.3(b), subject to the following area and/or depth limitations:

     

    (i)  Area:
      No area
      limitation.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (ii)  Depth:
      Limited
      to the interval between the surface of the ground down to the base of the LRD
      formation. If the Lower LRD formation, defined as the section below 5,800 feet
      down to 6,500 feet in the Standard Vicenus #1 well, is penetrated by the deepest
      of the Phase I Earning Wells and the Phase II Earning Well, then the assignment
      will be for depths from the surface of the ground down to the stratigraphic
      equivalent of 6,500 feet in the Standard Vicenus #1 well.

     

    Said
      assignment shall include language to change the depth limitation of the leases
      previously assigned in Sections 2.3 and 3.3(b), if applicable.

     

    4.  
PHASE
      III.

     

    4.1  
PHASE
      III EARNING WELL.

     

    (a)  Farmee’s
      Option.
      If the
      Farmee fulfills its Phase II obligations under Section 3, Farmee shall have
      the
      option, but not the obligation, to drill a “Phase
      III Earning Well.”

     

    (b)  Well
      Specifications.
      Farmee
      shall pay 100% of the costs to drill and complete to the pipeline connection,
      if
      a well is completed as a producer of oil and/or gas in paying quantities, or
      to
      drill and abandon, if a well is not completed as a producer of oil and/or gas
      in
      paying quantities, the Phase III Earning Well strictly in compliance with the
      following well specifications:

     

    (i)  Location:
      Within
      the Grizzly Bear AMI as shown on Attachment 2 to Exhibit A to the Operating
      Agreement, at a location proposed by Farmee.

     

    (ii)  Spudding
      Deadline:
      One
      year following the date that Farmee is presented with a final processed version
      of the 3D seismic survey described in Section 3.2(a).

     

    (iii)  Required
      Depth:
      Deep
      enough to test the Eel River, Pullen and Bear River formations.

     

    (iv)  Completion/Plugging
      Deadline:
      Not
      applicable.

     

    (c)  Completion
      Attempts in Shallower Zones.
      Should
      tests of the Eel River, Pullen or Bear River formations prove to be unsuccessful
      and the Farmor and Farmee elect to attempt to complete the well in any shallower
      zones, Farmor shall make an election to participate or not participate under
      Article VI of the Operating Agreement. In the event that Farmor elects to
      participate, it shall pay its 25% share of the costs of drilling the well to
      a
      depth of 100 feet below the lowest completion zone (or zone where a liner is
      placed for the purposes of production). Farmor agrees to pay such costs in
      the
      form of a cash call prior to the completion attempt(s). Farmor shall also be
      responsible for its 25% share of the completion costs of the well in such
      shallower zones.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    4.2  
PHASE
      III ASSIGNMENTS.

     

    (a)  Earned
      Assignments.
      As soon
      as practicable after Farmer is satisfied that Farmee has complied with all
      of
      its obligations under this Agreement with regard to the Phase III Earning Well,
      including the well specifications provided in Section 4.1(b), and has reached
      total depth on the Phase III Earning Well, but regardless of whether the Phase
      III Earning Well is completed as a producer of oil and/or gas in paying
      quantities or is plugged and abandoned as a dry hole, Farmer shall deliver
      to
      Farmee an additional acreage assignment as described in Section
      4.2(b).

     

    (b)  Additional
      Acreage Assignment.
      If an
      additional acreage assignment is earned under Section 4.2(a), such assignment
      shall cover an undivided 75% of Farmor’s rights, title and interests (excluding
      any overriding royalty interests held by Farmer) in the Farmout Lands not
      covered by the acreage assignments described in Sections 2.3(b), 3.3(b) and
      3.3(c), subject to the following area and/or depth limitations:

     

    (i)  Area:
      No area
      limitation.

     

    (ii)  Depth:
      No
      depth limitation.

     

    Said
      assignment shall include language to change the depth limitation of the leases
      previously assigned in Sections 2.3 and 3.3, if applicable.

     

    5.   RESERVED
      OVERRIDING ROYALTY INTERESTS.

     

    5.1  Drill
      Site Acreage Assignments.
      In each
      Drill Site Acreage Assignment by Farmor, Farmer shall reserve an overriding
      royalty interest equal to the following percentage of 8/8ths in all oil, gas,
      casinghead gas, condensate and other hydrocarbons that are or may be produced
      from the appropriate Earning Well. Such percentage shall be equal to the amount
      by which 25%, reduced in proportion to the assigned interest, exceeds the sum
      of
      all royalties, overriding royalties and other payments which burden the assigned
      interest at the time the Drill Site Acreage Assignment is made.

     

    5.2  Additional
      Acreage Assignments.
      In each
      Additional Acreage Assignment by Farmer, Farmor shall reserve an overriding
      royalty interest equal to the following percentage of 8/8ths in all oil, gas,
      casinghead gas, condensate and other hydrocarbons that are or may be produced
      from any wells drilled on such acreage. Such percentage shall be equal to the
      amount by which 21%, reduced in proportion to the assigned interest, exceeds
      the
      sum of all royalties, overriding royalties and other payments which burden
      the
      assigned interest at the time the Additional Acreage Assignment is
      made.

     

    5.3  Retained
      Overriding Royalty Interest.
      As to
      the leases acquired by Farmee and the assignment of interest therein to Farmer
      pursuant to Section 2.2(b), Farmer shall receive an overriding royalty interest
      (“Retained
      ORRI”)
      which
      is equal to the following percentage of 8/8ths in all oil, gas, casinghead
      gas,
      condensate and other hydrocarbons that are or may be produced from any wells
      drilled on such acreage. Such percentage shall be equal to (a) 1% plus (b)
      the
      product of 50% multiplied by (c) 100% less the lessor royalties specified in
      the
      leases less 80%; provided that the Retained ORRI shall never be less than 1%.
      By
      way of example only, the following is a calculation of the Retained ORRI,
      assuming the lessor royalties specified in the leases are equal to 16.667%.
      The
      Retained ORRI would be equal to 1% + 50% x (100%-16.667%-80%) = 2.667%. In
      this
      example, the net revenue interest to the Farmee in the leases is
      80.666%.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    6.  
OPERATING
      AGREEMENT.

     

    The
      Operating Agreement attached as Exhibit C to this Agreement shall be executed
      and become effective at the time this Agreement is executed. The Operating
      Agreement shall govern all operations on jointly owned Farmout Lands, but shall
      be subject to this Agreement. If there is any conflict between the Operating
      Agreement and this Agreement this Agreement shall govern and
      control.

     

    7.  
OTHER
      PROVISIONS.

     

    7.1  Delay
      Rentals.
      As
      provided in Section 2.2(b), Farmee shall be responsible (either by paying
      directly to the lessor or reimbursing Farmer) for any and all delay rentals
      required to maintain in effect the lease(s) included in the Farmout Lands until
      Femme; has met its obligations under Phases I, II and III. From that point
      forward, Farmor shall be responsible for its working interest share of such
      costs. Farmee shall not be liable to Farmor for any loss resulting from a good
      faith effort to make such payments.

     

    7.2  Other
      Operations in the Eel River Basin AMI.
      Except
      as otherwise provided herein, Farmee and Farmer shall share the costs of all
      other operations in the Eel River Basin AMI in proportion to their respective
      working interest shares. Such operations include, but are not limited to, the
      maintenance of the non-producing leases held by Farmor (except as provided
      in
      Section 2.2(c)), the acquisition of any new leases or the renewal or extension
      of any existing leases (except as provided in Section 2.2(c)), the drilling
      of
      any wells not otherwise provided for herein, and the acquisition, processing,
      reprocessing and interpretation of any seismic data not otherwise provided
      for
      herein.

     

    7.3  Acquisitions.

     

    (a)  Farmee
      shall use commercially reasonable efforts to effect the acquisition of all
      or
      part of the interests held by Forexco, Inc. in the Grimly Bluff Field, and
      by
      Vintage Petroleum in the Tompkins Hill Field.

     

    (b)  Should
      Fannies acquire all or part of the interests held by Vintage Petroleum in the
      Tompkins Hill Field or by Forexco, Inc. in the Grizzly Bluff Field, Farmer
      shall
      have the right, but not the obligation, to participate proportionately by paying
      for (i) 25% of the interest acquired by Farmee, or (ii) 25% of Farmee’s working
      interest in any well drilled to exclusively test reservoirs to which hydrocarbon
      reserves have not been attributed, provided that the well is not a Fannies
      obligation under the terms of the acquisition agreement(s).

     

    7.4  New
      Leases.
      For all
      existing defined prospects generated outside the Grimly Bear AMI, as shown
      on
      Exhibit D to this Agreement, Farmor shall be entitled to an overriding royalty
      interest on new leases acquired for such prospects calculated in accordance
      with
      the formula for the Retained ORRI described in Section 5.3. Subsequent prospects
      defined or developed after the Parties execute this Agreement shall be jointly
      owned as provided in this Agreement, and no party shall be entitled to an
      overriding royalty interest. The working interest for all new leases outside
      the
      Grizzly Bear AMI shall be 70% for Farmee and 30% for Farmer.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    7.5  Meetings.
      Partner
      and Farmee agree to hold quarterly meetings, in person or by conference phone
      or
      video, as appropriate, within five business days of the first day of each
      calendar quarter m share data, discuss plans and issues regarding current and
      the next succeeding quarter’s activities, and to propose operations and budget
      requirements for the next succeeding quarter’s activities (for example a meeting
      on April 1 to plan and discuss requirements for the second and third quarter’s
      activities). Both parties shall provide each other with an agenda to be
      addressed in the quarterly meetings a minimum of five business days prior to
      the
      meeting. This provision does not preclude additional meetings as necessary
      which
      may be called by providing an agenda of proposed topics and upon five days’
notice to the other party or parties.

     

    7.6  Time
      of the Essence.
      Time is
      of the essence in the performance of this agreement.

     

    7.7  Lease
      Exceptions.
      Farmor
      acknowledges that it has not been able to provide to Farmee certain outstanding
      requests specified in the email memo from Kirk Bosché to Farmer dated December
      20, 2005, as shown on Exhibit B-3, requested by Farmee to enable Farmee to
      satisfy itself as to the title, ownership and validity of certain leases listed
      on Exhibit B-2. Farmer and Farmee agree, if the title, ownership or validity
      of
      any such lease is subsequently determined to be materially different than as
      shown on Exhibit B-2, to the detriment of Farmee, that (i) they shall use their
      commercially reasonable efforts to agree upon a mutually acceptable modification
      to the terms of this Agreement to reflect the impact of any such material
      differences, and (ii) if Farmer and Farmee are unable to agree upon such
      modification of terms, such disagreement shall be subject to the provisions
      of
      Section 9.14 of Exhibit A to this Agreement.

     

    8.  
NOTICES
      AND WELL INFORMATION.

     

    8.1  General.
      All
      well data, information, notices and other communications to be given hereunder
      shall be made in writing and shall be deemed duly given if sent by facsimile,
      delivered personally with receipt acknowledged; mailed by registered mail return
      receipt requested postage prepaid; or delivered by a recognized commercial
      courier to the party at the address set forth below or such other address as
      any
      party shall have designated for itself by ten (10) days’ prior notice to the
      other party.

     

    
      	
            	Farmor:	
              5240
                Tennyson Parkway

              
                Suite
                  224

                Plano,
                  Texas 75024

                Telephone:
                  972-608-9994

                Facsimile:
                  972-608-9996

              

            


    

     

    
      	
            	Farmee:	
              P.O.
                Box 2701

              
                Bakersfield,
                  California 93303

                Telephone:
                  661-587-3688

                Facsimile:
                  661-587-3688

              

            


    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    Notice
      is
      deemed to have been duly received on the day personally delivered, on the day
      after it is sent by facsimile, four (4) days after mailing by certified or
      registered mail and the day after it is received from a recognized commercial
      courier.

     

    9.  
AGREEMENTS
      AFFECTING FARMOUT LANDS.

     

    9.1  Farmee
      Bound.
      Except
      as may be otherwise provided, Farmee shall be bound by any agreement which
      affects the Farmout Lands, as of the effective date of assignment to Farmee.
      Farmor shall not be liable for its good faith failure to disclose the existence
      or effect of any such agreement to Farmee, either in this Agreement or
      otherwise.

     

    9.2  Other
      Agreements.
      Subject
      to the disclaimer of liability contained in Section 9.1, Farmor believes (or
      the
      parties believe), in good faith, that the only other agreements affecting any
      interest to be assigned to Farmee are the oil and gas leases described in
      Exhibit B-2 and the following agreements:

     

    (a)  Settlement
      Agreement, General Release and Amendment to Joint Operating Agreement among
      Forexco, Inc., John M. Stafford, INNEX Energy, LLC, Ammonite Corporation and
      Independence Energy, LLC dated July 1, 2004 (defined in Section
      2.1(a)(i));

     

    (b)  Gas
      Purchase Agreement among CitiGas, LLC and INNEX Energy, LLC dated July 1,
      2004;

     

    (c)  Assignment
      effective as of July 2, 2004 from INNEX Energy, LLC in favor of Farmor;
      and

     

    (d)  Letter
      of
      Intent dated August 23, 2005, as amended on October 20, 2005 and November 21,
      2005, between affiliates of Farmee and Farmor (“LOI”),
      the
      terms of which are incorporated herein by this reference. A copy of the LOI
      is
      in the possession of Farmor and Farmee. If there is any conflict between this
      Agreement and the LOI, this Agreement shall govern and control.

     

    9.3  Assignment
      of Other Agreements.
      At any
      time after Farmee is entitled to an earned assignment as provided in this
      Agreement and upon request by Farmee, Farmor shall assign to Farmee the
      applicable undivided interest in Farmor’s rights, title and interests in the
      agreements described in Section 9.2(b) and 9.2(c) herein.

     

    10.         
      EXECUTION.

     

    Duplicate
      originals of this Agreement are being executed. This Agreement shall be null
      and
      void, at Farmor’s option, if either (a) one of the duplicate originals of this
      Agreement is not executed by Farmee and returned to Farmor by January 3, 2006
      or
      (b) Farmee fails to remit $50,000 to Farmor by January 3, 2006, representing
      the
      balance of the Project Fee owed to Farmor, as provided in Section 1a of the
      LOI.

     


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    Farmor,
      as provided in Section 1a of the LOI.

     

    
      	
              FARMOR  

            	 	FARMEE
	 	 	 	 	 
	 	 	 	 	 
	
              By:

            	 	 	
              By:

            	 
	 	
              
Title:
              President	 	 	
              
Title:
              Chief Financial Officer
	 	 	 	 	 
	 	Date:
              January 3,
              2006  	 	 	Date:
              January 3,
              2006  


    

     

    


    
      
        
        

      

      
        11