ex10-6.htm

Exhibit 10.6

    PURCHASE
      AND SALE AGREEMENT

     

    BY
      AND BETWEEN

     

    ENTEK
      USA INC.

     

    AS
      SELLER

     

    AND

     

    VELOCITY
      OIL & GAS INC.

     

    AS
      BUYER

     

    DATED
      NOVEMBER 8, 2007

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    PURCHASE
      AND SALE AGREEMENT

     

    This
      Purchase and Sale Agreement (this “Agreement”) is made and
      entered into this 8th day of November 2007, by and between Entek USA Inc.,
      a
      Delaware corporation (“Seller”), and Velocity Oil & Gas
      Inc., a Nevada corporation (“Buyer”).  Seller and
      Buyer are collectively referred to herein as the “Parties”, and
      are sometimes referred to individually as a
“Party.”

     

    W
      I T N E
      S S E T H:

     

    WHEREAS,
      Seller is the owner of 100% of the outstanding membership interests (the
“Membership Interests”) in South Marsh LLC, a Delaware limited
      liability company (the “Company”); and

     

    WHEREAS,
      the Company is a party to that certain Amended and Restated Participation
      Agreement, dated as of December 8, 2006, by and between Ridgelake Energy, Inc.,
      a Louisiana corporation (“Ridgelake”), GulfX, LLC (“GulfX”), a Delaware limited
      liability company, and the Company (as amended, the “Participation
      Agreement”); and

     

    WHEREAS,
      pursuant to the terms of the Participation Agreement, the Company acquired
      the
      right to earn the respective interests set forth below in the following oil
      and
      gas leases (each a “Lease” and collectively, the
“Leases”) covering certain blocks in the Outer
      Continental Shelf
      Area of the Gulf of Mexico as set forth below (the “OCS
      Blocks”), subject to and in accordance with the terms of the
      Participation Agreement:

     

    


    
      	
              OCS
                Lease No.:

            	
              OCS
                Area Name/ Block:

            	
              Interest

            
	
              OCS-G
                26190

            	
              Viosca
                Knoll Block 79 (“VK 79”)

            	
              10.00%

            
	
              OCS-G
                26560

            	
              High
                Island Area, East Addition, South Extension, Block A 307 (“HI
                A-307”)

            	
              10.00%

            
	
              OCS-G
                27078

            	
              Vermilion
                Area, South Addition Block 317 (“VM 317”)

            	
              10.00%

            
	
              OCS-G
                27089

            	
              South
                Marsh Island, South Addition Block 138 (“SMI 138”)

            	
              11.25%

            
	
              OCS-G
                27091

            	
              South
                Marsh Island, South Addition Block 152 (“SMI 152”)

            	
              15.00%

            


    

    


    ;
      and

     

    WHEREAS,
      Seller desires to sell and Buyer desires to purchase the Membership Interests,
      subject to the terms and conditions hereinafter set forth.

     

    NOW,
      THEREFORE, in consideration of the mutual benefits derived and to be derived
      from this Agreement by each Party, Seller and Buyer hereby agree as
      follows:

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    ARTICLE
      I

     

    Purchase
      and Sale

     

    Section
      1.01.          Agreement to
      Sell and Purchase.  Subject to and in accordance with the terms
      and conditions of this Agreement, Seller agrees to sell, and Buyer agrees to
      purchase, the Membership Interests.

     

    ARTICLE
      II

     

    Purchase
      Price

     

    Section
      2.01.          Purchase
      Price.  As consideration for the purchase, sale and assignment of
      the Membership Interests to Buyer, at Closing, as defined herein, Buyer will
      cause the Company to execute, acknowledge and deliver to Seller a production
      payment, substantially in the form of Exhibit A attached hereto (the
“Production Payment”), pursuant to which the Company shall pay
      to Seller fifty percent (50%) of the Net Proceeds, as defined below,
      attributable to the Company’s interest, whether now owned or acquired within
      five (5) years after the Closing, in the subject Leases, including any renewals
      or extensions thereof, until such time as Seller has received an amount equal
      to
      the Payment Amount, as defined below.

     

    Section
      2.02.          Production
      Payment Amount.

     

    (a)            As
      used herein, the “Payment Amount” means US$1,072,258.22, being
      the sum of:

     

    (i)           US$878,987.56,
      such amount being the “Sunk Costs”, as defined in the
      Participation Agreement, paid by the Company with respect to the Leases, plus
      interest thereon at 8% per annum from the date such Sunk Costs were paid by
      the
      Company to October 22, 2007; and

     

    (ii)           US$193,270.66
      (the Discovery Share Amount”), such amount being equal to
      1,000,000 (being the number of Entek Discovery Shares, as defined in the
      Participation Agreement, granted to Ridgelake under the Participation Agreement)
      multiplied AUD$0.22 (being the volume weighted average opening price of the
      ordinary shares of Entek Energy Limited as traded on the Australian Stock
      Exchange Limited during the immediately preceding five (5) trading days prior
      to
      execution of this Agreement), converted into U.S. Dollars using a conversion
      factor of US$0.878503 to AUD$1.00 (such conversion factor being the 12 noon
      buying rate on October 22, 2007 as published by the Federal Reserve Bank of
      New
      York).

     

    (b)            As
      used herein, “Net Proceeds” means all amounts actually received
      by the Company from the sale or other disposition of oil, gas or other
      hydrocarbons produced from or otherwise allocable to the subject Leases, after
      deduction of any royalties and other burdens on production therefrom which
      are
      existing as of the date hereof and any production, severance, or other similar
      taxes applicable thereto.

     

    (c)            The
      Sunk Costs paid by the Company as of the date hereof with respect to each Lease
      are as follows:

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    
      	
              OCS
                Lease No.:

            	
              Block:

            	
              Sunk
                Costs (in US$):

            	
              Interest   (in
                US$)

            	
              Total       (in
                US$)

            
	
              OCS-G
                26190

            	
              VK
                79

            	
              $60,306.86

            	
              $4,985.68

            	
              $65,292.54

            
	
              OCS-G
                26560

            	
              HI
                A-307

            	
              $57,909.46

            	
              $4,929.52

            	
              $62,838.98

            
	
              OCS-G
                27078

            	
              VM
                317

            	
              $116,954.84

            	
              $10,524.07$

            	
              $127,478.91

            
	
              OCS-G
                27089

            	
              SMI
                138

            	
              $274,475.67

            	
              $24,949.41

            	
              $299,425.08

            
	
              OCS-G
                27091

            	
              SMI
                152

            	
              $296,867.83

            	
              $27,084.22

            	
              $323,952.05

            
	 	 	 	 	
              $878,987.56

            


    

    


    (d)            The
      Production Payment shall be a non-recourse obligation of the Company payable
      solely out of proceeds of production from the Leases burdened thereby; provided,
      however, that if prior to receiving an assignment from Ridgelake with respect
      to
      any Lease, the Company assigns it rights under the Participation Agreement
      with
      respect to such Lease to a third party, then Buyer shall immediately pay to
      Seller an amount equal to the Sunk Costs attributable to such Lease (plus
      interest thereon as provided above), and upon receipt thereof, Seller shall
      execute and deliver to Buyer a release of the Production Payment with respect
      to
      such Lease.  Net Proceeds received by Seller attributable to a Lease
      shall be applied first to the Sunk Costs with respect to such Lease, and
      thereafter to the Discovery Share Amount.  At such time as the Net
      Proceeds paid to Seller and applied toward the Discovery Share Amount are equal
      to the Discovery Share Amount, all further payments of Net Proceeds attributable
      to a Lease shall be applied to any remaining Sunk Costs with respect to such
      Lease until payments of Net Proceeds attributable to such Lease and applied
      to
      Sunk Costs for such Lease equal the Sunk Costs (plus interest thereon as
      provided above) for such Lease.  At that time, the Production Payment
      shall automatically terminate as to such Lease only, and Seller shall, upon
      request, deliver to Buyer a partial release of the Production Payment, executed
      and acknowledged by Seller, evidencing such partial termination.

     

    ARTICLE
      III

     

    Indemnification

     

    Section
      3.01.         Definition of
      Claims.  As used herein, the term “Claims” means
      any and all direct or indirect demands, claims, notices of violation, notices
      of
      probable violation, filings, investigations, administrative proceedings,
      actions, causes of action, suits, other legal proceedings, judgments,
      assessments, damages, deficiencies, Taxes, penalties, fines, obligations,
      responsibilities, liabilities, payments, charges, costs and expenses (including
      without limitation costs and expenses of owning and operating the Leases) of
      any
      kind or character (whether or not asserted prior to Closing, and whether known
      or unknown, fixed or unfixed, conditional or unconditional, based on theories,
      contract, tort, strict liability or otherwise, choate or inchoate, liquidated
      or
      unliquidated, secured or unsecured, accrued, absolute, contingent or other
      legal
      theory), including, without limitation, penalties and interest on any amount
      payable as a result of any of the foregoing, any legal or other costs and
      expenses incurred in connection with investigating or defending any Claim,
      and
      all amounts paid in settlement of Claims.  Without limiting the
      generality of the foregoing, the term “Claims” specifically includes any
      and all Claims arising from, attributable to or incurred in connection with
      any
      (a) breach of contract, (b) loss of or damage to property, injury to or death
      of
      persons, and other tortious injury and (c) violations
      of applicable laws, rules, regulations, orders or any other legal right or
      duty
      actionable at law or in equity.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    Section
      3.02.          Buyer’s
      Indemnity.  Except for matters for which Buyer is entitled to
      indemnification from Seller pursuant to Section 3.03 below, from and after
      Closing, Buyer shall defend, protect, indemnify and hold Seller, its affiliates,
      and its/their partners, members, managers, directors, officers, employees,
      contractors and representatives (which additional parties, together with Seller,
      are hereinafter collectively referred to as the “Seller
      Parties”) harmless from and against any and all Claims in any way
      arising from, out of or in connection with, or otherwise relating to the
      Company, the Participation Agreement or the Leases, including, without
      limitation, the ownership or operation thereof and performance thereunder,
      whether attributable to periods before or after the Closing Date, including,
      without limitation, Claims arising from THE SELLER’S SOLE, JOINT,
      CONCURRENT OR COMPARATIVE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL
      MISCONDUCT), OR STRICT LIABILITY.

     

    Section
      3.03.          Seller’s
      Indemnity.  From and after Closing, Seller shall defend, protect,
      indemnify and hold Buyer, its affiliates, and its/their partners, members,
      managers, directors, officers, employees, contractors and representatives (which
      additional parties, together with Buyer, are hereinafter collectively referred
      to as the “Buyer Parties”) harmless from and against any and all
      third party Claims asserted against any Buyer Party, arising out of or in
      connection with, or otherwise relating to the Entek Discovery Shares issued
      pursuant to the Participation Agreement.  In the event the Company’s
      obligation in the Participation Agreement with respect to the Entek Discovery
      Shares is terminated or released, then Seller shall have no further indemnity
      obligation hereunder.

     

    ARTICLE
      IV

     

    Certain
      Covenants

     

    Section
      4.01.          Access to
      Records.  Prior to Closing, Seller shall permit Buyer and its
      representatives to examine, during normal business hours and such other
      reasonable times and in Seller’s offices, all files, records, information and
      data in Seller’s possession or under its control relating to the Company,
      including, without limitation, records relating to the Participation Agreement
      and the Leases, subject to such restrictions upon disclosure as may exist under
      confidentiality or other agreements binding upon Seller and the Company or
      such
      data; provided, however, that Seller shall, at Buyer’s request and at no cost or
      expense to Seller, request waivers of such confidentiality
      restrictions.  Seller makes no representations or warranties
      whatsoever as to the accuracy, completeness or reliability of such information,
      and Buyer may rely and depend on and use such information exclusively and
      entirely at its own risk and without recourse to Seller whatsoever.

     

    Section
      4.02.          Actions
      Prior to Closing.  Between the date hereof and the Closing,
      without the prior written consent of Buyer, Seller will not:

     

    (a)            sell,
      transfer or otherwise encumber the Membership Interests or permit the Company
      to
      issue or sell additional membership interests in the Company;

     

    (b)            permit
      the Company to grant any options or warrants or other rights to purchase or
      otherwise acquire any membership interests in the Company or issue any
      securities convertible into membership interests in the Company;

     

    (c)            amend
      the Company’s limited liability company agreement or other governing
      documents;

     

    (d)            permit
      the Company to borrow or agree to borrow any funds, or guarantee or agree to
      guarantee the obligations of others;

     

    (e)            permit
      the Company to waive any material rights; or, except in the ordinary course
      of
      business, enter into any material agreement, contract or commitment or
      materially amend or change the terms of any such agreement, contract or
      commitment;

     

    (f)             take
      any action or omit to take any action which would result in any of its
      representations or warranties set forth in this Agreement becoming
      untrue.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      V

     

    Representations
      and Warranties of Seller

     

    Section
      5.01.          Representations
      and Warranties.  Seller represents and warrants to Buyer
      that:

     

    (a)            Formation
      of the Company.  The Company is a limited liability company duly
      formed, validly existing and in good standing under the laws of the State of
      Delaware.  The Company has full legal power, right and authority to
      carry on its business as such is now being conducted and as contemplated to
      be
      conducted.

     

    (b)           Authorization.  Seller
      has the legal power and right to enter into and perform this Agreement and
      the
      transactions contemplated hereby.  The consummation of the
      transactions contemplated by this Agreement will not violate, or be in conflict
      with:

     

    (i)           
      any provision of Seller’s articles or certificate of incorporation, bylaws and
      other governing documents;

     

    (ii)           any
      provision of the Company’s limited liability company agreement and other
      governing documents;

     

                                                   
      (iii)          except for any
      required third party consents in connection with the transactions contemplated
      herein, any material agreement or instrument to which Seller or the Company
      is a
      party or by which Seller or the Company are bound; or

     

    (iv)           any
      judgment, order, ruling or decree applicable to Seller or the Company as a
      party
      in interest or any law, rule or regulation applicable to Seller or the
      Company.

     

    (c)            Execution.  The
      execution, delivery and performance of this Agreement and the transactions
      contemplated hereby are duly and validly authorized by all requisite limited
      liability
      company action on the part of Seller. This Agreement constitutes the legal,
      valid and binding obligation of Seller enforceable in accordance with its terms,
      except as the same may be limited by bankruptcy, insolvency or other laws
      relating to or affecting the rights of creditors generally, and by general
      equitable principles.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    (d)            No
      Brokers.  No broker or finder is entitled to any brokerage or
      finder’s fee, or to any commission, based in any way on agreements, arrangements
      or understandings made by or on behalf of Seller for which Buyer or the Company
      has or will have any liabilities or obligations (contingent or
      otherwise).

     

    (e)            Bankruptcy.  There
      are no bankruptcy, reorganization or arrangement proceedings pending, being
      contemplated by or to the best of Seller’s knowledge threatened against Seller
      or the Company.

     

    (f)             Suits
      and Claims.  There is no suit, action, written claim or proceeding
      by any person or entity or by any administrative agency or governmental
      authority pending against the Seller or the Company in any legal, administrative
      or arbitration proceeding or, to Seller’s knowledge, threatened against Seller
      or the Company that could materially affect Seller’s ability to consummate the
      transactions contemplated herein or that could have a material adverse effect
      on
      the Company.

     

    (g)            Taxes.  There
      are no claims against the Company for any Taxes (or against Seller with respect
      to any Tax for which any of the Company may be liable), and no assessment,
      deficiency or adjustment has been asserted, proposed, or threatened with respect
      to any such Tax.  The Company has been treated as a disregarded entity
      or partnership for tax purposes since formation.  For purposes of this
      Agreement, “Tax” or “Taxes” means any taxes,
      assessments, fees and other governmental charges imposed by any governmental
      authority, including without limitation income, profits, gross receipts, net
      proceeds, alternative or add-on minimum, ad valorem, value added, turnover,
      sales, use, property, personal property (tangible and intangible),
      environmental, stamp, leasing, lease, user, excise, duty, franchise, capital
      stock, transfer, registration, license, withholding, social security (or
      similar), unemployment, disability, payroll, employment, fuel, excess profits,
      occupational, premium, windfall profit, severance, unclaimed property and
      escheat obligations, estimated taxes, or other charge of any kind whatsoever,
      including any interest, penalty, or addition thereto, whether disputed or
      not.

     

    (h)            Preferential
      Rights and Required Consents.  Except as set forth on Exhibit
      B attached hereto, there are no rights or agreements that may permit any
      person or entity to purchase or acquire the Membership Interests that are
      triggered by the transactions contemplated herein, and there are no material
      required consents, approvals or authorizations of, or notifications to, any
      person or entity (excluding any of the foregoing customarily obtained following
      Closing), in each case, that are applicable to the transactions contemplated
      hereby.

     

    (i)             Compliance
      with Laws.  The Company is in compliance in all material respects
      with all applicable laws.

     

    (j)             Contracts.  The
      Participation Agreement (including all exhibits thereto) is the only contract
      or
      agreement to which the Company is a party.  The Participation
      Agreement is
      in
      full force and effect and no default or breach (or event that, with notice
      or
      lapse of time or both, would become a default or breach) thereof has occurred
      or
      is continuing on the part of the Company or, to Seller’s knowledge, any other
      party thereto.  Seller has delivered to Buyer or made available to
      Buyer a true, correct and complete copy of the Participation
      Agreement.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    (k)            Planned
      Future Commitments.  Except as set forth on Exhibit B
      attached hereto, as of the date hereof, (i) there are no outstanding authorities
      for expenditures (“AFEs”) or other commitments to make capital
      expenditures that are binding on the Company, and (ii) there are no outstanding
      AFEs under the Participation Agreement as to which the Company has not made
      (or
      been deemed to have made) an election.

     

    (l)             Non-Consent
      Operations.  Except as set forth on Exhibit B, the Company
      has not gone “non-consent” or failed to participate in the drilling of any well
      or other operation under the Participation Agreement which has caused the
      Company to suffer a penalty or loss or forfeit any of its interests in any
      of
      the Leases.

     

    (m)           Capitalization.  The
      Membership Interests comprise one hundred percent (100%) of the issued and
      outstanding membership interests in the Company and are owned beneficially
      and
      of record by Seller, free and clear of all liens and
      encumbrances.  There are no outstanding or authorized options,
      warrants, subscriptions, calls, puts, conversion or other rights, contracts,
      agreements, commitments or understandings of any kind respecting the Membership
      Interests obligating Seller or the Company to issue, sell, purchase, return,
      redeem or pay any distribution or dividend with respect to any membership or
      other ownership interest in the Company.  All of the Membership
      Interests have been duly authorized, validly issued, and were issued in
      compliance with all applicable federal and state laws.

     

    (n)            Subsidiaries.  The
      Company has no subsidiaries and does not own any direct or indirect equity
      interest in any person or entity.

     

    (o)            Employee
      and Employee Benefits.  The Company does not have, nor has the
      Company  ever had, any employees or employee benefit
      plans.

     

    (p)            Assets
      and Business.  The assets of the Company consist solely of its
      interest in the Participation Agreement and any rights or interests arising
      from
      or relating thereto.  The Company has not engaged in any business
      other than in connection with the Participation Agreement.

     

    (q)            Liabilities.  The
      Company does not have any existing, contingent, or threatened liabilities or
      obligations.

     

    Section
      5.02.          Representations
      and Warranties Exclusive.  All representations and warranties of
      Seller contained in this Agreement are exclusive, and are given in lieu of
      all
      other representations and warranties, express, implied or
      statutory.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    ARTICLE
      VI

     

    Representations
      and Warranties of Buyer

     

    Section
      6.01.          Representations
      and Warranties.  Buyer represents and warrants to Seller
      that:

     

    (a)            Formation.  Buyer
      is a corporation duly formed, validly existing and in good standing under the
      laws of the State of Nevada, and is duly qualified to carry on its business
      in
      all jurisdictions in which such qualification is required by law except where
      the failure to qualify would not have a material adverse effect on Buyer’s
      ability to consummate the transactions contemplated hereby.  Buyer has
      full legal power, right and authority to carry on its business as such is now
      being conducted and as contemplated to be conducted.

     

    (b)            Authorization.  Buyer
      has the legal power and right to enter into and perform this Agreement and
      the
      transactions contemplated hereby. The consummation of the transactions
      contemplated by this Agreement will not violate, or be in conflict
      with:

     

    (i)            
      any provision of Buyer’s governing documents;

     

    (ii)           
      any material agreement or instrument to which Buyer is a party or by which
      Buyer
      or its assets are bound; or

     

    (iii)           any
      judgment, order, ruling, decree, law, rule or regulation applicable to
      Buyer.

     

    (c)            Execution.  The
      execution, delivery and performance of this Agreement and the transactions
      contemplated hereby are duly and validly authorized by all requisite action
      on
      the part of Buyer. This Agreement constitutes the legal, valid and binding
      obligation of Buyer enforceable in accordance with its terms, except as the
      same
      may be limited by bankruptcy, insolvency or other laws relating to or affecting
      the rights of creditors generally, and by general equitable
      principles.

     

    (d)            Brokers.  No
      broker or finder is entitled to any brokerage or finder’s fee, or to any
      commission, based in any way on agreements, arrangements or understandings
      made
      by or on behalf of Buyer.

     

    (e)            Bankruptcy.  There
      are no bankruptcy, reorganization or arrangement proceedings pending, being
      contemplated by or to the best of Buyer’s knowledge threatened against
      Buyer.

     

    (f)             Suits
      and Claims.  There is no suit, action, written claim or proceeding
      by any person or entity or by any administrative agency or governmental
      authority pending against the Buyer in any legal, administrative or arbitration
      proceeding or, to Buyer’s knowledge, threatened against Buyer that could
      materially affect Buyer’s ability to consummate the transactions contemplated
      herein.

     

    (g)            Independent
      Evaluation.  Buyer acknowledges that it is an experienced and
      knowledgeable investor in the oil and gas business, and the business of
      purchasing, owning, developing
      and operating oil and gas properties.  In making the decision to enter
      into this Agreement and to consummate the transactions contemplated hereby,
      Buyer has relied solely upon its own independent due diligence investigation
      of
      the Company, the Membership Interests and the Participation Agreement and it
      has
      been advised by and has relied solely on its own expertise and its own legal,
      tax, financial and other professional counsel and advisors concerning this
      transaction.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    (h)            Acquisition
      not for Distribution.  Buyer is acquiring the Membership Interests
      for its own account and not with a view to, or for offer of resale in connection
      with, a distribution thereof, within the meaning of the Securities Act of 1933,
      15 U.S.C. § 77a et seq., and any other rules, regulations, and laws
      pertaining to the distribution of securities.

     

    Section
      6.02.          Representations
      and Warranties Exclusive.

     

    All
      representations and warranties of Buyer contained in this Agreement, and the
      documents delivered in connection herewith, are exclusive, and are given in
      lieu
      of all other representations and warranties, express, implied or
      statutory.

     

    Section
      6.03.          Disclaimers,
      Waivers and Acknowledgments.  EXCEPT AS EXPRESSLY PROVIDED IN THIS
      AGREEMENT, SELLER MAKES NO WARRANTY OR REPRESENTATION OF ANY KIND OR NATURE,
      EXPRESS OR IMPLIED IN FACT OR BY LAW, WITH RESPECT TO THE COMPANY. THE
      MEMBERSHIP INTERESTS, THE PARTICIPATION AGREEMENT OR THE
      LEASES.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER
      ACKNOWLEDGES THAT SELLER HAS NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS
      AND
      NEGATES, AND BUYER HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY,
      EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE, RELATING TO PRODUCTION
      RATES, COMPLETION OR RECOMPLETION OPPORTUNITIES, DECLINE RATES, OR THE QUALITY,
      QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO
      ANY
      OF THE LEASES, OR THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION,
      DATA OR OTHER MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED
      TO BUYER BY OR ON BEHALF OF SELLER.

     

    ARTICLE
      VII

     

    Conditions
      to Obligations of Seller

     

    The
      obligations of Seller to consummate the transactions provided for herein are
      subject, at the option of Seller, to the fulfillment on or prior to the Closing
      Date of each of the following conditions:

     

    Section
      7.01.          Representations.  The
      representations and warranties of Buyer contained herein that are qualified
      by
      materiality shall be true and correct at and as of Closing as though such
      representations and warranties were made at such time and the representations
      and warranties of Buyer contained herein that are not so qualified shall be
      true
      and correct in all material respects at and as of Closing as though such
      representations and warranties were made at such time.

     

    Section
      7.02.          Performance.  Buyer
      shall have performed all obligations, covenants and agreements contained in
      this
      Agreement to be performed or complied with by it in all material respects at
      or
      prior to the Closing.

     

    Section
      7.03.          Pending
      Matters.  No suit, action or other proceeding shall be pending or
      threatened that seeks to, or could reasonably result in a judicial order,
      judgment or decree that would, restrain, enjoin or otherwise prohibit the
      consummation of the transactions contemplated by this Agreement.

     

    Section
      7.04.          Closing
      Documents.  Buyer shall be willing and able to deliver the
      documents and perform the actions set forth in Section 
9.02.

     

    Section
      7.05.          Consents.  All
      required third-party consents to the transactions contemplated herein shall
      have
      been obtained or waived or the time period by which such consents were required
      to be made, given or withheld shall have expired without action by the party
      whose consent is required.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      VIII

     

    Conditions
      to Obligations of Buyer

     

    The
      obligations of Buyer to consummate the transactions provided for herein are
      subject, at the option of Buyer, to the fulfillment on or prior to the Closing
      Date of each of the following conditions:

     

    Section
      8.01.          Representations.  The
      representations and warranties of Seller contained herein that are qualified
      by
      materiality shall be true and correct at and as of Closing as though such
      representations and warranties were made at such time and the representations
      and warranties of Seller contained herein that are not so qualified shall be
      true and correct in all material respects at and as of Closing as though such
      representations and warranties were made at such time.

     

    Section
      8.02.          Performance.  Seller
      shall have performed all obligations, covenants and agreements contained in
      this
      Agreement to be performed or complied with by it in all material respects at
      or
      prior to the Closing.

     

    Section
      8.03.          Pending
      Matters.  No suit, action or other proceeding shall be pending or
      threatened that seeks to, or could reasonably result in a judicial order,
      judgment or decree that would, restrain, enjoin, or otherwise prohibit the
      consummation of the transactions contemplated by this Agreement.

     

    Section
      8.04.          Closing
      Documents.  Seller shall be willing and able to deliver the
      documents and perform the actions set forth in Section 
9.02.

     

    Section
      8.05.          Consents.  All
      required third-party consents to the transactions contemplated herein shall
      have
      been obtained or waived or the time period by which such consents were required
      to be made, given or withheld shall have expired without action by the party
      whose consent is required.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    ARTICLE
      IX

     

    The
      Closing

     

    Section
      9.01.          Closing.  The
      closing of the transactions contemplated by this Agreement (the
“Closing”) shall take place on November 8, 2007 at 1:00 p.m.
      (the “Closing Date”) at the offices of Andrews Kurth LLP, 600
      Travis, Suite 4200, Houston, TX  77002 or on such other date or at
      such other place as Seller and Buyer may agree in writing.

     

    Section
      9.02.          Actions at
      Closing.  At the Closing, the following shall occur:

     

    (a)            Seller
      and Buyer shall execute and deliver an assignment of the Membership Interests
      in
      the form attached hereto as Exhibit “C” (the
“Assignment”);

     

    (b)            Buyer
      shall execute, acknowledge and deliver to Seller an Assignment of Production
      Payment, substantially in the form of Exhibit A attached hereto, with
      respect to each of the Leases;

     

    (c)            Seller
      shall deliver resignations of each of the officers and, if applicable, managers
      of the Company; and

     

    (d)            Seller
      shall deliver its records with respect to the Company to Buyer; provided,
      however, that Seller may retain copies thereof.

     

    Section
      9.03.          Termination.  This
      Agreement and the transactions contemplated hereby may be terminated in the
      following instances:

     

    (a)            By
      Seller if any condition set forth in Article VII has not been satisfied
      or waived by Seller by the Closing Date; provided that Seller is not in material
      breach of this Agreement;

     

    (b)            By
      Buyer if any condition set forth in Article VIII has not been satisfied
      or waived by Buyer by the Closing Date; provided that Buyer is not in material
      breach of this Agreement; or

     

    (c)            By
      mutual written agreement of Buyer and Seller.

     

    ARTICLE
      X

     

    Miscellaneous

     

    Section
      10.01.        Publicity.  Seller
      and Buyer shall consult with each other with regard to all press releases or
      other public or private announcements made concerning this Agreement or the
      transactions contemplated hereby, and except as may be required by applicable
      laws or the applicable rules and regulations of any governmental agency or
      stock
      exchange, neither Buyer nor Seller shall issue any such press release or other
      publicity without the prior written consent of the other party, which shall
      not
      be unreasonably withheld. 

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Section
      10.02.       
Assignment.  Prior to Closing, Buyer may not assign any rights
      acquired hereunder or delegate any duties assumed hereunder without the prior
      written consent of Seller, which consent may be withheld at Seller’s sole
      discretion.

     

    Section
      10.03.        Entire
      Agreement.  This Agreement constitutes the entire agreement
      between Seller and Buyer with respect to the transactions contemplated herein,
      and supersedes all prior oral or written agreements, commitments, and
      understandings between the parties.  No amendment shall be binding
      unless in writing and signed by both parties.  Headings used in this
      Agreement are only for convenience of reference and shall not be used to define
      the meaning of any provision.  This Agreement is for the benefit of
      Seller and Buyer and their respective successors, representatives, and assigns
      and not for the benefit of third parties.

     

    Section
      10.04.        Notices.  All
      notices and consents to be given hereunder shall be in writing and shall be
      deemed to have been duly given if delivered either by personal delivery, telex,
      telecopy or similar facsimile means, by certified or registered mail, return
      receipt requested, or by courier or delivery service, addressed to the parties
      hereto at the following addresses:

     

    If
      to Seller:

     

    Entek
      USA
      Inc.

    15
      Rheola
      St.

    West
      Perth

    Western
      Australia 6005

    Australia

    Attn:  Mr.
      Jack Toby

    Fax:  +61
      (8) 9213 4399

     

    with
      a copy to:

    


    Cheryl
      S.
      Phillips

    Andrews
      Kurth LLP

    600
      Travis, Suite 4200

    Houston,
      Texas  77002

    Telephone
      No.: 713.220.4446

    Fax
      No.:  713.238.7414

     

    If
      to Buyer:

     

    Velocity
      Oil & Gas, Inc.

    595
      Howe
      Street

    Suite
      323

    Vancouver,
      BC

    Canada

    V6C
      2T5

    Attn:  Mr.
      Frank A. Jacobs

    Telephone:
      604-765-3337

    Facsimile:
      604-688-4725

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    or
      at
      such other address as either party shall designate by written notice given
      to
      the other party in the manner hereinabove set forth.  Notices shall be
      deemed given when received, if sent by facsimile (confirmation of such receipt
      by confirmed facsimile transmission being deemed receipt of communications);
      and
      when delivered and receipted for (or upon the date of attempted delivery where
      delivery is refused), if either hand-delivered, sent by express courier or
      delivery service, or sent by certified or registered mail, return receipt
      requested.

     

    Section
      10.05.        Governing
      Law.  This Agreement shall be governed by the laws of the State of
      Texas, without giving effect to any principles of conflicts of law.

     

    Section
      10.06.        Confidentiality.  Buyer
      agrees that all information furnished or disclosed by Seller or acquired by
      Buyer in connection with this Agreement or otherwise relating to the sale of
      the
      Membership Interests shall remain confidential prior to
      Closing.  Buyer may disclose such information only to its subsidiaries
      or affiliates, agents, advisors, counsel or representatives (herein
“Representatives”) who have agreed, prior to being given access
      to such information, to maintain the confidentiality thereof.  In the
      event that Closing of the transactions contemplated by this Agreement does
      not
      occur for any reason, Buyer agrees that all information furnished or disclosed
      by Seller or acquired by Buyer in connection with the Company shall remain
      confidential.  Buyer and its Representatives shall promptly return to
      Seller any and all materials and information furnished or disclosed by Seller
      relating in any way to the Company, including any notes, summaries,
      compilations, analyses or other material derived from the inspection or
      evaluation of such material and information, without retaining copies thereof
      and destroy any information relating to the Company and independently acquired
      by Buyer.

     

    Section
      10.07.       Survival of Certain
      Obligations.  The representations and warranties and other
      obligations of Seller set forth herein shall terminate upon
      Closing.  The waivers, disclaimers, releases, representations,
      warranties, indemnities and other obligations of Buyer set forth herein shall
      survive Closing.

     

    Section
      10.08.        Further
      Cooperation.  After the Closing, each party shall execute,
      acknowledge, and deliver all documents, and take all such acts which from time
      to time may be reasonably requested by the other party in order to carry out
      the
      purposes and intent of this Agreement.

     

    Section
      10.09.        Counterparts.  This
      Agreement may be executed in one or more counterparts with the same effect
      as if
      all signatures of the parties hereto were on the same document, but in such
      event each counterpart shall constitute an original, and all of such
      counterparts shall constitute one Agreement; but in making proof of this
      Agreement, it shall not be necessary to produce or account for more than one
      such counterpart signed by each party.

     

    Section
      10.10.         Exhibits and
      Schedules.  All of the Exhibits referred to in this Agreement are
      hereby incorporated into this Agreement by reference and constitute a part
      of
      this Agreement.

     

    Section
      10.11.        Severability.  If
      any term or provision of this Agreement is invalid, illegal or incapable of
      being enforced by any rule of law, all other conditions and provisions of the
      Agreement shall nevertheless remain in full force and effect so long as the
      economic or legal substance of the transactions contemplated hereby are not
      affected in any materially adverse manner to the other party.

     

    Section
      10.12.        Expenses.  All
      fees, costs and expenses incurred by Buyer or Seller in negotiating this
      Agreement or in consummating the transactions contemplated by this Agreement
      shall be paid by the party incurring the same, including, without limitation,
      legal and accounting fees, costs and expenses.

     

    Section
      10.13.       CONSPICUOUSNESS/EXPRESS
      NEGLIGENCE.  THE DEFENSE, INDEMNIFICATION AND HOLD
      HARMLESS PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER
      OR NOT THE DAMAGES, LOSSES, INJURIES, LIABILITIES, COSTS OR EXPENSES IN QUESTION
      AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE,
      STRICT LIABILITY, BREACH OF DUTY (STATUTORY OR OTHERWISE), OR OTHER FAULT OF
      ANY
      INDEMNIFIED PARTY, OR FROM ANY PRE-EXISTING DEFECT, EXCEPT TO THE EXTENT CAUSED
      BY THE INDEMNIFIED PARTY’S GROSS NEGLIGENCE OR WILLFUL
      MISCONDUCT.  BUYER AND SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES
      WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.

     

    Section
      10.14.        Waiver of Certain
      Damages.  Each party irrevocably waives and agrees not to seek
      indirect, consequential, punitive or exemplary damages of any kind in connection
      with any dispute arising out of or related to this Agreement or the breach
      hereof.  For the avoidance of doubt, this Section 10.14 does
      not diminish or otherwise affect the parties’ rights and obligations to be
      indemnified against, and provide indemnity for, indirect, consequential,
      punitive or exemplary damages awarded to any third party for which
      indemnification is provided in this Agreement or Seller’s right to receive
      liquidated damages.

     

    EXECUTED
      as of the date first above written.

     

    SELLER:

     

    Entek
      USA
      Inc.

    


    


    By: /s/
      Russell
      Brimage                                            

    Russell
      Brimage, Director

    


    BUYER:

    


    Velocity
      Oil & Gas Inc.

    


    


    By:  /s/
      Frank A.
      Jacobs                                                   

    Frank
      A. Jacobs

    President
&
CEO

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
               

            	
              EXHIBIT
                A

            


    

     

    
      	
               

            	
              Form
                of Production Payment

            


    

     

    


    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
               

            	
              EXHIBIT
                B

            


    

     

    
      	
               

            	
              Disclosure
                Schedule

            


    

     

    


     

    
      	
               

            	
              NONE.

            


    

     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
               

            	
              EXHIBIT
                C

            


    

     

    
      	
               

            	
              Form
                of Assignment