EXHIBIT
10.2

     

    Prepared
by and when recorded, please return to:

     

    
      
        	
                Porter
      & Hedges, LLP

              
	
                1000
      Main, 36th
      Floor

              
	
                Houston,
      Texas 77002

              
	
                Attention:
      Ephraim del Pozo

              


      

    

    


    CONVEYANCE
OF NET PROFITS INTEREST

     

    THIS
CONVEYANCE OF NET PROFITS INTEREST (this “Conveyance”), dated
effective as 7:00 am M.S.T on June 3, 2009 (the “Effective Date”), is
made from and by RANCHER ENERGY
CORP., a Nevada corporation doing business in the State of Wyoming as
RANCHER ENERGY OIL & GAS
CORP. (the “Grantor”), to and in
favor of GASROCK CAPITAL
LLC, a Delaware limited liability company (the “Grantee”).

     

    ARTICLE
I

     

    Defined
Terms

     

    Section
1.1    Defined
Terms.  When used in this Conveyance or in any exhibit or
schedule hereto (unless otherwise defined in any such exhibit or schedule), the
following terms have the respective meanings assigned to them in this section or
in the sections, subsections, exhibits and schedules referred to
below:

     

    “Affiliate” of any
Person means (a) any Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person
who is a director, manager, managing member, general partner or officer (i) of
such Person, (ii) of any subsidiary of such Person or (iii) of any Person
described in clause (a) above.  For purposes of this definition,
control of a Person means the power, direct or indirect, (A) to vote 10% or more
of the equity interests having ordinary voting power for the election of
directors of such Person or other Persons performing similar functions for any
such Person, or (B) to direct or cause the direction of the management and
policies of such Person whether by ownership of equity interests, contract or
otherwise.

     

    “Applicable Law”
means, as to any Person, any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement of
any governmental authority, whether now or hereafter in effect, including
Environmental Laws, energy regulations and the occupational, safety and health
standards or controls in each case applicable or binding upon such Person or its
property or to which such Person or its property is subject.

     

    “Business Day” means
for all purposes, a day other than a Saturday, Sunday or legal holiday, on which
commercial banks are authorized or required to be open in Houston, Texas,
U.S.A.

     

    “COPAS” means the
accounting procedures which are a part of an applicable operating agreement or,
in the event that there is not an operating agreement in effect, the Accounting
Procedures for Joint Operations recommended by the Council of Petroleum
Accountants then in effect.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Defensible Title”
means with respect to the Subject Interests, such title that: (a) with regard to
leasehold interests (i) entitles Grantor to receive production of Hydrocarbons
for the productive life of Subject Interests (subject only to the Permitted
Encumbrances); and (ii) obligates Grantor to bear costs and expenses relating to
the maintenance, development and operation of the Subject Interests for the
productive life of the Subject Interests free and clear of any encumbrances
(except for Permitted Encumbrances), and (b) with regard to fee interests,
entitles Grantor to receive production of Hydrocarbons equal to the undivided
fee interest owned by the Grantor (except for Permitted
Encumbrances).

     

    “Environmental Laws”
means any and all Applicable Laws relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes.

     

    “Fixed Rate” means,
for any day, the rate that is the lesser of (a) twelve percent (12%) per annum,
based on actual days elapsed and a year of 360 days or (b) the Maximum
Rate.

     

    “Grantee Indemnitees”
has the meaning assigned to such term in Section 6.6.

     

    “Grantee Taxes” means
any taxes imposed on Grantee in relation to its income, worth or
assets.

     

    “Gross Proceeds”
means, from and after the Effective Date, the aggregate gross amount of proceeds
received by Grantor from or attributable to (a) the sale or other disposition
for value of Subject Hydrocarbons, provided that such amount shall include all
consideration received, directly or indirectly from the sale or other
disposition for value of Subject Hydrocarbons, including without limitation (i)
advance payments, payments under take-or-pay (recoupable or non-recoupable),
production payments or similar provisions of production sales agreements,
(ii) any gains realized under any financially settled hedge transactions in
relation to the Subject Hydrocarbons; provided that such gains
relate to hedge transactions in existence as of the Effective Date and (b) the
sale or other disposition for value of any portion of the Subject Interests
(without duplication with regard to any amounts Grantee receives from a sale of
the Sold NPI under Section 4.7).

     

    “Hazardous Substance”
has the meaning specified in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980.

     

    “Hydrocarbons” means
oil, gas, drip gasoline, natural gasoline, condensate, distillate, liquid
hydrocarbons, gaseous hydrocarbons and all products refined or separated
therefrom.

     

    “Leases” means oil,
gas and/or mineral leases or portions thereof and the lands covered
thereby.

     

    “Marketing Terms and
Conditions” has the meaning assigned to such term in Section
3.1.

     

    “Maximum Rate” means
the maximum nonusurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received by a creditor
under Applicable Law, if any.

     

    “Month” means the
period between 7:00 a.m. Mountain Standard Time or Mountain Daylight Time, as
the case may be, on the first day of each calendar month and 7:00 a.m.
Mountain Standard Time, or Mountain Daylight Time, as the case may be, on the
first day of the next succeeding calendar month.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Net Profit” means the
amount by which Gross Proceeds exceeds the sum of (i) Production Costs and (ii)
any losses realized under any financially settled hedge transactions in relation
to the Subject Hydrocarbons; provided that such losses
relate to hedge transactions in existence as of the Effective Date.

     

    “NPI” is defined in
Section 2.1.

     

    “Permitted
Encumbrances” means:

     

    (a)           liens
for taxes, assessments or other governmental charges or levies which are not due
or which are being contested in good faith by appropriate action promptly
initiated and diligently conducted and for the payment of which Grantor has
reserved adequate funds and which do not materially impair the value of the
NPI;

     

    (b)           `liens
of vendors, contractors, subcontractors, carriers, warehousemen, mechanics,
laborers or materialmen or other like liens arising by law or contract in the
ordinary course of business for sums which are not due or which are being
contested in good faith by appropriate action promptly initiated and diligently
conducted and for the payment of which Grantor has reserved adequate funds and
which do not materially impair the value of the NPI;

     

    (c)           covenants,
restrictions, easements, servitudes, permits, conditions, exceptions,
reservations, minor rights, minor encumbrances, minor irregularities in title or
conventional rights of reassignment prior to abandonment which do not materially
interfere with the occupation, use and enjoyment by Grantor or Grantee of their
respective interests in the Subject Interests in the normal course of business
as presently conducted or to be conducted, materially impair the value thereof
for the purpose of such business, or materially impair the value of the
NPI;

     

    (d)           liens
and security interests granted by Grantor in favor of Grantee or its
Affiliates;

     

    (e)           liens
of operators under joint operating agreements or similar contractual
arrangements with respect to Grantor’s proportionate share of the expense of
exploration, development and operation of oil, gas and mineral leasehold or fee
interests owned jointly with others, to the extent that such liens secure sums
which are not due or which are being contested in good faith by appropriate
action promptly initiated and diligently conducted and for the payment of which
Grantor has reserved adequate funds and which do not materially impair the value
of the NPI;

     

    (f)           any
prior contractual obligations to which Grantee has been advised exists as of the
Effective Date; and

     

    (g)           all
royalties, overriding royalties and net profits interests or other burdens
recorded with the applicable county clerk prior to the Effective
Date.

     

    “Person” means any
individual, sole proprietorship, general partnership, limited partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, limited liability
partnership, institution, public benefit corporation, joint venture, entity or
governmental authority (whether federal, state, county, city, municipal or
otherwise, including any instrumentality, division, agency, body or department
thereof).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Production Costs”
means, on a cash accounting basis the aggregate, without duplication, of
Grantor’s proportionate share of the Specified Costs from and after the
Effective Date; provided, however, that such
costs shall not
include any general and administrative expenses.  Notwithstanding
anything to the contrary set in this Conveyance, Production Costs shall be
reduced by the following, only if such proceeds are included in the definition
of Specified Costs:

     

    (a)           all
proceeds received by Grantor from the sale or other disposition for value, from
and after the Effective Date, of any materials, supplies, equipment and other
personal property or fixtures, or any part thereof or interest therein, located
on or used in connection with the Subject Interests;

     

    (b)           all
insurance proceeds received by Grantor as a consequence of the loss or damage
from and after the Effective Date to the Subject Interests, or any part thereof
or interest therein, or any materials, supplies, equipment or other personal
property or fixtures located on or used in connection with any of the Subject
Interests or any Subject Hydrocarbons unless such proceeds are used by Grantor
within sixty (60) days of receipt to replace any such lost or damaged materials,
supplies, equipment and other personal property;

     

    (c)           the
proceeds of all judgments and claims received by Grantor for damages from and
after the Effective Date directly or indirectly related to the Subject Interests
or the Subject Hydrocarbons, or any part thereof or interest therein, or any
materials, supplies, equipment or other personal property or fixtures, or any
part thereof or interest therein, located on or used in connection with any of
the Subject Interests or any Subject Hydrocarbons and which is specifically
allocated to the Subject Interests, the Subject Hydrocarbons or the materials,
supplies, equipment or other personal property or fixtures or any party thereof
located on or used in connection with any of the Subject Interests or any
Subject Hydrocarbons; and

     

    (d)           all
proceeds of and/or from each of the following amounts received by Grantor (to
the extent attributable to periods from and after the Effective Date) with
respect to the Subject Interests (i) delay rentals, (ii) lease bonuses, (iii)
shut in gas well royalties or payments, (iv) rentals from reservoir use or
storage, (v) payments in connection with the drilling or deferring of any
Subject Well and (vi) all other proceeds from whatever source relating to the
Subject Interests or the Subject Hydrocarbons and not included in Gross
Proceeds.

     

    Provided
that, to the extent that Production Costs are reduced below zero for any Month,
the amount of such reduction below zero shall be carried forward and utilized in
the calculation of Production Costs in subsequent Months until the negative
balance has been eliminated.

     

    “Reimbursable
Expenses” means all reasonable costs and expenses paid or incurred by or
on behalf of Grantee which are related to: (a) the negotiation, acquisition,
ownership, enforcement, or termination of the NPI, this Conveyance, or any
waivers or amendments hereto or thereto, or (b) any litigation, contest, release
or discharge of any adverse claim or demand made or proceeding instituted by any
Person, other than Grantor or Grantee, affecting in any manner whatsoever the
NPI, this Conveyance, the enforcement or defense hereof or
thereof.  Included among the Reimbursable Expenses are (i) all
recording and filing fees, (ii) all actual and reasonable fees and expenses of
legal counsel, consulting engineers, consulting accountants and other
consultants, experts and advisors for Grantee and mortgagees, and (iii) all
amounts which Grantee is entitled to receive hereunder and all costs of Grantee
in exercising any of its remedies hereunder.

     

    “Release” has the
meaning specified in the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Sold Subject
Interest” is defined in Section 4.5.

     

    “Sold NPI” is defined
in Section 4.5.

     

    “Specified Costs”
means collectively and without duplication, the Specified LOE, Specified Taxes,
Specified Marketing Costs, and Specified Transportation Costs.

     

    “Specified LOE” means
all direct costs paid by Grantor, including but not limited to overhead charges,
for operating, producing, and maintaining the Subject Interests, with respect to
Subject Hydrocarbons, calculated in accordance with COPAS.

     

    “Specified Marketing
Costs” means all direct costs paid by Grantor for marketing the Subject
Hydrocarbons; provided,
however, that no such
costs shall exceed the fair and reasonable costs for the area which would have
been charged at the time in arm’s-length dealings with parties other than
Affiliates of Grantor.

     

    “Specified Taxes”
means all ad valorem or property taxes and all conservation taxes, severance
taxes or similar taxes incurred by Grantor against or measured by production and
severance of Subject Hydrocarbons or the value thereof, and any personal
property taxes assessed against production equipment.

     

    “Specified Transportation
Costs” means all direct costs paid by Grantor (or any other operator of
Subject Interests on behalf of Grantor) to gatherers, processors or transporters
for transporting Subject Hydrocarbons from the lease to the point of sale or for
processing Subject Hydrocarbons off of the Subject Interests to meet pipeline or
transporter specifications and qualifications; provided, however, that no such costs
shall exceed fair and reasonable costs for the area which would have been
charged at the time in arm’s-length dealings with parties other than Affiliates
of Grantor.

     

    “Subject Hydrocarbons”
is defined in Section 2.1.

     

    “Subject Interests”
means:

     

    (a)           all
of Grantor’s right, title and interest, now owned or hereafter acquired, in and
to the leasehold interests, overriding royalties, productions payments, net
profits interest, fee mineral interests, and other property interests described
in or referred to on Exhibit A attached
hereto (including the lands related thereto) and any and all extensions,
renewals or replacements thereof in which Grantor now owns or hereafter acquires
an interest and the rights appurtenant to any of the foregoing as set forth in
Section 2.5; and

     

    (b)           all
of Grantor’s right, title and interest, now owned or hereafter acquired, in and
to, or otherwise derived from, all Units relating to the properties described in
subsection (a) above in this definition.

     

    “Subject Wells” means
all of Grantor’s right, title and interest in and to all wells producing or
capable of producing Hydrocarbons and all service wells, now or hereafter
located on the Subject Interests (whether fully drilled and completed or not),
including without limitation, the wells described or referred to on Exhibit A
attached hereto.

     

    “Unit” means a pooled
(compulsory or voluntary) unit, proration unit, production unit, regulatory
unit, field-wide unit or similar designation or allocation of lands of similar
impact in order to comply with (i) the terms of any applicable pooling or
unitization agreements, unit operating agreements or the like or (ii) the
applicable rules and regulations of the applicable governmental authorities
related to pooling, unitization, well spacing or the like.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section 1.2    Rules
of Construction. All references in this Conveyance to articles, sections,
subsections and other subdivisions refer to corresponding articles, sections,
subsections and other subdivisions of this Conveyance unless expressly provided
otherwise.  Titles appearing at the beginning of any of such
subdivisions are for convenience only and shall not constitute part of such
subdivisions and shall be disregarded in construing the language contained in
such subdivisions.  All references in this Conveyance to exhibits and
schedules refer to exhibits and schedules to this Conveyance unless expressly
provided otherwise, and all such exhibits and schedules are hereby incorporated
herein by reference and made a part hereof for all purposes.

     

    ARTICLE
II

     

    Granting and Payment
Provisions

     

    Section 2.1    Granting
Clause.  For a good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby GRANT,
BARGAIN, SELL, TRANSFER, ASSIGN, CONVEY, WARRANT and DELIVER to Grantee a net
profits interest in and to all Hydrocarbons in and under and that may be
produced and saved from the Subject Interests (the “Subject
Hydrocarbons”) equal to ten percent (10%) of the Net Profit attributable
to Grantor’s interest therein from and after the Effective Date as calculated
for each Month (the “NPI”), together with
all and singular the rights and appurtenances thereto in anywise
belonging.

     

    TO HAVE
AND TO HOLD the NPI unto Grantee, its successors and assigns, forever, subject
to the following terms, provisions and conditions.  This Conveyance is
made with full substitution and subrogation of Grantee in and to all covenants
and warranties by others heretofore given or made.

     

    Section 2.2    Cost
Bearing Interest.  The NPI is a non-operating interest in and
to the Subject Interests and shall be free and clear of, and, except for
Specified Costs, shall bear no burden or part of, any and all other costs,
including: (a) all taxes of any kind, except for Grantee Taxes, (b) all costs
and expenses associated with acquiring, exploring, developing, reworking,
recompleting, and remediating the Subject Interests, (c) all royalties,
overriding royalties, production payments, other charges burdening the Subject
Interests, and (d) all costs for separating, gathering, compressing, or
processing the Subject Hydrocarbons or of transporting the Subject Hydrocarbons
to the point of sale in a condition to meet pipeline or transporter
specifications and qualifications.  Grantor shall promptly pay, or
cause to be promptly paid, all taxes, except for Grantee Taxes, costs and
expenses, royalties, overriding royalties, production payments, and similar
charges, on or before the dates the same become delinquent (unless being
disputed in good faith by appropriate proceedings being diligently pursued and
for which adequate reserves have been established).  In addition,
Grantor will, upon demand by Grantee, reimburse Grantee for any Reimbursable
Expenses which have been paid by or on behalf of Grantee.  Each amount
which is to be paid by Grantor pursuant to this Section 2.2 which is instead
paid by or on behalf of Grantee shall bear interest at the Fixed Rate on each
day from and including the date of such payment until but not including the date
repaid by Grantor.

     

    Section
2.3    Payments.

     

    (a)           Payments to Begin following
the Effective Date.  On or before the last Business Day of the
second Month immediately following the Month during which the Effective Date
occurs and continuing on the last Business Day of each Month thereafter for as
long as this Conveyance is in effect, Grantor shall pay to Grantee the
NPI.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)           Payment
Instructions.  All amounts due under this Conveyance will be
paid to Grantee by Grantor, by such party as follows:

     

    If by
wire transfer:

    


    GasRock
Capital LLC

    GasRock
Operating Account

    Amegy
Bank, Houston, TX

    Account
#3718840

    ABA #
113011258

    


    If by
check via US Mail or courier:

    


    GasRock
Capital LLC

    Attention:
Marshall Lynn Bass

    1301
McKinney, Suite 2800

    Houston,
TX 77010

    


    Phone
number for courier: (713) 300-1400

    


    The funds
received by Grantor for or on account of Grantee shall be collected by Grantor
and shall constitute trust funds in Grantor’s hands, to be immediately paid over
to Grantee by wire transfer or check to such account or location as Grantee may
direct from time to time in writing (or by such other form of transfer
reasonably specified by Grantee).  If by check, checks should be made
payable to “GasRock Capital LLC.”  The directions for payments may be
modified by notice to Grantor pursuant to Section 6.5 below.

     

    (c)           Interest on Past Due
Payments.  Provided Grantor has received Proceeds from the sale
of Subject Hydrocarbons, any amount not paid by Grantor to Grantee, when due,
shall bear, and Grantor shall pay, interest in an amount equal to the Fixed Rate
in effect during the period such amount shall remain outstanding and such
interest shall be paid from such due date until such amount is
paid.

     

    (d)           Overpayment.  If
at any time Grantor inadvertently pays Grantee an amount that is more than the
amount due, Grantee shall not be obligated to return any such overpayment, but
the amount or amounts otherwise payable for any subsequent period or periods
shall be reduced by such overpayment without any interest component being
imputed on such overpayment.

     

    Section 2.4    Measurement.  Grantor
hereby represents, warrants and covenants to Grantee that production from each
Subject Well is and will be measured at a point prior to any point where Subject
Hydrocarbons from each such Subject Well are commingled with Hydrocarbons from
any other well or wells that are not Subject Wells.

     

    Section 2.5    Renewals
and Extensions.  This Conveyance and the NPI granted hereunder
shall apply to Grantor’s and any of its Affiliate’s, successor’s, or permitted
assign’s interests in all renewals, extensions, replacements and other similar
arrangements of each of the Subject Interests (or other determinable interest),
whether such renewals, extensions, replacements or arrangements have heretofore
been obtained or are hereafter obtained and whether or not the same are
described in or referred to on Exhibit
A.

     

    For the
purposes of the preceding paragraph, a new Lease that covers the same interest
(or any part thereof) covered by a prior Lease covering any of the Subject
Interests, and which is acquired within one (1) year after the expiration,
termination, or release of such prior Lease, shall be treated as a renewal or
extension of such prior Lease.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
III

     

    Marketing of Subject
Hydrocarbons

     

    Section 3.1    Nature
of Marketing Arrangements.  Grantor shall have the obligation
to prudently market, or cause to be prudently marketed, the Subject Hydrocarbons
in transactions with reputable purchasers, with each such marketing arrangement,
including those arrangements relating to sales, treating, transportation,
compression and processing, to be made upon terms and conditions (the “Marketing Terms and
Conditions”) that (a) are the best terms and conditions reasonably
obtainable in the general field or area, and (b) are at least as favorable as
Grantor or any of its Affiliates obtains for Grantor’s share of the Hydrocarbons
attributable to any other properties in the same field or general
area.  No Subject Hydrocarbons are or will become subject to any sales
arrangement whereby (y) payment for Subject Hydrocarbons is or can be deferred
for a substantial period after the Month in which the Subject Hydrocarbons are
delivered (i.e., in excess of sixty (60) days), or (z) payments may be made
other than by checks, drafts, wire transfer or similar communications for the
immediate payment of money. Grantor shall duly and prudently perform all
obligations performable by it under any arrangements by which Subject
Hydrocarbons are sold or otherwise marketed, and shall take all appropriate
measures to enforce the performance under each such arrangement of the
obligations of the other parties thereto. As to any third parties, all acts of
Grantor in marketing the Subject Hydrocarbons and all sales or other marketing
agreements executed by Grantor in accordance herewith shall be binding on
Grantee and the NPI; it being understood that the right and obligation to market
the Subject Hydrocarbons is at all times vested in Grantor, and Grantee does not
have any such right or obligation.  Accordingly, it shall not be
necessary for Grantee to join in any production sales or marketing agreements or
any amendments to existing production sales or marketing
agreements.

     

    Section 3.2    Production
Records and Statements.  Grantor shall keep full, true, and
correct records of:  (a) the production and sale of the Subject
Hydrocarbons, (b) all costs associated with producing, processing, transporting,
and marketing the Subject Hydrocarbons, and (c) any other records necessary to
keep proper accounts in accordance with the provisions of this
Conveyance.  Such records may be inspected by Grantee or its
authorized representatives and copies made thereof at all reasonable
times.  On or before the last Business Day of each Month, commencing
upon the last Business Day of the Month following the second Month during which
the Effective Date occurs, Grantor shall send to Grantee a statement setting
forth (w) the production from the Subject Interests for the preceding Month, (x)
the Gross Proceeds and Production Costs attributable to the sale of Subject
Hydrocarbons, (y) the calculation of the NPI, and (z) such other data as Grantee
may reasonably request.

     

    ARTCLE
IV

     

    Representations, Warranties
and Covenants

     

    Grantor
hereby represents, warrants and covenants for the benefit of Grantee as
follows:

     

    Section 4.1    Operations.  The
Subject Interests and properties unitized therewith are being (and, to the
extent the same could adversely affect the ownership or operation of the Subject
Interests after the date hereof, have during Grantor’s tenure of ownership been)
maintained, operated and developed in a good and workmanlike manner, in
accordance with prudent industry standards and in conformity with all Applicable
Laws, and in conformity, in all material respects, with all Leases, deeds and
other contracts and agreements forming a part of or pertaining to the Subject
Interests.  Grantor, directly or through appropriate agreements with
the operator of the Subject Interests, has all governmental licenses and permits
necessary or appropriate to own and operate the Subject Interests, and Grantor
has not received notice of any material violations in respect of any such
licenses or permits.  Grantor shall develop, operate and maintain the
Subject Interests as would a prudent operator.  As to any portions of
the Subject Interests as to which Grantor is not the operator, Grantor shall
take all actions and exercise all legal rights and remedies as are available to
it to cause the operator to so develop, maintain and operate such portions of
the Subject Interests in accordance with this Section 4.1.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section 4.2    Title;
Permitted Encumbrances.  Grantor has Defensible Title to the
Subject Interests, free and clear of all liens, security interests, and
encumbrances except for Permitted Encumbrances as defined
herein.  Such qualification as to Permitted Encumbrances is made for
the sole purpose of limiting the representations and warranties of Grantor made
herein, and is not intended to restrict the description of the Subject
Interests, nor is it intended that reference herein to any Permitted Encumbrance
shall subordinate the NPI to such Permitted Encumbrance or otherwise cause this
Conveyance or any rights of Grantee hereunder to be made subject to, or reduced
or encumbered by, such Permitted Encumbrance.  Notwithstanding the
definition of Permitted Encumbrances, Grantor has obtained all consents and has
satisfied preferential rights and similar rights required to grant the NPI to
Grantee.  Grantor hereby binds itself to WARRANT and FOREVER DEFEND
all and singular title to the NPI unto Grantee, its successors and assigns,
against every Person lawfully claiming or to claim the same or any part
thereof.

     

    This
Conveyance is made with full substitution and subrogation of Grantee in and to
all covenants, representations and warranties by others heretofore given or made
with respect to the Subject Interests.

     

    Section 4.3    Leases,
Deeds and Contracts; Performance of Obligations.  The Leases,
contracts, servitudes, fees, deeds, and other agreements forming a part of the
Subject Interests or are set forth on Exhibit A, to the
extent the same cover or otherwise relate to the Subject Interests, are in full
force and effect, and Grantor agrees to so maintain them, or to cause them to be
so maintained, in full force and effect to the extent a prudent operator would
do so.

     

    Section 4.4.    Compliance
with Laws.  (a) The Subject Interests, and Grantor’s present
and proposed operations thereon, are in compliance in all material respects with
all Applicable Laws; (b) Grantor has taken all steps reasonably necessary to
determine and has determined that, except as otherwise disclosed to Grantee, no
Release of Hazardous Substance has occurred on the Subject Interests or as a
result of operations on the Subject Interests, and the use which Grantor makes
and intends to make of the Subject Interests will not result in any such
Release; (c) to the best of Grantor’s knowledge, none of such operations of
Grantor, and none of the Subject Interests, is the subject of any federal, state
or local investigation evaluating whether any remedial action is needed to
respond to a Release of any Hazardous Substance into the environment or to the
improper storage or disposal (including storage or disposal at offsite
locations) of any Hazardous Substance; (d) neither Grantor nor, to the knowledge
of Grantor, any other Person has filed any notice under any Environmental Law
indicating that Grantor is responsible for the Release into the environment, or
the improper storage or disposal, of any Hazardous Substance that are now
located on, were removed from, or are in any way related to any Subject
Interests, or that any Hazardous Substance have been Released, or are improperly
stored or disposed of, upon any Subject Interests; and (e) neither Grantor nor
any of its Affiliates otherwise has any material contingent liability in
connection with operations on any Subject Interests for the Release into the
environment, or the improper storage or disposal, of any Hazardous
Substance.  Grantor will not cause or permit the Subject Interests or
Grantor to be in violation of any Environmental Laws or other Applicable Laws
with respect to the Subject Interests or do anything or permit anything to be
done which will subject Grantor, Grantee or the Subject Interests to any
material remedial obligations under any Environmental Laws, assuming in each
case disclosure to the applicable governmental authorities of all relevant
facts, conditions and circumstances, if any, pertaining to the Subject
Interests, and Grantor will promptly notify Grantee in writing of any existing,
pending or, to the knowledge of Grantor, threatened investigation or inquiry of
a material nature affecting any Subject Interest by any private party or
governmental authority in connection with any Environmental
Laws.  Grantor will take all steps reasonably necessary to determine
that no Hazardous Substance are disposed of or otherwise Released on or to the
Subject Interests in violation of any Environmental Laws.  Grantor
will not cause or permit the Release of any Hazardous Substance on or to the
Subject Interests in violation of any Environmental Law and covenants and agrees
to remove or remediate any Hazardous Substance which have been Released on the
Subject Interests in amounts which would violate any Environmental
Laws.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section 4.5    NPI
Right to Join in Sales.  Whenever Grantor has, and intends to
take, the opportunity to sell any of its interest (a “Sold Subject
Interest”) in any properties and interests subject to this Conveyance,
Grantor shall take all necessary action to ensure that Grantee has the
opportunity to sell that portion of the NPI that relates to or burdens the
properties and interests to be sold (a “Sold NPI”) as a part
of such transaction.  In exercising such option, Grantee may elect to
resell the Sold NPI to Grantor (for further sale on to the purchaser) or to sell
the Sold NPI directly to the purchaser.  Any such resale to Grantor
shall specially warrant Grantee’s title to the Sold NPI.  Grantor
shall give Grantee at least thirty (30) days notice of any such potential
sale.  Grantee shall notify Grantor in writing within fifteen (15)
days after receiving such notice whether Grantee elects to participate in such
sale, and failure to so notify Grantor shall irrevocably be deemed to be an
election not to participate in such sale.

     

    ARTICLE
V

     

    Assignments and
Transfers

     

    Section 5.1    Assignment
and Transfer by Grantee.  Grantee may, and nothing herein
contained shall in any way limit or restrict the right of Grantee to, sell,
convey, assign, mortgage or otherwise dispose of any NPI (including its rights,
titles, interests, estates, remedies, powers and privileges appurtenant or
incident to such NPI under this Conveyance), in whole or in part.  No
change of ownership of any NPI shall be binding upon Grantor, however, until
Grantor is furnished with copies of the original recorded documents evidencing
such change.  Upon receipt by Grantor of copies of the original
documents evidencing a sale, conveyance, assignment, mortgage or other
disposition of any NPI, and to the extent of such transfer, Grantor shall
thereafter deal with the transferee Grantee in place of the transferring Grantee
and references herein to the Grantee shall thereafter be deemed to be references
to such transferee Grantee rather than such transferring Grantee, provided that
such transferring Grantee shall, with respect to such transferred NPI, continue
to have, and benefit from, all rights to indemnification and reimbursement that
are provided herein.

     

    Section 5.2    Assignment
and Transfer by Grantor.  The Conveyance shall inure to the
benefit of and be binding to the parties and their respective successors and
permitted assigns except to the extent expressly stated otherwise
herein.  Any sale, conveyance, assignment, mortgage or other
disposition of the Subject Interests, or any part thereof or interest therein,
by Grantor shall be subject to this Conveyance.  Any assignment or
transfer by Grantor not in compliance with this Section 5.2 shall be null and
void.

     

    Section 5.3    Covenants
Running With the Subject Interests.  All covenants and
agreements of Grantor herein contained shall be deemed to be covenants running
with the Subject Interests.  All of the provisions hereof shall inure
to the benefit of Grantee and its Affiliates, and their respective successors
and assigns.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
VI

     

    Miscellaneous
Provisions

     

    Section 6.1    Further
Assurances.  Grantor agrees to execute and deliver to Grantee,
and, to the extent it is within Grantor’s power to do so, to cause any third
parties to execute and deliver to Grantee, all such other and additional
instruments and to do all such further acts and things as may be necessary or
appropriate to more fully vest in and assure to Grantee, from time to time, all
of the rights, titles, interests, remedies, powers and privileges herein granted
or intended so to be.

     

    Section 6.2    No
Waiver.  The failure of either party to insist upon strict
performance of a covenant hereunder or of any obligation hereunder, irrespective
of the length of time for which such failure continues, shall not be a waiver of
that party’s right to demand strict compliance in the future.  No
consent or waiver, express or implied, to or of any breach or default in the
performance of any obligation hereunder shall constitute a consent or waiver to
or of any other breach or default in the performance of the same or any other
obligation hereunder.  No provision of this Conveyance shall be deemed
a waiver by a party of any rights granted to the party under Applicable Law
governing net profits interests and the rights and privileges of the owners or
grantors thereof.

     

    Section 6.3    Applicable
Law.  THIS CONVEYANCE AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, BE
GOVERNED BY AND INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF WYOMING.

     

    Section 6.4    Severability.  Every
provision in this Conveyance is intended to be severable.  If any term
or provision hereof is determined to be invalid, illegal or unenforceable for
any reason whatsoever, such invalidity, illegality or unenforceability shall not
affect the validity, legality and enforceability of the remainder of this
Conveyance.

     

    Section 6.5    Notices.  Unless
otherwise stated herein, all notices authorized or required by the terms of this
Conveyance shall be in writing and shall be delivered by United States Postal
Service, courier or facsimile to the party to be notified, or by delivering such
notice in person to such party.  Notice shall be deemed effective only
upon receipt by the party to whom such notice is directed.  Any party
may change its address for notice at any time by giving written notice of the
new address to the other party in the manner set forth herein.  For
purposes of notice, the addresses of Grantor and Grantee shall be as
follows:

     

    
      
        	
                GRANTOR

                Rancher
      Energy Corp.

                999
      18th
      Street, Suite 3400

                Denver,
      Colorado 80202

                Attention:  John
      Works

                Facsimile:
      (702) 904-5698

              	
                GRANTEE

                GasRock
      Capital LLC

                1301
      McKinney Street, Suite 2800

                Houston,
      Texas 77010-2026

                Attention:
      Marshall Lynn Bass

                Facsimile:
      (713) 300-1401

              


      

    

    


    Section
6.6    No
Liability of Grantee; Indemnity.  No Grantee
Indemnitee (defined below) shall ever be responsible for payment of any part of
the costs, expenses or liabilities incurred in connection with the exploring,
developing, operating, owning, maintaining, reworking or recompleting of the
Subject Interests, any obligations of Grantor with respect to any tax
partnerships burdening the Subject Interests, the physical condition of the
Subject Interests, any costs or liabilities incurred by Grantor or any other
lessee attributable to the Subject Interests or the Subject Hydrocarbons
(including any sums previously paid by Grantor to Grantee pursuant to this
Conveyance) or the handling, treating or transporting of Subject Hydrocarbons
(including any costs, expenses, losses or liabilities related to compliance with
or violation of an Environmental Law or otherwise related to damage to or
remediation of the environment, whether the same arise out of Grantee’s
ownership of an interest in property or out of the actions of Grantor or of
third parties or arise otherwise). Grantor
agrees to protect, defend, indemnify and hold each Grantee Indemnitee harmless
from and against all costs, expenses, losses and liabilities incurred by any
Grantee Indemnitee (i) in connection with any of the foregoing, (ii) in
connection with this Conveyance, or the transactions, activities and events
(including the enforcement or defense thereof or hereof) at any time associated
with or contemplated in any of the foregoing or (iii) in connection with any tax
partnership burdening any of the Subject Interests.  Such indemnity
shall also cover all reasonable  costs and expenses of any Grantee
Indemnitee, including reasonable legal fees and expenses, which are incurred
incident to the matters indemnified against.  As used in this Article
VI, “Grantee
Indemnitees” means Grantee and Grantee’s successors and assigns and
purchasers (including any Person who at any time purchases all or part of the
NPI or the Subject Interests attributable thereto), all of their respective
Affiliates, and all of the officers, directors, agents, beneficiaries, trustees,
attorneys and employees of themselves and their Affiliates.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    The
foregoing indemnity shall apply WHETHER OR NOT ARISING OUT
OF THE JOINT OR CONCURRENT NEGLIGENCE, FAULT OR STRICT LIABILITY of any
Grantee Indemnitee (except for the intentional act or willful misconduct of any
Grantee Indemnitee, in which event the indemnities set forth in this section 6.6
in favor of such Grantee Indemnitee shall not apply), and shall apply, without
limitation, to any liability imposed upon any Grantee Indemnitee as a result of
any theory of strict liability or any other doctrine of Law, provided that the
foregoing indemnity shall not apply to any costs, expenses, losses or
liabilities incurred by any Grantee Indemnitee to the extent caused by the
intentional act or willful misconduct of such Grantee Indemnitee.  The
foregoing indemnity shall survive any termination of this
Conveyance.

     

    Section 6.7    Counterparts.  This
Conveyance is being executed in several counterparts, all of which are
identical, except that, to facilitate recordation, in certain counterparts
hereof only that portion of Exhibit A which contains specific descriptions of
the Subject Interests located in the recording jurisdiction in which the
counterpart is to be recorded shall be included, and all other portions of
Exhibit A shall be included by reference only.  All of such
counterparts together shall constitute one and the same
instrument.  Complete copies of this Conveyance, containing the entire
Exhibit A, have been retained by Grantor and Grantee.

     

    (Signature
and Acknowledgment Pages follow)

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    IN
WITNESS WHEREOF, this Conveyance is executed as of the acknowledgement date of
each of the parties hereto, but shall be effective as of the Effective
Date.

     

    
      
        
          
            
              	 	GRANTOR:	 
	 	 	 
	 	      
                      RANCHER
      ENERGY CORP.,

                      a
      Nevada corporation d/b/a

                      RANCHER
      ENERGY OIL & GAS CORP.

                    	 
	 	 	 	 
	
                       

                    	
                      By:
      

                    	/s/
      John Works	 
	 	 	John
      Works 	 
	 	 	President
      and Chief Executive Officer	 


            

          

        

      

    

    


    


    
      
        
          	
                  STATE
      OF COLORADO 

                	
                  §

                
	 	      
                  §

                
	
                  COUNTY
      OF DENVER

                	      
                  §

                


        

      

    

     

    The
foregoing instrument was acknowledged before me on June 3, 2009 by John
Works, President and Chief Executive Officer of Rancher Energy Corp. a Nevada
corporation doing business in the State of Wyoming as Rancher Energy Oil &
Gas Corp., on behalf of said corporation.

     

     

    
      
        
          
            	 	
                    /s/  
      Denise R. Greer

                  
	 	
                    Notary
      Public, State of
Colorado

                  


          

        

      

    

    


    My Commission Expires:  May
9, 2011

     

    
      
         

      

      
        
          Signature
and Acknowledgment Page to Conveyance of Net Profits
Interest

        

        
          

        

      

      
         

      

    

     

    
      	 	GRANTEE:	 
	 	 	 
	 	      
                    
                GASROCK
      CAPITAL LLC,

                a
      Delaware limited liability company

              

            	 
	 	 	 	 
	
               

            	
              By:
      

            	/s/
      Marshall Lynn Bass	 
	 	 	Marshall
      Lynn Bass	 
	 	 	Principal	 



     

     

    
      	
              STATE
      OF TEXAS

            	
              §

            
	 	      
              §

            
	
              COUNTY
      OF HARRIS

            	      
              §

            


    

     

    The
foregoing instrument was acknowledged before me on June 3, 2009 by Marshall Lynn
Bass, Principal of GasRock Capital LLC, a Delaware limited liability company on
behalf of said limited liability company.

     

    
      	 	
              /s/  
      Jan Louise Spencer

            
	 	
              Notary
      Public, State of Texas

            


    

     

    


    
      My
Commission Expires: June 27, 2010

       

      
        
           

        

        
          
            Signature
and Acknowledgment Page to Conveyance of Net Profits
Interest