Filed by Automated Filing Services Inc. (604) 609-0244 - Terax Energy Inc. - Exhibit 10.1






THIS AGREEMENT RELATES TO AN OFFERING OF SECURITIES IN AN
OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED IN
REGULATIONS UNDER THE 1933 ACT) PURSUANT TO REGULATION S UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), NONE OF THE SECURITIES TO
WHICH THIS AGREEMENT RELATES HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY
U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR
SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO U.S. PERSONS (AS
DEFINED HEREIN) EXCEPT IN ACCORDANCE WITH THE PROVISJONS OF REGULATION S UNDER
THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER TILE 1933
ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF TUE 1933 ACT AND IN EACH CASE ONLY IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS, IN ADDITION, HEDGING
TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE
WITH THE 1933 ACT.

PURCHASE AGREEMENT

          THIS
PURCHASE AGREEMENT (this “Agreement”) is made as of the 12th day of May,
2006 by and between Terax Energy, Inc., a Nevada corporation (the
“Company”), and Paul A. Turner, Trustee (the “Investor”),

Recitals

                     A.
  The Company and the Investor are executing and delivering this Agreement in
  reliance upon the exemption from securities registration afforded by the provisions
  of Regulation S (“Regulation S”), as promulgated by the U.S. Securities
  and Exchange Commission (the “SEC”) under the Securities Act of 1933,
  as amended; and

                    B.
  The Investor wishes to purchase from the Company, and the Company wishes to
  sell and issue to the Investor, upon the terms and conditions stated in this
  Agreement, (i) a promissory note in the principal amount set forth on signature
  page hereof (the “Principal Amount”), bearing interest at the rate
  of 12.5% per annum in the form attached hereto as Exhibit A (the “Note”),
  and (ii) 71,429 shares of the Company’s common stock (the “Common
  Stock”). The Company is selling an aggregate of up to $2,500,000 principal
  amount of promissory notes (the “Aggregate Offering”) of which the
  Note shall be a part.

                    In
  consideration of the mutual promises made herein and for other good and valuable
  consideration, the receipt and sufficiency of which are hereby acknowledged,
  the parties hereto agree as follows:

          
  I. Definitions. In addition to those terms defined above and elsewhere
  in this Agreement, for the purposes of this Agreement, the following terms shall
  have the meanings set forth below:

                     “Affiliate”
  means, with respect to any Person, any other Person which directly or indirectly
  through one or more intermediaries Controls, is controlled by, or is under common
  control with, such Person.

                    “Business
  Day” means a day, other than a Saturday or Sunday, on which banks in
  New 




York City are open for the general transaction of business.

                    
  “Company’s Knowledge” means the actual knowledge of the
  executive officers (as defined in Rule 405 under the 1933 Act) of the
  Company, after due inquiry.

                   
“Confidential Information” means trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
processes, procedures and techniques, research and development information,
computer program code, performance specifications, support documentation,
drawings, specifications, designs, business and marketing plans, and customer
and supplier lists and related information).

                   
“Control” (including the terms “controlling”, “controlled by” or “under
common control with”) means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or
otherwise.

                   
“Intellectual Property” means all of the following: (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); (ii) trademarks, service marks, trade
dress, trade names, corporate names, logos, slogans and Internet domain names,
together with all goodwill associated with each of the foregoing; (iii)
copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).

                   
“Material Adverse Effect” means a material adverse effect on (i) the
assets, liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries taken as a whole, or
(ii) the ability of the Company to perform its obligations under the Transaction
Documents.

                   
“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein,

                   
  “Purchase Price” means the price paid for the Note and Common
  Stock set forth on the signature page hereof.

                   
  “SEC Filings” has the meaning set forth in Section 4.6.

                   
“SEC” mean the United States Securities and Exchange Commission.

                   
“Securities” means the Note and the Investor Shares.

                   
“Subsidiary” of any Person means another Person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first
Person.

                   
“Transaction Documents” means this Agreement and the Note.

                     “1933
Act” means the Securities Act of 1933, as amended, or any successor statute,
and the rules and regulations promulgated thereunder.

2




                       
“1934 Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.

          2. Purchase
  and Sale of the Note and the Investor Shares: Security. Subject to the terms
  and conditions of this Agreement, on the Closing Date, the Company shall sell
  and issue to the Investor, a Note in the Principal Amount, together with the
  Investor Shares in exchange for the Purchase Price. The Investor shall be permitted
  to maintain a security interest in the oil, gas and mineral leases owned by
  the Company and covering acreage in Erath County, Texas, and all wells located
  on the acreage covered by said leases that are owned and operated by the Company,
  right-of-ways and easements and the Company’s share of production obtained
  from its wells in Erath County, Texas (the “Security Interest”),
  as more fully set forth in Section 6.4 hereof.

          3. Closing.
  There shall be no formal closing ceremony with respect to the transactions contemplated
  by this Agreement. Instead, the parties shall execute and exchange the Transaction
  Documents by facsimile and email and the closing o eh transactions contemplated
  by this Agreement shall be deemed to have occurred (the “Closing”)
  on the date (the “closing Date”) that the Company receives
  the Purchase Price in full.

          4. Representations
  and Warranties of the Company. The Company hereby represents and warrants
  to the Investor that, except as set forth in the schedules delivered herewith
  (collectively, the “Disclosure Schedules”):

                   
  4.1 Organization. Good Standing and Qualification. Each of the Company
  and its Subsidiaries is a corporation duly organized, validly existing and in
  good standing under the laws of the jurisdiction of its incorporation and has
  all requisite corporate power and authority to carry on its business as now
  conducted and to own its properties. Each of the Company and its Subsidiaries
  is duly qualified to do business as a foreign corporation and is in good standing
  in each jurisdiction in which the conduct of its business or its ownership or
  leasing of property makes such qualification or leasing necessary unless the
  failure to so qualify has not and could not reasonably be expected to have a
  Material Adverse Effect.

                   
  4.2 Authorization. The Company has full power and authority and, has
  taken all requisite action on the part of the Company, its officers, directors
  and stockholders necessary for (i) the authorization, execution and delivery
  of the Transaction Documents, (ii) authorization of the performance of ail obligations
  of the Company hereunder or thereunder, and (iii) the authorization, issuance
  (or reservation for issuance) and delivery of the Securities. The Transaction
  Documents constitute the legal, valid and binding obligations of the Company,
  enforceable against the Company in accordance with their terms, subject to bankruptcy,
  insolvency, fraudulent transfer, reorganization, moratorium and similar laws
  of general applicability, relating to or affecting creditors’ rights generally.

                   
  4.3 Capitalization. All of the issued and outstanding shares of the Company’s
  capital stock have been duly authorized and validly issued and are fully paid,
  nonassessable and free of preemptive rights. All of’ the issued and outstanding
  shares of capital stock of each Subsidiary have been duly authorized and validly
  issued and are fully paid, nonassessable and free of pre-emptive rights, were
  issued in full compliance with applicable state and federal securities law and
  any rights of third parties and are owned by the Company, beneficially and of
  record, subject to no lien, encumbrance or other adverse claim.

                   
  4.4 Valid Issuance. The Notes have been duly and validly authorized and,
  when issued and paid for pursuant to this Agreement, shall be free and clear
  of all encumbrances and restrictions (other than those created by the Investor~,
  except for restrictions on transfer set forth in the Transaction Documents or
  imposed by applicable securities laws. The Investor Shares have been duly and
  validly 

3




authorized, fully paid and non-assessable, free and clear of
all encumbrances and restrictions, except for restrictions on transfer set forth
in the Transaction Documents or imposed by applicable securities laws and except
for those created by the Investor.

                   
4.5 Consents. The execution, delivery and performance by the
Company of the Transaction Documents, and the offer, issuance and sale of the
Securities require no consent of, action by or in respect of, or filing with,
any Person, governmental body, agency, or official other than filings that have
been made pursuant to applicable state securities laws, and post-sale filings
pursuant to applicable state and federal securities laws which the Company
undertakes to file within the applicable time periods.

                   
4.6 SEC Filings; Business. The Company has made available to the Investor
through the EDGAR system, true and complete copies of the Company’s most recent
Annual Report on Form 10-KSB for its last fiscal year (the “1 0-KSB”), and all
other reports filed by the Company pursuant to the 1934 Act since the filing of
the l0-KSB and prior to the date hereof (collectively, the “SEC Filings”). The
SEC Filings are the only filings required of the Company pursuant to the 1934
Act for such period. The Company and its Subsidiaries are engaged in all
material respects only in the business described in the SEC Filings and the SEC
Filings contain a complete and accurate description in all material respects of
the business of the Company and its Subsidiaries, taken as a whole.

                   
4.7 Use of Proceeds. The net proceeds of the sale of the Notes and the
Investor Shares hereunder shall be used by the Company for completion of
gathering systems, well cost and working capital.

                   
4.8 No Material Adverse Change. Since the date of the financial
statements contained in the most recent SEC Filings, and except as identified
and described in the SEC Filings, there has not been:

                             
(i)            
 any change in the consolidated assets, liabilities, financial condition or
operating results o the Company from that reflected in the financial statements
included in the Company’s Quarterly Report on Form 10-QS13 for the quarter ended
December 31, 2005, except for changes in the ordinary course of business which
have not and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;

                             
(ii)             any
declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or
repurchase of any securities of the Company;

                             
(iii)            
any material damage, destruction or loss, whether or not covered by insurance to
any assets or properties of the Company or its Subsidiaries;

                             
(iv)             any
waiver, not in the ordinary course of business, by the Company or any Subsidiary
of a material right or of a material debt owed to it;

                             
(v)             any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company and its Subsidiaries
taken as a whole (as such business is presently conducted and as it is proposed
to be conducted);

                             
(vi)             any
change or amendment to the Company’s Certificate of Incorporation or Bylaws, or
material change to any material contract or arrangement by which the Company or
any Subsidiary is bound or to which any of their respective assets or properties
is subject;

4




                             
(vii)          any material labor
difficulties or labor union organizing activities with respect to employees of
the Company or any Subsidiary;

                             
(viii)         any material
transaction entered into by the Company or a Subsidiary other than in the
ordinary course of business;

                             
(ix)            the loss
of the services of any key employee, or material change in the composition or
duties of the senior management of the Company or any Subsidiary;

                             
(x)             the
loss or threatened loss of any customer which has had or could reasonably be
expected to have a Material Adverse Effect; or

                             
(xi)            any other
event or condition of any character that has had or could reasonably be expected
to have a Material Adverse Effect.

                   
4.9 SEC Filings.

                             
(a) At the time of filing thereof, the SEC Filings complied as to form in all
material respects with the requirements of the 1934 Act and did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading,

                             
(b) Each registration statement and any amendment thereto filed by the Company
since January 1, 2005 pursuant to the 1.933 Act and the rules and regulations
thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein not misleading; and each prospectus filed pursuant to Rule 424(b)
under the 1933 Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.

                   
4.10 No Conflict, Breach, Violation or Default. The execution, delivery
and performance of the Transaction Documents by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under (i) the
Company’s Certificate of Incorporation or the Company’s Bylaws, both as in
effect on the date hereof (true and complete copies of which have been made
available to the Investor through the EDGAR system), or (ii)(a) any statute,
rule, regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company, any Subsidiary or any
of their respective assets or properties, or (b) any agreement or instrument to
which the Company or any Subsidiary is a party or by which the Company or a
Subsidiary is bound or to which any of their respective assets or properties is
subject.

                   
4.11 Tax Matters. The Company and each Subsidiary has timely prepared and
filed all tax returns required to have been filed by the Company or such
Subsidiary with all appropriate governmental agencies and timely paid all taxes
shown thereon or otherwise owed by it. The charges, accruals and reserves on the
books of the Company in respect of taxes for all fiscal periods are adequate

5




in all material respects, and there are no material unpaid
assessments against the Company or any Subsidiary nor, to the Company’s
Knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing
authority except for any assessment which is not material to the Company and its
Subsidiaries, taken as a whole. All taxes and other assessments and levies that
the Company or any Subsidiary is required to withhold or to collect for payment
have been duly withheld and collected and paid to the proper governmental entity
or third party when due. There are no tax liens or claims pending or, to the
Company’s Knowledge, threatened against the Company or any Subsidiary or any of
their respective assets or property.

                   
4.12 Title to Properties. Except as disclosed in the SEC Filings, the
Company and each Subsidiary has good and marketable title to all real properties
and all other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.

                   
4.13 Certificates, Authorities and Permits. The Company and each
Subsidiary possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.

                   
4.14 No Labor Disputes. No material labor dispute with the employees of
the Company or any Subsidiary exists or, to the Company’s Knowledge, is
imminent.

                   
4.15 Environmental Matters. Neither the Company nor any Subsidiary is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company’s Knowledge, threatened
investigation that might lead to such a claim.

                   
4.16 Litigation. Except as described in the SEC Filings, there are no
pending actions or suits against or affecting the Company, its Subsidiaries or
any of its or their properties; and to the Company’s Knowledge, no such actions,
suits or proceedings are threatened or contemplated.

                   
4.17 Financial Statements. The financial statements included in each SEC
Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and each flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis (“GAAP”) (except as may be
disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form l0-QSB under the 1934 Mt). Except as
set forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof, neither the Company nor any of its, Subsidiaries
has incurred any liabilities, contingent or 

6




otherwise, except those incurred in the ordinary course of
business, consistent (as to amount and nature) with past practices since the
date of such financial statements, none of which, individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse
Effect.

                   
4.18 No Directed Selling Efforts or General Solicitation. Neither the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation S) in
connection with the offer or sale of any of the Securities.

                   
4.19 No Integrated Offering. Neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Regulation S for the exemption from registration for
the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act.

                   
4.20 Private Placement. The offer and sale of the Securities to the
Investor as contemplated hereby is exempt from the registration requirements of
the 1933 Act.

                   
4.21 Questionable Payments. Neither the Company nor any of its
Subsidiaries nor, to the Company’s Knowledge, any of their respective current or
former stockholders, directors, officers, employees, agents or other Persons
acting on behalf of the Company or any Subsidiary, has on behalf of the Company
or any Subsidiary or in connection with their respective businesses: (a) used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company or any Subsidiary; or (e) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment of
any nature.

                   
4.22 Disclosures. Neither the Company nor any Person acting on its behalf
has provided the Investor or their agents or counsel with any information that
constitutes or might constitute material, non-public information. The written
materials delivered to the Investor in connection with the transactions
contemplated by the Transaction Documents do not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.

          5. Representations
  and Warranties of the Investor. The Investor hereby represents and warrants
  to the Company that:

                   
5.1 Organization and Existence. Such Investor is a validly existing
corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to invest in the Securities pursuant to this Agreement.

                   
5.2 Authorization. The execution, delivery and performance by such
Investor of the Transaction Documents to which such Investor is a party have
been duly authorized and will each constitute the valid and legally binding
obligation of such Investor, enforceable against such Investor in accordance
with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors’ rights generally.

                   
5.3 Purchase Entirely for Own Account. The Securities to be received by
such Investor hereunder will be acquired for such Investor’s own account, not as
nominee or agent, and not with a view 

7




to the resale or distribution of any part thereof in violation
of the 1933 Act, and such Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
1933 Act without prejudice, however, to such Investor’s right at all times to
sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws. Nothing contained herein
shall be deemed a representation or warranty by such Investor to hold the
Securities for any period of time. Such Investor is not a broker-dealer
registered with the SEC under the 1934 Act or an entity engaged in a business
that would require it to be so registered.

                   
5.4 Investment Experience. Such Investor acknowledges that it can bear
the economic risk and complete loss of its investment in the Securities and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.

                   
5.5 Disclosure of Information. Such Investor has had an opportunity to
receive all information related to the Company requested by it and to ask
questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities. Such
Investor acknowledges receipt of copies of the SEC Filings. Neither such
inquiries nor any other due diligence investigation conducted by such Investor
shall modify, amend or affect such Investor’s right to rely on the Company’s
representations and warranties contained in this Agreement.

                   
5.6 Restricted Securities. Such Investor understands that the Securities
are characterized as “restricted securities” under the U.S. federal securities
laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 1933 Act only in
certain limited circumstances.

                   
5.7 The Investor further represents and acknowledges that:

                               
  (a) The Investor is located outside the United States;

                               
  (b) The investor is not aware of any advertisement of any of the Securities
  to be issued hereunder;

                               
  (c) The Investor will not acquire the Securities as a result of, and will not
  itself engage in, any “directed selling efforts” (as defined in Regulation
  S under the 1933 Act) in the United States in respect of the Securities which
  would include any activities undertaken for the purpose of, or that could reasonably
  be expected to have the effect of, conditioning the market in the United States
  for the resale of the shares; provided, however, that the Investor may sell
  or otherwise dispose of the Securities pursuant to registration of the shares
  pursuant to the 1933 Act and any applicable state and provincial securities
  laws or under an exemption from such registration requirements and as otherwise
  provided herein;

                   
              (d)
  The Investor agrees that the Company will refuse to register any transfer of
  the Securities not made in accordance with the provisions of Regulation S, pursuant
  to an effective registration statement under the 1933 Act or pursuant to an
  available exemption from the registration requirements of the 1933 Act and in
  accordance with applicable state and provincial securities laws; and

                   
              (e)
  The Investor understands and agrees that offers and sales of any of the Securities
  prior to the expiration of a period of one year after the date of transfer of
  the Securities (the “Distribution Compliance Period”), shall only
  be made in compliance with the safe harbor provisions set forth in Regulation
  5, pursuant to the registration provisions of the 1933 Act or an exemption therefrom,
  and that all offers and sales after the Distribution Compliance Period shall
  be made only in compliance with the 

8




registration provisions of the 1933 Act or an exemption
therefrom and in each case only in accordance with all applicable securities
laws;

                   
              (f)
  The Investor understands and agrees not to engage in any hedging transactions
  involving the Securities prior to the end of the Distribution Compliance Period
  unless such transactions are in compliance with the provisions of the 1933 Act;

                               
  (g) The Investor hereby acknowledges and agrees to the Company making a notation
  on its records or giving instructions to the registrar and transfer agent of
  the Company in order to implement the restrictions on transfer set forth and
  described herein.

                   
5.7 Legends. It is understood that, except as provided below,
certificates evidencing the Securities may bear the following or any similar
legend:

                                (a)
  THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
  THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”)
  OR OTHER APPLICABLE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR
  INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE AND MAY NOT BE OFFERED,
  SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE PROVISIONS
  OF REGULATIONS S, RULE 901 THROUGH RULE 905, AND PRELIMINARY NOTES UNDER THE
  U.S. SECURITIES ACT OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
  REQUIREMENTS OF THE U.S. SECURITIES ACT OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
  STATEMENT. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED
  UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.

                              
   (b) If required by the authorities of any state in connection with the
  issuance of sale of the Securities, the legend required by such state authority.

                   
5.8 No General Solicitation. Such Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.

                   
5.9 Brokers and Finders. No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of such Investor.

          6. Conditions
  to Closing.

                   
6.1 Conditions to the Investor’s Obligations, The obligation of the
Investor to purchase the Notes and the Investor Shares at the Closing is subject
to the fulfillment to such Investor’s satisfaction, on or prior to the Closing
Date, of the following conditions, any of which may be waived by the
Investor:

                              
   (a) The representations and warranties made by the Company in Section
  4 hereof qualified as to materiality shall be true and correct at all times
  prior to arid on the Closing Date, except to the extent any such representation
  or warranty expressly speaks as of an earlier date, in which case such representation
  or Warranty shall be true and correct as of such earlier date, and, the representations
  and warranties made by the Company in Section 4 hereof not qualified as to materiality
  shall be true and correct in all material respects at all times prior to and
  on the Closing Date, except to the extent any such representation or warranty
  expressly speaks as of an earlier date, in which case such representation 

9




or warranty shall be true and correct in all material respects
as of such earlier date. The Company shall have performed in all material
respects all obligations and conditions herein required to be performed or
observed by it on or prior to the Closing Date.

                              
   (b) The Company shall have obtained any and all consents, permits, approvals,
  registrations and waivers necessary or appropriate for consummation of the purchase
  and sale of the Securities, and the consummation of the other transactions contemplated
  by the Transaction Documents, all of which shall be in full force and effect.

                              
   (c) No judgment, writ, order, injunction, award or decree of or by any
  court, or judge, justice or magistrate, including any bankruptcy court or judge,
  or any order of or by any governmental authority, shall have been issued, and
  no action or proceeding shall have been instituted by any governmental authority,
  enjoining or preventing the consummation of the transactions contemplated hereby
  or in the other Transaction Documents.

                      6.2
  Conditions to Obligations of the Company. The Company’s obligation
  to sell and issue the Shares and the Investor Shares at the Closing is subject
  to the fulfillment to the satisfaction of the Company on or prior to the Closing
  Date of the following conditions, any of which may be waived by the Company:

                               
  (a) The representations and warranties made by the Investor in Section 5 hereof
  shall be true and correct in all respects on the Closing Date with the same
  force and effect as if they bad been made on and as of said date. The Investor
  shall have performed in all material respects all obligations and conditions
  herein required to be performed or observed by them on or prior t~ the Closing
  Date.

                               
  (b) The Investor shall have delivered the Purchase Price to the Company.

                     
  6.3 Termination of Obligations to Effect Closing; Effects.

                   
              (a)
  The obligations of the Company, on the one hand, and the Investor, on the other
  hand, to effect the Closing shall terminate as follows:

                             
              (i)Upon
  the mutual written consent of the Company and the Investor;

                                         
  (ii) By the Company if any of the conditions set forth in Section 6.2 shall
  have become incapable of fulfillment, and shall not have been waived by the
  Company;

                                         (iii)
  By an Investor (with respect to itself only) if any of the conditions set forth
  in Section 6,1 shall have become incapable of fulfillment, and shall not have
  been waived by the Investor; or

                                         
  (iv) By either the Company or the Investor if the Closing has not occurred on
  or prior to May 31, 2006;

provided, however, that, except in the case of clause (i)
above, the party seeking to terminate its obligation to effect the Closing shall
not then be in breach of any of its representations, warranties, covenants or
agreements contained in this Agreement or the other Transaction Documents if
such breach

10




has resulted in the circumstances giving rise to such party’s
seeking to terminate its obligation to effect the Closing.

          7.
Covenants and Agreements of the Company.

                   
7.1 Reports. The Company will furnish to the Investor and/or their
assignees such information relating to the Company and its Subsidiaries as from
time to time may reasonably be requested by the Investor and/or their assignees;
provided, however, that the Company shall not disclose material nonpublic
information to the Investor, or to advisors to or representatives of the
Investor, unless prior to disclosure of such information the Company identifies
such information as being material nonpublic information and provides the
Investor, such advisors and representatives with the opportunity to accept or
refuse to accept such material nonpublic information for review and the Investor
wishing to obtain such information enters into an appropriate confidentiality
agreement with the Company with respect thereto.

                   
7.2 No Conflicting Agreements. The Company will not take any action,
enter into any agreement or make any commitment that would conflict or interfere
in any material respect with the Company’s obligations to the Investor under the
Transaction Documents.

                   
7.3 Compliance with Laws. The Company will comply in all material
respects with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities.

                   
7.4 Security Interest. The Company shall cooperate with the Investor in
all reasonable respects in connection with the establishment and maintenance of
the Security interest. The Company agrees to execute such further documents and
instruments and to take such further actions as may be reasonably necessary to
carry out the purposes and intent of the Security Agreement. The Company shall
be responsible for the payment of all costs and expenses reasonably incurred by
Investor in connection with the preparation of any documents, instruments or
agreements required to create or perfect the Security Interest and for all
filing fees related thereto.

                   
7.5 Termination of Covenants. The provisions of Sections 7.1 through 7.4
shall terminate and be of no further force and effect on the date on which the
Company’s obligations under the Note shall terminate.

          8.
Survival and Indemnification.

                   
8.1 Survival. The representations, warranties, covenants and agreements
contained in this Agreement shall survive the Closing of the transactions
contemplated by this Agreement until the repayment in full of the Note.

                   
8.2 Indemnification. The Company agrees to indenmify and hold harmless
each Investor and its Affiliates and their respective directors, officers,
employees and agents from and against any and all losses, claims, damages,
liabilities and expenses (including without limitation reasonable attorney fees
arid disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof) (collectively, “Losses”) to which such
Person may become subject as a result of any breach of representation, warranty,
covenant or agreement made by or to be performed on the part of the Company
under the Transaction Documents, and will reimburse any such Person for all such
amounts as they are incurred by such Person.

11




                   
8.3 Conduct of Indemnification Proceedings. Promptly after receipt by
ai~1y Person (the “Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 8.2, such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not he
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. Without the prior written
consent of the Indemnified Person, which consent shall not be unreasonably
withheld, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.

          9.
Miscellaneous.

                   
9.1 Successors and Assigns. This Agreement may not be assigned by a party
hereto without the prior written consent of the Company or the Investor, as
applicable, provided, however, that an investor may assign its rights and
delegate its duties hereunder in whole or in part to an Affiliate or to a third
party acquiring some or all of its Securities in a private transaction without
the prior written consent of the Company, after notice duly given by such
Investor to the Company. The provisions of this Agreement shall inure to the
benefit of and be binding upon the respective permitted successors and assigns
of the parties. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this
Agreement.

                   
9.2 Counterparts: Faxes. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.

                   
9.3 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.

                   
9.4 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given as hereinafter described (i) if given by personal delivery, then such
notice shall be deemed given upon such delivery, (ii) if given by telex or
telecopier, then such notice shall be deemed given upon receipt of confirmation
of complete 

12




transmittal, (iii) if given by mail, then such notice shall be
deemed given upon the earlier of (A) receipt of such notice by the recipient or
(B) three days after such notice is deposited in first class mail, postage
prepaid, and (iv) if given by an internationally recognized overnight air
courier, then such notice shall be deemed given one business day after delivery
to such carrier. All notices shall be addressed to the party to be notified at
the address as follows, or at such other address as such party may designate by
ten days’ advance written notice to the other party:

If to the Company:

Mr. Lawrence Finn,
Interim Chief
Executive Officer
Terax Energy, Inc.
13355 Noel Road
Suite
1370
Dallas, TX 75240
Fax: 972-503-0901

If to the Investor: 

Mr. Paul A. Turner
3E-B 1 Lonsdale
Gardens
25 Tai Hang Drive Jardine’s Lookout
Hong Kong,
SAR
paul@turner.hk

                      9.5
  Expenses. The parties hereto shall pay their own costs and expenses in
  connection herewith. In the event that legal proceedings are commenced by any
  party to this Agreement against another party to this Agreement in connection
  with this Agreement or the other Transaction Documents, the party or parties
  which do not prevail in such proceedings shall severally, but not jointly, pay
  their pro rata share of the reasonable attorneys’ fees and other reasonable
  out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.

                      9.6
  Amendments and Waivers. Any term of this Agreement may be amended and
  the observance of any term of this Agreement may be waived (either generally
  or in a particular instance and either retroactively or prospectively), only
  with the written consent of the Company and the Investor. Any amendment or waiver
  effected in accordance with this paragraph shall be binding upon each holder
  of any Securities purchased under this Agreement at the time outstanding, each
  future holder of all such Securities, and the Company.

                     
  9.7 Publicity. Except as set forth below, no public release or announcement
  concerning the transactions contemplated hereby shall be issued by the Company
  or the Investor without the prior consent of the Company (in the case of a release
  or announcement by the Investor) or the Investor (in the case of a release or
  announcement by the Company) (which consents shall not be unreasonably withheld),
  except as such release or announcement may be required by law or the applicable
  rules or regulations of any securities exchange or securities market, in which
  case the Company or the Investor, as the case may be, shall allow the Investor
  or the Company, as applicable, to the extent reasonably practicable in the circumstances,
  reasonable time to comment on such release or announcement in advance of such
  issuance.

                      9.8
  Severability Any provision of this Agreement this is prohibited or unenforceable
  in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
  of such prohibition or 

13




unenforceability without invalidating the remaining provisions
hereof but shall be interpreted as if it were written so as to be enforceable to
the maximum extent permitted by applicable law, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereby waive any provision of law which renders
any provision hereof prohibited or unenforceable in any respect.

                     
  9.9 Entire Agreement. This Agreement, including the Exhibits and the
  Disclosure Schedules, and the other Transaction Documents constitute the entire
  agreement among the parties hereof with respect to the subject matter hereof
  and thereof and supersede all prior agreements and understandings, both oral
  and written, between the parties with respect to the subject thatter hereof
  and thereof.

                      9.10
  Further Assurances. The parties shall execute and deliver all such further
  instruments and documents and take all such other actions as may reasonably
  be required to carry out the transactions contemplated hereby and to evidence
  the fulfillment of the agreements herein contained.

                      9.11
  Governing Law: Consent to Jurisdiction; Waiver of Jury Trial. This Agreement
  shall be governed by, and construed in accordance with, the internal laws of
  the State of Nevada without regard to the choice of law principles thereof.
  Each of the parties hereto irrevocably submits to the exclusive jurisdiction
  of the courts of the State of Nevada and the United States District Courts for
  the purpose of any suit, action, proceeding or judgment relating to or arising
  out of this Agreement and the transactions contemplated hereby. Service of process
  in connection with any such suit, action or proceeding may be served on each
  party hereto anywhere in the world by the same methods as are specified for
  the giving of notices under this Agreement. Each of the parties hereto irrevocably
  consents to the jurisdiction of any such court in any such suit, action or proceeding
  and to the laying of venue in such court. Each party hereto irrevocably waives
  any objection to the laying of venue of any such suit, action or proceeding
  brought in such courts and irrevocably waives any claim that any such suit,
  action or proceeding brought in any such court has been brought in an inconvenient
  forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TIUAL BY
  JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS TRAT COUNSEL
  HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

[SIGNATURE PAGES FOLLOW]

14




     IN WITNESS WFIERFOF, the parties
have executed this Agreement or caused their duly authorized officers to execute
this Agreement as of the date first above written.

	 	The Company: 
	 	  
	 	TERAX ENERGY, INC. 
	 	  
	 	  
	 	  
	 	By:	 /s/ Lawrence
      Finn
	 	Name:Lawrence Finn 
	 	Title: President and Chief Executive Officer 
	 	  
	 	  
	 	The Investor: 
	 	  
	 	  
	 	  
	 	By:   	 /s/ Paul
      A. Turer
	 	Name:Paul A. Turner 
	 	Capacity: Trustee 







	 	NAME OF INVESTOR 
	 	 
	 	 
	 	  
	 	By: _____________________________________________________
	 	 
	 	Name: 
	 	Title: 
	 	 
	 	Principal Amount of Note purchased:$___________________________
    
	 	 
	 	Tax ID No.: 
	 	 
	 	ADDRESS FOR NOTICE 
	 	 
	 	C/o: _____________________________________________________
	 	 
	 	Street: ___________________________________________________
	 	 
	 	City/State/Zip: _____________________________________________
	 	 
	 	Attention: ________________________________________________
	 	 
	 	Tel: _____________________________________________________
	 	 
	 	Fax: _____________________________________________________
	 	 
	 	DELIVERY INSTRUCTIONS 
	 	(if different from above) 
	 	 
	 	C/o: _____________________________________________________
	 	 
	 	Street: ___________________________________________________
	 	 
	 	City/State/Zip: _____________________________________________
    
	 	 
	 	Attention: ________________________________________________
	 	 
	 	Tel: _____________________________________________________
	 	  


16