ex101.htm


    EXHIBIT
10.1

    


    Wallen
Settlement Agreement

    


    CAUSE NO.
11259

    


    QUEST OIL
CORPORATION                                                            §           IN
THE DISTRICT COURT OF

    §

    Plaintiff                                                                                                  §

    §

    v.                                                                                                            
§           GILLESPIE
COUNTY, TEXAS

    §

    JOSEPH F.
WALLEN AND B&B OIL,
INC.                                    §

    §

    Defendants                                                                           
§           216th
JUDICIAL DISTRICT

    


    COMPROMISE SETTLEMENT
AGREEMENT

    


    This COMPROMISE SETTLEMENT AGREEMENT
entered into by and between Quest Oil Corporation (“Quest”) and Joseph F. Wallen and B&B Oil, Inc. and any and
all of his/its
affiliates (collectively referred to herein as “Wallen”) is as
follows:

    


    
      	
              1.  

            	
              This
      agreement and all of the terms herein are binding upon and inure to the
      benefit of Quest and Wallen’s respective successors, heirs, assigns, and
      personal representatives.

            


    

    
      	
              2.  

            	
              Other
      than the above-styled and numbered lawsuit filed by Quest against Wallen
      in Gillespie County, Texas, Quest and Wallen hereby represent to each
      other that they have not filed any complaints, charges, actions,
      administrative charges or legal proceedings against the other party with
      any federal, state or local governmental agency or court.  Quest
      and Wallen further represent to each other that they have not made any
      promises to induce execution of this Release except for the promises or
      agreement specifically set forth
herein.

            


    

    
      	
              3.  

            	
              As
      consideration for Quest dismissing and releasing its claims and demands in
      the above-referenced lawsuit and thereby dissolving a Temporary
      Restraining Order against Wallen in connection therewith, Wallen agrees to
      the following: Upon execution of this Compromise Settlement Agreement,
      Wallen shall contemporaneously assume all debts and obligations (and/or
      alleged debts and obligations) of Quest, PetroStar Oil Services, Inc.,
      and/or Wallstin Petroleum, LLC with respect to the vendors/ creditors of
      leases any such entities are or have been involved with in McCullough
      County, Texas and Eastland County, Texas, including, but not limited to,
      those vendors/ creditors listed on Exhibit “A” attached hereto and by this
      reference incorporated herein.  The list attached as Exhibit “A”
      is not meant to be exhaustive and Wallen agrees to contemporaneously
      assume all debts and obligations, whether now known or unknown by Quest,
      PetroStar Oil Services, Inc., Wallstin Petroleum, LLC or Wallen with
      regard to all leases Quest, PetroStar Oil Services, Inc., and/or Wallstin
      Petroleum, LLC is or has been involved with in McCullough County, Texas
      and Eastland County, Texas. Wallen hereby specifically acknowledges the
      ongoing litigation between Quest Oil Corporation and a former alleged
      vendor, Cisco Pump, Inc. filed in the 91st
      District Court in and for Eastland County, Texas. Should any debt or
      obligation (or alleged debt or obligation) of Quest, PetroStar Oil
      Services, Inc., and/or Wallstin Petroleum, LLC with respect to the
      vendors/ creditors of properties/leases any such entities are or have been
      involved with in McCullough County, Texas and Eastland County, Texas,
      including, but not limited to, those vendors/ creditors listed on Exhibit
      “A” attached hereto and by this reference incorporated herein be asserted
      against Quest, PetroStar Oil Services, Inc., and/or Wallstin Petroleum,
      LLC or should any judgment be rendered against Quest, PetroStar Oil
      Services, Inc., and/or Wallstin Petroleum, LLC related to same, Wallen
      agrees to fully and completely indemnify Quest, PetroStar Oil Services,
      Inc., and/or Wallstin Petroleum, LLC from any and all claims made by any
      such vendors/ creditors or any liens by way of subrogation or otherwise,
      such indemnity to include the entity’s attorneys’ fees and costs. Further,
      with regard to the foregoing, Wallen specifically hereby agrees that
      Quest, PetroStar Oil Services, Inc., and/or Wallstin Petroleum, LLC shall
      be allowed to place a lien against any such properties/leases such
      entities are or have been involved with in McCullough County, Texas and
      Eastland County, Texas as a result of or with regard to any such debts or
      obligations (or alleged debts or
obligations).

            


    

    
      	
              a.  

            	
              Upon
      execution of this Compromise Settlement Agreement, Wallen shall
      contemporaneously assume all previously existing, current and/or future
      liabilities of Quest, PetroStar Oil Services, Inc., and/or Wallstin
      Petroleum, LLC with regard to leases in McCullough County, Texas and
      Eastland County, Texas, including, but not limited to, plug and
      abandonment liabilities, all Texas Railroad Commission or other state or
      federal fees, fines, or penalties, claims for personal injuries, or other
      liabilities as a result of incidents, events or occurrences related to
      such leases.

            


    

    
      	
              b.  

            	
              Upon
      execution of this Compromise Settlement Agreement, Wallen shall
      contemporaneously assume all previously existing, current and/or future
      known and/or unknown liabilities related to a 2004 Ford F-250 registered
      in the name of Wallstin Petroleum, LLC (VIN# 1FTNW21P3AEC35156),
      including, but not limited to, an existing loan in Wallstin Petroleum,
      LLC’s name with Wells Fargo Bank

            


    

    
      	
              c.  

            	
              Upon
      execution of this Compromise Settlement Agreement, Wallen hereby agrees to
      release Quest, PetroStar Oil Services, Inc., and/or Wallstin Petroleum,
      LLC from any and all previously existing and current amounts owed, due or
      payable to Wallen

            


    

    
      	
              d.  

            	
              For
      the one (1) year following the date this agreement is executed, Quest
      shall receive the right to participate in any debt or equity capital
      raisings related to any properties Wallen leases, purchases or is
      otherwise involved with, whether same occurs contemporaneously with or
      occurs after the execution of this Compromise Settlement Agreement. Wallen
      shall provide written notice of such debt or equity capital raising to
      Quest via facsimile at (760) 804-8845 or overnight mail,
      addressed to Quest Oil Corporation, 2038 Corte del Nogal, Suite 110,
      Carlsbad, California 92008 or at a different address or facsimile
      number provided to Wallen by Quest after the date of the execution of this
      Compromise Settlement Agreement.  Quest shall be provided
      fifteen (15) days after the date of receipt of such correspondence to make
      a commitment for such capital raising and shall deposit funds related to
      same in an escrow account of Quest’s choosing no later than twenty (20)
      days after the date of receipt of such
  correspondence.

            


    

    
      	
              e.  

            	
              Quest
      shall receive the right to participate in all future
      operations, including drilling, derived from any lands, to the extent
      that Wallen is ever to secure such lands, in Eastland County, Texas and
      McCullough County, Texas, that were previously under the control of Quest,
      PetroStar Oil Services, Inc., and/or Wallstin Petroleum,
      LLC.  Wallen shall provide written notice of such future
      operations to Quest via facsimile at (760) 804-8845 or overnight mail,
      addressed to Quest Oil Corporation, 2038 Corte del Nogal, Suite 110,
      Carlsbad, California 92008 or at a different address or facsimile
      number provided to Wallen by Quest after the date of the execution of this
      Compromise Settlement Agreement.  Prior to each future
      operation, including drilling opportunity, Quest shall be provided an
      option period of no less than thirty (30) days from the date of receipt of
      such notice in order to participate in such future operation in one of the
      following forms:

            


    

    
      	
              i.  

            	
              a
      Gross Overriding Royalty (“GORR”) and/or a Overriding Royalty Interest
      (“ORRI”) in an amount equal to five percent (5%) with no additional
      capital commitment for all properties Wallen leases, purchases or is
      otherwise involved with that were previously under the control of Quest,
      PetroStar Oil Services, Inc., and/or Wallstin Petroleum, LLC., whether
      same has occurred prior to, occurs contemporaneously with or occurs after
      the execution of this Compromise Settlement
  Agreement;

            


    

    
      	
              ii.  

            	
              A
      Working Interest (“WI”) in an amount equal to twelve and one half percent
      (12.5%), with no additional capital commitment, for all properties Wallen
      leases, purchases or is otherwise involved with that were previously under
      the control of Quest, PetroStar Oil Services, Inc., and/or Wallstin
      Petroleum, LLC., whether same has occurred prior to, occurs
      contemporaneously with or occurs after the execution of this Compromise
      Settlement Agreement; or

            


    

    
      	
              iii.  

            	
              as
      an equal joint venture (50-50 split) for all properties Wallen leases,
      purchases or is otherwise involved with that were previously under the
      control of Quest, PetroStar Oil Services, Inc., and/or Wallstin Petroleum,
      LLC., between Wallen and Quest and any other party or parties in which
      Quest will provide fifty percent (50%) of the cash required to participate
      in an AFE. In the event Quest elects to participate, Quest will be
      notified by Wallen in the manner set forth above within thirty (30) days
      of spud.  An Authority for Expenditure (“AFE”) will be provided
      by Wallen in the manner set forth above followed by Cash Call. Cash Call
      must be paid by Quest within seven (7) business of receipt of an AFE
      provided by Wallen, which was sent in writing to Quest via facsimile at
      (760) 804-8845 or overnight mail,
      addressed to Quest Oil Corporation, 2038 Corte del Nogal, Suite 110,
      Carlsbad, California 92008 or at a different address or facsimile number
      provided to Wallen by Quest after the date of the execution of this
      Compromise Settlement Agreement.

            


    

    
      	
              f.  

            	
              Wallen
      and its affiliates will assist Quest with obtaining a release of funds
      underlying certain deposits held in connection with the Texas Railroad
      Commission operator licenses held by Quest Oil Corporation and Wallstin
      Petroleum, LLC that Joseph F. Wallen was responsible for setting up while
      an employee of Quest.   These funds include, but may not be
      limited to; (i) funds held in connection with a bond posted with the Texas
      Railroad Commission on behalf of Quest Oil Corporation; and (ii) funds
      held in connection with a letter of credit provided to the Texas Railroad
      Commission on behalf of Wallstin Petroleum, LLC. These funds will
      immediately be provided and returned to Quest upon their
      release.

            


    

    
      	
              4.  

            	
              This
      Agreement shall not be construed as an admission of wrongdoing or
      liability by the parties.  Any and all such wrongdoing or
      liability is expressly denied.  In respect of this Agreement,
      the parties hereby agree not to disparage, criticize, insult, malign,
      libel or slander the other party, its owners, officers, employees, agents
      or services in any way from the date
hereof.

            


    

    
      	
              5.  

            	
              All
      of Quest’s expenses growing out of or resulting from the above-referenced
      and styled action, including attorneys’ fees, and all other costs and
      expenses, are the responsibility of and will be paid by
      Quest.  All of Wallen’s expenses growing out of or resulting
      from the above-referenced and styled action, including attorneys’ fees,
      and all other costs and expenses, are the responsibility of and will be
      paid by Wallen.

            


    

    
      	
              6.  

            	
              Each
      individual executing this Agreement on behalf of any party represents and
      warrants that he is fully authorized to execute and deliver this Agreement
      on behalf of such party in accordance with its terms, and that this
      Agreement is not in violation of, inconsistent with or contrary to the
      provisions of any agreement to which it is a
  party.

            


    

    
      	
              7.  

            	
              This
      Compromise Settlement Agreement contains the entire agreement of the
      parties with respect to the matters contemplated hereby.  This
      Release may be amended or modified only by a written instrument executed
      by the parties.

            


    

    
      	
              8.  

            	
              If
      any provision of this Compromise Settlement Agreement is held by a court
      of competent jurisdiction to be unenforceable, the balance of this
      Compromise Settlement Agreement shall nevertheless continue in full force
      and effect unaffected by such holding and
  determination

            


    

    
      	
              9.  

            	
              This
      Compromise Settlement Agreement shall be binding upon the parties and
      their respective successors, assigns, heirs and
      representatives.

            


    

    


    


    Upon execution below, the parties shall
have accepted all of the aforementioned terms and conditions and shall have
entered into a binding agreement.

    


    


    JOSEPH
F. WALLEN

    


    /s/
Joseph F. Wallen

    __________________________________

    By: Joseph F. Wallen

    An: Individual

    


    


    B & B OIL COMPANY

    


    /s/
Joseph F. Wallen

    ___________                                                                

    By: Joseph F. Wallen

    Its: President

    


    


    QUEST OIL CORPORATION

    


    /s/
James B. Panther, II

    ________________                                                                

    By: James B. Panther, II

    Its: Interim Chief Executive
Officer

    


     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    
 

    EXHIBIT
A

    


    QUEST
ACCOUNTS PAYABLE

    


    
      	
              Vendor

            	 
      	
              Amount

            
	
              3D
      AG Services

            	 
      	
                        351.50

            
	
              AB
      Well Service

            	 
      	
                     8,036.65

            
	
              Brenco
      Well Service

            	 
      	
                   12,497.50

            
	
              Cap
      Rock Energy

            	 
      	
                          28.90

            
	
              Cellular
      One

            	 
      	
                          57.73

            
	
              Cisco
      Pump

            	 
      	
                   20,658.25

            
	
              Dynochem

            	 
      	
                        595.38

            
	
              Earl
      Burns

            	 
      	
                        150.00

            
	
              Had
      Drilling

            	 
      	
                   13,675.88

            
	
              Heart
      S

            	 
      	
                        780.70

            
	
              Oilfield
      Supply

            	 
      	
                     8,826.97

            
	
              Otex

            	 
      	
                   10,800.00

            
	
              Seller
      Sales

            	 
      	
                     5,391.59

            
	
              Sequoia
      Fossil Fuels

            	 
      	
                        320.00

            
	
              T&S
      Services

            	 
      	
                     5,564.80

            
	
              Texas
      Work Commission

            	 
      	
                          19.09

            
	
              Tollett
      Roustabout Service

            	 
      	
                   13,425.20

            
	
              Tollett
      Tank & Supply

            	 
      	
                     3,290.63

            
	
              Wheats
      Oilfield Service

            	 
      	
                        550.00

            
	
              Comanche
      Electric

            	 
      	
                     2,146.11

            
	
              Davidson

            	 
      	
                     2,620.00

            
	
              Digital
      Mapping Services

            	 
      	
                        200.00

            
	
              Gleason
      Engineering

            	 
      	
                     7,100.00

            
	
              JWS

            	 
      	
                   18,500.00

            
	
              Mcculloch County
      Appraisal

            	 
      	
                          21.25

            
	
              Petroleum
      Motor Transport

            	 
      	
                        100.00

            
	
              Wesley
      Ritchie

            	 
      	
                     8,096.97

            
	
              Steve
      Wilson Construction

            	 
      	
                        285.00

            
	
              Westar
      Energy

            	 
      	
                        188.48