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|   |                                  i.             **"Proceeds"** means the sum      of (a) the proceeds realized from the sale of production from all Wells,      after excluding the Existing Burdens attributable thereto, (b) any sales      proceeds realized from the sale or other disposition of part, or all, of      an interest in the Wells, or the Subject Leases, (c) any insurance proceeds      received in respect of loss or damage to Wells, or the Subject Leases, and      (d) proceeds received in respect of damages pursuant to any settlement or      judgment in legal proceedings affecting the Wells, Subject Leases or operations      thereon.                                        ii.              **"Exploration and Development      Costs"** of the Wells means all actual third party direct costs and expenses      incurred or paid with respect thereto, including but not limited to (a)      costs of drilling, re-entering, logging, testing, completing, and equipping      such Well(s) for production, (b) that portion of drilling rate overhead      charges allocated to such |
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|   | Well(s) under the applicable JOA, and (c) costs      of plugging and abandoning and surface restoration for any such well completed      as a dryhole.                                        iii.              **"Operating Costs"**of a      Well means all costs incurred in producing such Well and disposing of such      production including, but not limited to:                                                     (1)              Labor and other services necessary      for the maintenance and operations of such Well;                                                     (2)              Materials, supplies, transportation,      repairs, and replacements used in the maintenance and operation of such      Well, including replacements for all parts of machinery, equipment, tanks,      or other equipment to replace and/or repair original Well and/or lease equipment;                                                          (3)              Reworking or re-equipping such      Well;                                                     (4)             Gathering, treating, processing,      transporting, and marketing of production from such Well; and ad valorem,      severance, gathering, windfall profits, or other applicable taxes; and                                                     (5)             That portion allocated to such      Well in accordance with the usual and customary accounting practices of      all other costs (including, but not limited to, overhead costs of the Contract      Operator as set out in the JOA) which, pursuant to such accounting practices,      are determined to be Operating Costs.                                        iv.            ** "Acquisition Costs"**means      the sum of all costs incurred and paid that are associated with acquiring      the Subject Leases, including land brokerage, title and curative costs,      and all delay rentals paid.                                        v.             **"Seismic Costs"**means all      costs incurred and paid in connection with the Exploration Program, including      without limitation costs of acquiring seismic permits, options and licenses      attributable to the Area. |
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|   | A.     | A General Assignment and Bill      of Sale from the Sellers covering all of the applicable Acquired Assets;                                                                                                                                                                                                                 |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                        |
|   | B.     | An Assignment and Assumption Agreement      covering all of the Assumed Liabilities;                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                        |
|   | C.     | Assignments of all leases and      interests covering all of the applicable Acquired Assets from Eli Smith      (the title nominee of record);                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                        |
|   | D.     | All other Basic Documents or instruments      of assignment, transfer, or conveyance, in each case dated as of the date      of this Agreement, as the Sellers and the Purchaser and their respective      counsels shall reasonably deem necessary or appropriate to vest in or confirm      title to the Acquired Assets; |
|   |   |                                                                                                                                                                                                                                                                                                                        |
|   | E.     | A certificate of existence and      of good standing for each of the Sellers from the Secretary of State of      the State of Texas, dated within ten (10) days of the Closing;                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                        |
|   | F.     | Copies of resolutions, certified      by the Secretary of each of the Sellers as to the authorization of this      Agreement and all of the transactions contemplated hereby;                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                        |
|   | G.     | A fully executed Joint Operating      Agreement covering the Acquired Assets and the AMI in the form attached      as Schedule 3(d)(iv); and                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                        |
|   | H.     | A fully executed copy of this      Agreement.                                                                                                                                                                                                                                                                               |

|   | A.     | An Assignment and Assumption Agreement      covering all of the Assumed Liabilities;                                                                                                                                                                                                                                                     |
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|   |   |                                                                                                                                                                                                                                                                                                                                     |
|   | B.     | A certificate of existence and      of good standing for the Purchaser from the Secretary of State of the State      of Nevada, dated within ten (10) days of the Closing and evidence that Purchaser      is qualified to do business and in good standing in the State of Texas,      again dated within ten (10) days of the Closing; |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
|   | C.     | Copies of resolutions of the Purchaser's      board of directors, certified by the Secretary of the Purchaser as to the      authorization of this Agreement and all of the transactions contemplated      hereby;                                                                                                                       |

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|   | D.     | A fully executed Joint Operating      Agreement covering the Acquired Assets and the AMI in the form attached      as Schedule 3(d)(iv); and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                         |
|   | E.     | A fully executed copy of this      Agreement.                                                                                                |

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| If to Purchaser: | REOSTAR ENERGY CORPORATION       Attn: Mark Zouvas       3880 Hulen St., Ste. 500       Fort Worth, Texas 76107       Tel: (817) 989-7367       Fax: (817) 989-7368               |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |                                                                                                                                                                              |
| With a copy to:  | Greenburg Traurig       Attn: Raymond A. Lee, Esq.       3161 Michelson Drive, Suite 1000       Irvine, CA 92612-4410       Tel: (949) 732-6510       Fax: (949) 732-6501         |
|             |                                                                                                                                                                              |
| If to Seller:    | ZAZA ENERGY, LLC       Attn: Gaston Kearby       600 Leopard St., Ste. 2100       Corpus Christi, Texas 78473       Tel: (361) 884-9105       Fax: (361) 884-9107                 |
|             |                                                                                                                                                                              |
| With a copy to:  | Crady, Jewett & McCulley, LLP       Attn: Chris Goodrich       2727 Allen Parkway, Suite 1700       Houston, Texas 77019-2125       Tel: (713) 739-7007       Fax: (713) 739-8403 |

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|                                          | SELLERS:       ZAZA ENERGY, LLC,       a Texas limited liability company       By: __________________________________________       Name: ________________________________________      Title: _________________________________________       ELI SMITH AND ASSOCIATES       By:   /s/ Eli Smith                                                                                 Name:   Eli Smith                                                                                  Title: _________________________________________       PURCHASER:       REOSTAR ENERGY CORPORATION,       a Nevada corporation       By:   /s/ Mark S. Zouvas                                                                     Name:  Mark S. Zouvas                                                                      Title:   Chief Executive Officer                                                      |
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| SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT |

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