exhibit_10-4.htm


    
      
        

      

    

    Exhibit
      10.4

     

    Purchase
      and Sale Agreement

    


    CANDAK
      AREA, NORTH DAKOTA

    


     

    This
      Agreement made January 16, 2008

     

    BETWEEN:

     

    JED
      OIL (USA) INC.,

    a
      body
      corporate, registered to carry on business in the State of Nevada

     and
      having an office in the town of Didsbury, Alberta

    (hereinafter
      called the “Transferor”)

     

    -
      and
      -

     

    JAYHAWK
      ENERGY INC.,

    a
      body
      corporate, registered to carry

    on
      business in the State of Colorado and having an office in the town of
      Broomfield

    (hereinafter
      called the “Transferee”)

     

     

    Whereas
      Transferor wishes to sell and the Transferee wishes to purchase the Assets,
      the
      Parties agree as follows:

    


    


    
      	
              1.

            	
              Definitions

            


    

    


    
      	
               

            	
              Each
                capitalized term used in this Head Agreement will have the meaning
                given
                to it in the 2000 CAPL Property Transfer Procedure (hereinafter referred
                to as the “Property Transfer Procedure”). In
                addition:

            


    

    


    
      	
              (a)  

            	
              “Closing
                Date” means 3:00 p.m. on January 25th, 2008, or such other time and date
                as may be agreed upon in writing by the
                Parties.

            


    

    


    
      	
              (b)  

            	
              “Effective
                Date” means January 1, 2008.

            


    

    


    


    
      	
              2.

            	
              Schedules

            


    

    


    
      	
               

            	
              The
                following Schedules are attached hereto and made part of this
                Agreement:

            


    

    


    
      	
              (a)  

            	
              Schedule
                “A”, which is the Land Schedule, and
                identifies:

            


    

    


    
      	
               

            	
                    
                  (i)

            	
              the
                Lands;

            


    

    


    
      	
               

            	
                    
                 (ii)

            	
              the
                Leases;

            


    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
                    
                 (iii)

            	
               
                any other agreements, documents or data that are to be excluded from
                the
                Miscellaneous Interests under that
                definition;

            


    

    


    
      	
              (iv)  

            	
                 any
                encumbrances;

            


    

    


    
      	
              (v)  

            	
                 any
                Rights of First Refusal;

            


    

    


    
      	
              (vi)  

            	
                 production
                sale agreements;

            


    

    


    
      	
               (vii)  

            	
                 other
                agreements, penalties or restrictions by contract on the use of the
                Assets
                required to be included in the Land Schedule under the definition
                of
                Permitted Encumbrances or the definition of Title and Operating
                Documents;

            


    

     

    
      	
               (viii)  

            	
                 any
                Facilities required to be included in the Land Schedule under the
                definition of Facilities, any other Tangibles described in Paragraph
                (c)
                of the definition of Tangibles and any assets otherwise falling within
                the
                definition of Tangibles that are specifically excluded therefrom;
                and

            


    

    


    
      	
              (ix)  

            	
                  the
                Wells;

            


    

    


    
      	
              (x)  

            	
                 any
                lawsuits and claims;

            


    

    


    
      	
              (xi)  

            	
                 any
                default notices;

            


    

    


    
      	
              (xii)  

            	
                 any
                outstanding AFE’s;

            


    

    


    
      	
              (xiii)  

            	
                
                any knowledge of environmental matters under Clause 6.02(k) of the
                Property Transfer Procedure;

            


    

    


    
      	
              (xiv)  

            	
                
                any areas of mutual interest; and

            


    

    


    
      	
              (xv)  

            	
                
                any commitments to deliver under Clause 6.02(t) of the Property Transfer
                Procedure.

            


    

    


    
      	
              (b)  

            	
              Schedule
                “B”, which is the Property Transfer Procedure, including the Exhibit
                thereto that is the form of the General Conveyance.  For
                clarity, this Schedule “B” to the Agreement includes a summary sheet that
                indicates the elections and rates in the Property Transfer Procedure
                that
                have been agreed to by the Parties.  A blank copy of the
                Property Transfer Procedure, including the Exhibit thereto that is
                the
                form of the General Conveyance, is attached to such summary sheet
                of the
                elections and rates for the Property Transfer Procedure.  The
                Parties shall deem that such summary sheet of the elections and rates
                of
                the Property Transfer Procedure shall operate as having the same
                effect as
                if such elections and rates were physically typed into the copy of
                the
                Property Transfer Procedure included in Schedule
                “B”.

            




    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    
      	
              3.

            	
              Purchase
                and Sale

            


    

    


    


    
      	
               

            	
              (a)

            	
              The
                Transferor agrees to dispose of the Assets to the Transferee and
                the
                Transferee agrees to purchase the Assets from the Transferor on the
                terms
                and conditions set forth in this
                Agreement.

            


    

    


    
      	
               

            	
              (b)

            	
              Subject
                to the modifications that may be made under the Property Transfer
                Procedure, the consideration payable by the Transferee to the Transferor
                for the Assets is $ 3,500,000.00, plus any interest that accrues
                under
                Clause 2.04 of the Property Transfer Procedure.  The Purchase
                Price shall be allocated among the Assets as
                follows:

            


    

    


    
      	
               

            	
               

            	
               

            
	
                       (i)
                To Petroleum and Natural Gas Rights

            	
              $    
                2,799,990.00

            	
               

            
	
              (ii)    (ii) To
                Tangibles

            	
              $      
                 700,000.00

            	
               

            
	
              (iii)   (iii)
                To Miscellaneous Interests

            	
              $                
                10.00

            	
               

            
	
              Total

            	
               $3,500,000.00

            	
               

            


    

    


    
      	
               

            	
                   The GST
                payable on the Tangibles and Miscellaneous Interests
                totals

            
	
               

            	
                   $
                NOT APPLICABLE

            


    

     

    **(Note
      that Parties will have to examine the GST issue where any fee simple/freehold
      interests or other real

        property
      interests are to be purchased by Transferee prior to finalizing this Clause
      and
      Clause 2.03 A of the

        Property
      Transfer Procedure).

    


    
      	
              (c)  

            	
              The
                Transferee will pay the Purchase Price to the Transferor
                as

            


    

             follows:

    


    
      	
              (i)  

            	
              the
                delivery of ten percent (10%) of the Purchase Price, representing
                a
                Deposit towards the Purchase Price, payable on or before January
                18, 2008;
                and

            


    

    


    
      	
              (ii)  

            	
              at
                Closing, the delivery of the remainder of the Purchase Price (ie.
                the
                Purchase Price less the Deposit made under Clause 3(c)(i) hereof),
                any
                interest that accrues under Clause 2.04 of the Property Transfer
                Procedure.

            


    

    


    
      	
              4.

            	
              Additional
                Conditions

            


    

    


    
      	
              (a)  

            	
              The
                following additional condition precedent is included for the benefit
                of
                the

            


    

    Transferee
      under Clause 10.02(d) of the Property Transfer Procedure:

    


    (i)
      Environmental Review:   The Transferee will have completed
      a review of

        the
      environmental condition of the Assets prior to January 15, 2008,
      through

        which
      the Transferee is satisfied, acting reasonably, with the
      environmental

        condition
      of the Assets.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    In
      witness whereof the Parties have duly executed this Agreement.

     

     

    
      	
               

              JED
                OIL (USA) INC.

               

              Per:____________________

               

               

              Per:____________________

               

            	
               

              JAYHAWK
                ENERGY INC.

               

              Per:____________________

               

               

              Per:____________________

            


    

     

    This
      is
      the execution page of that certain Purchase and Sale Agreement dated January
      16,
      2008 between JED OIL (USA) INC., as Transferor, and JAYHAWK ENERGY INC., as
      Transferee.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    This
      is SCHEDULE "A" to a Purchase and Sale Agreement dated

    


    January
      16, 2008

    


    between
      JED OIL (USA) INC. and JAYHAWK ENERGY INC.

    


    (1)
      162
      pages constitute the Land Schedule for the Agreement.

    (2)  see
      item (1)

    (3)  see
      item (1)

    (4)  see
      item (1)

    (5)  no
      Rights of First Refusal

    (6)  See
      attachment dated August 25, 2006 between SemCrude and Jed Oil
      USA  Contract Number SC060032.

    (7)
      C
      01245 Lease Acquisition and Exploration Agreement with attached AAPL
      Form   610 – 1989 Operating Agreement

    (8)
      See
      attachment labeled Surface Lease Equipment

    (9)
      Kearney 4-25H-T164N R97W5PM

         Erickson
      1-27H T164N R97W5PM

         Landstrom  1-33H
      T164N R97W5PM

         Burner
      1-34H T164N R97W5PM

         Schultz
      5-26H T164N R97W5PM

    (10)
      $3.6
      million against Jed Oil Inc. by Portside Growth and Opportunity Fund, breach
      of
      10% convertible note

     (contact
      Marcia Johnston V.P. legal and Corporate affairs, at
      1-403 335-2105)

    (11)
      No
      Default Notices

    (12)
      No
      Outstanding A.F.E.’s

    (13)No
      knowledge of any environmental concerns

    (14)
      Yes,
      AMI contained in Contract 01245

    (15)
      None

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    


    This
      is Schedule “B” to a Purchase and Sale Agreement dated

    January
      16, 2008

    


    between
      JED OIL (USA) INC. and JAYHAWK ENERGY INC.

    


    SUMMARY
      SHEET OF ELECTIONS AND RATES FOR THE

    PROPERTY
      TRANSFER PROCEDURE

    


    


    1.         GST
      (Subclause 2.03A):     (i)   GST
      Election:  Alternate __NA (USA
      Properties)_

                                                              
      (ii)  GST Business #: NA

    


    2.         Interest
      Accrual (Clause 2.04):  Alternate 1
.

    


    3.         Place
      of Closing (Clause 3.01):  Office of: Western Divestments,
      2020, 801- 6th

    Avenue
      S.W Calgary, AB T2P 3W2

    


    4.         Access
      to Transferee’s Files (Subclause 3.04B):  60
      months

    


    5.         Distribution
      of Specific Conveyances (Clause 3.05):   Alternate
__2___

    


    6.         Final
      Statement of Adjustments (Paragraph
      4.02A(b))   _180_day period

    


    7.         Treatment
      of Income During Interim Period (Clause 4.03):  Alternate
1

    Income
      Tax Adjustment if Alternate 1 applies: ___%  NOT
      APPLICABLE

    Exception
      to 4.03A if Alt. 1 applies (Subclause
      4.03B):  will__X_/ will
      not_____

    apply
      NOT APPLICABLE

    


    
      	
              8.

            	
              Transferor’s
                Representations and Warranties (Clause 6.02).  Those
                representations and warranties in that Clause that apply are indicated
                by
                a Y below.

            
	
               

              __   (a)
                Residency for Tax Purposes

              _Y_
                (b) Lawsuits and Claims

              _Y_
                (c) No Default Notices

              _Y_
                (d) Compliance with Leases

              _Y_
                (e) Payment of Royalties

              _Y_
                (f) Encumbrances

              _Y_
                (g) No Reduction

              _Y_
                (h) Sale Agreements

              _Y_
                (i) Provision of Documents

              _Y_
                (j) Authorized Expenditures

              _Y_
                (k) Environmental Matters

              _Y_
                (l) Condition of Wells

               

            	
               

              _Y_
                (m) Abandonment of Wells

              _Y_
                (n) Condition of Tangibles

              _Y_
                (o) Well/Tangibles Lic. Transfers

              _  _
                (p) Reg. Production Penalties

              __   (q)
                Reg. Production Allowables

              _Y_
                (r) Area of Mutual Interest

              ___
                (s) No Offset Obligations

              _Y__
                (t) Commitment to Deliver

              ___
                (u) ARTC

              _Y_
                (v) Quiet Enjoyment

              ___
                (w) Additional Representations

            


    

    9.        
      Survival of Representations and Warranties (Clause
      6.04)  __12___ months.

    


    10.       Option
      to Terminate Re ROFR Exercises (Subclause 7.01D): will___/ will
      not__X__apply

    


    11.      
      Delivery of Title Defects Notice (Subclause
      8.02A):  _5_ Business Days.

    


    12.      
      Title Defects Mechanism (Subclause
      8.02B):  Alternate:__1__

           
If
      Alternate
      2 applies  (i)   $ Value threshold (Sublclause
      8.02B): 

                                                             
        ten percent (10%) of the Purchase Price

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

                         (ii)  Transferor’s
      termination threshold (Paragraph 8.02B(c))):

                                                             
       Not Applicable

    


                        
      (iii) Transferee’s termination threshold (Paragraph 8.02B(d)):

                                                            
       Not Applicable

    


    13.         Responsibility
      of Transferor (Clause 13.01):

     

    
                            (i) 
        Subclause 13.01A:  Alternate __2__


                        (ii)  Subclause
        13.01B:  _12_ months

    

        


    14.        
      Limit of Transferor’s Responsibility (Subclause
      13.03A):  will _X_ / will not__apply.

    


    15.         Minimum
      Claim Threshold (Subclause 13.03B):  will ___ / will
      not__X__
      apply.

                                  $
      Threshold if Subclause B applies: $____________.

    


    16.         Address
      for Service (Clause 15.02):

    
      	
               

              JED
                OIL (USA) INC.

              Box
                1420

              1601-15th
                Avenue

              Didsbury,
                Alberta

              T0M
                0W0

               

              Attention:  Land
                Department

               

              Fax
                No. (403) 335-8391

               

            	
               

              Jayhawk
                Energy Inc.

              370
                Interlocken Blvd Suite 400

              Broomfield,
                CO 80021

               

               

               

              Attention:  Land
                Department

               

              Fax
                No. (303) 327-1574

            


    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    


    SURFACE
      LEASE EQUIPMENT

     

    Burner
      1-34

    


    1           HG
      640-365-192 Pumping
      unit                                                              2005

    1           32
      HP  C-106 Gas Engine

    1           12’X12’
      Engine
      House                                                                          2005

    1           50#
      WP 6’x32’ Vertical
      Treater                                                            2005

    1           10’x12’
      Treater
      House                                                                           2005

    1           Solar
      Ignitor at pit

    1           400
      BBL Fibreglass Water
      Tank                                                          2005

    2           400
      BBL welded cone bottom oil
      tanks                                              2005

    1           Monel
      35601 recycle pump w/5.5 hp Honda

    1           Superior
      Beam chemical pump

    


    


    Landstrom  1-33

    


    1           HG
      640-365-192 Pumping
      Unit                                                             2005

    1           Ajax
      Gas Engine

    1           12’X12’
      Engine
      House                                                                          2005

    1           75#WP
      6’x20’ Vertical
      Treater                                                             2005

    1           12’x12’
      Treater
      House                                                                           2005

    1           Solar
      Ignitor at pit

    1           400
      BBL Fibreglass Water
      Tank                                                          2005

    2           400
      BBL steel welded Oil
      Tanks                                                          2005

    1           Monel
      35601 recycle pump w/5.5 hp Honda

    


    Kearney  4-24

    


    1           HG
      912-365-192 Pumping
      Unit                                                              2005

    1           32HP
      C-106 Gas Engine

    1           12’X12’
      Engine
      House                                                                           2005

    1           75#WP
      6’x20’ Vertical
      Treater                                                              2005

    1           12’x12’
      Treater
      House                                                                           
2005

    1           Solar
      Ignitor at pit

    1           400
      BBL Fibreglass Water
      Tank                                                           2005

    2           400
      BBL steel welded Oil
      Tanks                                                           2005

    1           Monel
      35601 recycle pump w/5.5 hp Honda

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    Schutz
      5-26H

    


    1           HG
      912-365-192 Pumping
      Unit                                                              2005

    Ser#
      QB050808.16109

    1           32HP
      C-106 Gas Engine

    Ser#
      302981

    1           12’X12’
      Engine
      House                                                                           2005

    1           75#WP
      6’x20’ Vertical Treater
      coated                                                 2005

    1           12’x12’
      Treater
      House                                                                           
2005

    1           Solar
      Ignitor at pit

    1           400
      BBL Fibreglass Water Tank
      Ser#1178                                        
2005

    2           400
      BBL steel welded Oil
      Tanks                                                          2005

    Ser#
      7273,7262, 7263

    1           Monel
      35601 recycle pump w/5.5 hp Honda

    Ser#
      ZM1541605

    1           Superior
      Beam chemical pump

    


    Erickson
      1-27

    


    1           HG
      912-365-192 Pumping
      Unit                                                              2005

    1           Ajax
      Gas Engine

    1           12’X12’
      Engine
      House                                                                           2005

    1           75#WP
      6’x20’ Vertical
      Treater                                                              2005

    1           12’x15’
      Treater
      House                                                                           
2005

    1           Solar
      Ignitor at pit

    1           400
      BBL Fibreglass Water
      Tank                                                           2005

    3           400
      BBL welded cone bottom oil
      tanks                                               2005

    1           Monel
      35601 recycle pump w/5.5 hp Honda

    1           Superior
      Beam chemical pump

    


    GENERAL
      AREA EQUIPMENT

    


    H2S
      personal monitoring device

    2
      Portable Scott Air Packs

    Trailer
      Mounted Portable Gas Meter

    Centrifuge

    Fax/Copier

    Office
      Trailer and Lot located at Crosby City – Crosby Acres Lot 1A Block
      1

    2
      Pop
      Tanks

    Any
      remaining material is property of Jayhawk

    1
      Fluid
      Level Gun (Jed invoice # 13331 for $9,000.00)