Unassociated Document


     

    PURCHASE
AGREEMENT

     

    This
agreement is entered into this the 6th day of
May, 2010, between CHARLIE HEATER, d/b/a H 5 PRODUCERS, a sole proprietorship,
herein Seller and GRYPHON PRODUCTION CO., LLC, herein Buyer, the terms of which
are as follows:

    1.           Seller
agrees to sell and Buyer agrees to buy, subject to the contingencies hereinafter
set forth, all of Seller's right, title and ownership interest in and unto each
of the oil, gas and/or casinghead gas leasehold estates as owned by Seller more
fully described in Exhibit "A" attached as located in Hutchinson County, Texas
together with all wells, casing, tubing, tanks (both metal and fiberglass),
rods, pumps, flow lines, water lines, pump jacks, heater treaters and all other
equipment, structures and personal property now located upon said lands as
described in Exhibit "A" attached as used in connection with Seller's oil and
gas operations thereon except only those as may hereinafter be reserved by
Seller.

    2.           The
sale by Seller of the oil and gas leasehold estates as set out in Exhibit "A"
attached shall also include all oil, gas and casinghead gas and associated
hydrocarbons attributable to said lands, or any lands pooled therewith,
effective as of date of closing.

    3.           Purchase
price to be paid buy Buyer to Seller at closing is $150,000.00 of which Buyer
agrees to deposit with Robert L. Finney Trust Account, as escrow agent, the full
purchase price sum on or before the expiration of seven (7) days from the date
of the signing of this agreement by the Buyer by wire transfer into account No.
400-73354-7 at
FirstBank Southwest, Pampa, Texas (routing No. 111308057).

    4.           Seller
warrants that all ad valorem property taxes due on said Exhibit "A" properties
have been paid to and including the year 2009 without exception and that 2010 ad
valorem property taxes on each lease shall be prorated to date of
closing.

     

    5.           Seller
covenants and agrees on date of closing that each of the Exhibit "A" properties
shall be free and clear of all mortgages, liens, mechanic's liens, debts or
other encumbrances applicable to the oil, gas and casinghead gas leasehold
estates and equipment located thereon as owned by Seller. Seller shall provide
Buyer at closing an Affidavit of no unrecorded liens or encumbrances as created
by Seller covering the Exhibit "A" properties.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    6.            Buyer's
purchase of the leasehold estates described in Exhibit "A" attached is
specifically CONTINGENT UPON each of the following matters:

    a.            Approval
of said purchase and purchase price by CHANCELLOR GROUP, INC., a Nevada
Corporation, being the owner of Buyer herein on or before May 4,
2010.

    b.            Completion
by Buyer, within 21 days from the execution of this agreement, of its due
diligence necessary to satisfy itself as to Buyer's clear title to the working
interest in each of the Exhibit "A" properties as being free and clear of all
liens, mortgages, environmental defects and/or other encumbrances, provided
counsel for Buyer receives Seller's complete lease file records on or before May
4, 2010 at 4:00 p.m.

    C.              Buyer's
due diligence to verify the Seller's compliance with all rules and regulations
promulgated by the State of Texas and the Texas Railroad Commission or any other
entity having regulatory authority over the Exhibit "A" properties.

     

    d.              Net
revenue working interest to be acquired by Buyer shall be at least the
percentage hereinafter shown on each respective lease, or more:

     

    
      	
              (1)

            	
              T D
      LEWIS "A" LEASE:

            	
              81.25% of
      8/8

            
	
              (2)

            	
              MOORE
      LEASE:

            	
              81.25% of
      8/8

            
	
              (3)

            	
              TIMMS
      LEASE:

            	
              81.25% of
      8/8

            


    

     

    7.            Closing
of this sale shall occur on or before the 24th day
of May, 2010 in the office of Robert L. Finney, P. C., 309 West Foster, Pampa,
Texas 79065
or such other time or place as the parties may be able to mutually agree.
At closing Seller shall prepare, execute and deliver to Buyer an Assignment of
Interest and Bill of Sale on the form set out in Exhibit "B" attached, but with
all personal property and equipment to be conveyed "AS IS", "WHERE IS" with no
warranties expressed, implied or otherwise.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    8.            At
closing, Seller shall execute all necessary documents and change of operator
forms as may be required or necessary to appoint Buyer, and/or its designated
agent, as sole operator of each of the leases in Exhibit "A"
attached.

    9.           On
or before May 4, 2010 at 4:00 p.m., Seller shall provide to Buyer, for
examination purposes Seller's complete lease file and all information in
Seller's possession as to name and address of first purchasers of oil, gas
and/or casinghead gas. In the event Seller is receiving or is entitled to
receive 100% of production for distribution purposes, Seller shall also furnish
to Buyer, at closing, a listing of all royalty, overriding royalty and other
third party payees that Sellers have in their possession on each lease entitled
to proceeds from production other than due Seller and the percentage of proceeds
ownership due each.

    10.           If
any of the contingencies set out in paragraph 6 above should occur, this
agreement, at the sole option of Buyer, shall be null and void and escrow agent
shall be authorized to return to Buyer the escrow deposit required of Buyer by
this agreement.

     

    11.           Buyer
agrees to pay Seller, for the use and benefit of JMR GAS, LLC., Pampa, Texas at
the posted price in the Texas Panhandle on date of sale, for 97.44 total barrels
of crude petroleum (representing seven feet (7') of tank oil), less production
taxes, in addition to the $150,000.00 purchase price required to be paid to
Seller under paragraph 3 of this agreement. Such payment shall be timely paid to
Seller from proceeds received by the Buyer from its sale of the first load of
oil from any of the properties described in Exhibit "A" attached. Upon receipt
of such payment Seller agrees to indemnify and hold harmless Buyer and all of
Buyer's properties from any and all claims for such proceeds due to JMR GAS,
LLC., by Seller herein and shall timely furnish to Buyer a receipt and
recordable release from JMR GAS, LLC. for such payment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    DATED
this the 6th day
of May, 2010, but effective as of 7:00 a.m. on May 1, 2010.

     

    
      
        	 	
                SELLER:

              	 
	 	 	 	 
	 	      
                CHARLIE HEATER, d/b/a H S
      PRODUCERS, a sole proprietorship P. 0. Box 375

              
	 	      
                Stinnett, TX, 79083-0395

              
	 	 
	 	      
                MISTY
      HEATER

              
	 	 
	 	BUYER:
	 	 
	 	      
                GRYPHON
      PRODUCTION CO., LLC

              
	 	 
	
              	
                By:
      

              	 	 
	 	MAXWELL
      GRANT, Manager	 
	 	P.
      0. Box 742	 
	 	Pampa,
      Texas 79066-0742	 


      

    

     

     

    EXHIBIT "A"

     

     

     T.
D. LEWIS "A" LEASE:

     

    The
Northwest Quarter of the Northeast Quarter (NW/4 of NE/4) of Section Six (6), in
Block Twenty-Three (23), BS&F Railway Co., Survey, Hutchinson County,
Texas.

     

    MOORE
LEASE:

     

    The
Northwest Eighty (NW/80) acres of Section Twenty-One (21), Block M-2 1, TC
Railway Co., Survey, Hutchinson County, Texas.

     

    TIMMS
LEASE:

     

    The West
Half of the Northeast Quarter (W/2 of NE/4) of Section Five (5), Block 231 BS&F
Railway Co., Survey, Hutchinson County, Texas.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT "B"

     

    NOTICE
OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE
ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR
RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S
LICENSE NUMBER.

    


    ASSIGNMENT
OF OIL AND GAS LEASES

    

      
        	
                ASSIGNOR:

              	
                CHARLIE
      HEATER, d/b/a H 5 PRODUCERS,

              	 
      
	 
      	
                a
      sole proprietorship

              	 
      


      

      
        	 
      	
                     
      

              	 
      
	 
      	
                    
      

              	 
      


      

    

     

    
      	
              ASSIGNEE:

            	
              GRYPON
      PRODUCTION CO., LLC

            
	 	      
              P.
      O. Box 742

            
	 	      
              Pampa,
      Texas 79066-0742

            


    

    


    For and in consideration of Ten Dollars
($10.00) and other good and valuable consideration, paid to Assignor by
Assignee, the receipt and sufficiency of which is hereby acknowledged, Assignor
does hereby BARGAIN, GRANT,
SELL, CONVEY, TRANSFER, ASSIGN, SET OVER and DELIVER unto the said Assignee
all of Assignor's right, title and interest in and to the following described
properties situated in Hutchinson County, Texas:

    


    A.  The
oil and gas leases affecting lands in Hutchinson County, Texas, described on
Exhibit "A" attached hereto and made a part hereof, and the leasehold estates
evidenced thereby;

    


    B.  All
wells, casing, tubing, derricks, tanks, tank batteries, separators, rods, pumps,
flow lines, water lines, gas lines, equipment, structures and other personal
property and fixtures located upon the lands described on Exhibit "A" or used in
connection with oil and gas operations thereon, except as hereinafter excepted
and reserved to Assignor;

    


    C.  All
of the interest of Assignor in all permits, licenses, franchises, easements,
servitudes and rights-of-way of every character which are useful or appropriate
in exploring for, developing, operating, producing, gathering, treating, storing
or transporting oil, gas and other minerals on or off the lands described on
Exhibit "A";

    


    D.  All
of the interest of Assignor in, to and under all hydrocarbon sales agreements,
and other instruments, contracts and agreements of every character, except as
hereinafter excepted and reserved, insofar as they cover or affect the
properties described on Exhibit "A" or the production and marketing of oil, gas
and other hydrocarbons from the lands described on Exhibit "A"; and

     

    E.  All
of the interest of Assignor in and to all of the abstracts of title, records,
well logs, and all other instruments and files pertaining to the above described
oil and gas leases.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    all of
the foregoing being hereinafter sometimes called the "Conveyed
Properties".

    TO HAVE AND TO HOLD the
Conveyed Properties, together with all and singular all rights, privileges,
hereditaments and appurtenances thereto in anywise belonging unto said Assignee,
its successors and assigns forever, subject, however, to the terms, provisions,
conditions, exceptions, reservations, covenants and agreements herein set
forth:

    1.  This Assignment is
subject to all terms and conditions of the Leases covering said land (express
and implied) which terms and conditions Assignee accepts and agrees to perform
insofar as they relate to that portion of the Leases assigned
hereby.

    2.  This Assignment is
subject to all terms and conditions of all prior Assignments which appear of
record in the office of the County Clerk of Hutchinson County, Texas, affecting
the lands above described.

    3.  This Assignment is made
subject to all outstanding Overriding Royalty Interests of record in the office
of the County Clerk of Hutchinson County, Texas, affecting the lands above
described.

    4.  Assignor agrees to timely
execute and deliver to Assignee, upon request, all necessary transfer orders,
and all such other and additional instruments as may be necessary to correctly
or to more fully describe and identify the properties and interests herein
intended to be conveyed.

    5.  Assignee has inspected
the Conveyed Properties for the purpose of detecting the presence or
concentration of naturally occurring radium, thorium and other such materials
("NORM") and satisfied itself as to their physical and environmental condition,
both surface and subsurface, and Assignee accepts all of the same in their "AS
IS, WHERE IS" condition.  Assignor disclaims any liability to Assignee
arising with the presence of NORM on the Conveyed Properties.

    6.  Assignor covenants and
represents to Assignee herein that all ad valorem taxes for the year 2009 and
prior years have been paid.  In connection with the ad valorem taxes
to become due on the Conveyed Properties for the year 2010, such taxes are to be
prorated between the Assignor and Assignee in the manner so that the Assignor
shall timely pay 5/12th thereof and the Assignee shall timely pay 7/12th
thereof.

    7.  The assignments and
conveyances made by this Assignment are made without warranty of title, express,
implied or statutory, and without recourse, even as to the return of the
purchase price or other consideration, but with full substitution and
subrogation of Assignee, and all persons claiming by, through or under Assignee,
to the extent assignable, in and to all covenants and warranties by Assignor's
predecessors in title and with full subrogation of all rights accruing under the
statutes of limitation or prescription under the laws of the State of Texas and
all rights or actions of warranty against all former owners of the Conveyed
Properties.  Any covenant or warranties implied by statute or law by
the use of the words "grant", "assign" or "convey" or other similar words in
this Assignment are hereby expressly disclaimed, waived and
negated.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    8.  Assignor and Assignee
agree that, to the extent required by applicable law to be operative, the
disclaimers of certain warranties contained herein are "conspicuous" disclaimers
for the purposes of any applicable law, rule or order.  The Conveyed
Properties are assigned to Assignee without recourse (even as to the return of
the purchase price or other consideration), covenant or warranty of any kind,
express, implied or statutory.  WITHOUT LIMITATION OF THE GENERALITY
OF THE FOREGOING, ASSIGNOR HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR
OTHERWISE RELATING TO THE CONDITION OF THE CONVEYED PROPERTIES (INCLUDING
WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, OR
FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS).

    9.  All the terms,
provisions, covenants and agreements herein contained shall extend to and be
binding upon the parties hereto and their respective successors and
assigns.  All references herein to the Assignor and Assignee shall
include their respective successors and assigns.

    10.  This Assignment has been
executed in a number of identical counterparts, each of which, for all purposes,
shall be deemed to be an original.

    11.  The effective date of
this Assignment shall be May 1, 2010, at 7:00 A.M. (CST).

    EXECUTED by Assignor and
Assignee on the dates of our respective acknowledgments.

     

    
      
        	      
                ASSIGNOR:

              	
              	 
	 	 	 	 
	
                 

              	
              	 	 
	 	 	      
                CHARLIE
      HEATER, d/b/aH5 PRODUCERS

              	 


      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
        	      
                AGREED
      TO AND ACCEPTED BY:

              	 	 	 
	      
                ASSIGNEE:

              	 	 	 
	 	 	 	 
	 	 	      
                GRYPON
      PRODUCTION CO., LLC

              	 
	 	 	 	 
	 	By:  	   
       	 
	 	 	      
                MAXWELL
      GRANT, Manager

              	 


      


       

      
        	      
                THE
      STATE OF TEXAS 

              	§	 	 
	 	§	 	 


      

      
        	      
                COUNTY
      OF

              	    
        	 	§	 	 


      

       

    

    This instrument was acknowledged before
me on the ____ day of ____________, 2010, by CHARLIE HEATER, d/b/a H 5
PRODUCERS.

     

     

    
      
        	 	 	 	 	
              	 
	 	
                      
                  Notary
      Public, State of Texas

                

              	 	 	
              	 


      

    

    
       

      
        	      
                THE
      STATE OF TEXAS 

              	§	 	 
	 	§	 	 
	COUNTY
      OF HUTCHINSON    	§	 	 


      

    

    


    This instrument was acknowledged before
me on the ____ day of ___________, 2010, by MAXWELL GRANT, Manager
of GRYPON PRODUCTION
CO., LLC, a limited liability company, on behalf of said
company.