Document:

Filed by sedaredgar.com - Doral Energy Corp. - Exhibit 10.1

 

 

 

 

 

SCHEDULE “A”

FORM OF PROMISSORY NOTE

PROMISSORY NOTE

	EXECUTED BY:	DORAL ENERGY CORP. 

    (the "Borrower") 
	 	 
	 IN FAVOR OF: 	GREEN SHOE INVESTMENTS LTD 

    (the "Lender") 
	 	 
	PRINCIPAL AMOUNT: 	$87,000 (U.S.)
	 	 
	DUE DATE:	May 1, 2011
	 	 
	 

FOR VALUE RECEIVED the Borrower  hereby promises to pay to or to the order of the Lender on or before May 1,  2011, the principal sum of $87,000 (U.S.), together with interest thereon at  the rate of 5% per annum, calculated and compounded annually, both before and  after maturity from the date hereof.

The Borrower waives  presentment, demand, notice, protest and notice of dishonour and all other  demands and notices in connection with the delivery, acceptance, performance,  default or enforcement of this Promissory Note.

The Borrower agrees this  Promissory Note may be negotiated, assigned, discounted, or pledged by the  Lender and in every case payment will be made to the holder of this Promissory  Note instead of the Lender upon notice being given by the holder to the  undersigned, and no holder of this Promissory Note will be affected by the  state of accounts between the undersigned and the Lender or by any equities  existing between the undersigned and the Lender and will be deemed to be a  holder in due course and for the value of the Promissory Note held by him.

 

DATED at Midland, TX  this 29th day of April, 2009.

 

DORAL ENERGY CORP.

by its authorized signatory:

 

________________________________

Everett Willard Gray, IIFiled by sedaredgar.com - Doral Energy Corp. - Exhibit 10.2

SALE AND PURCHASE AGREEMENT 

          This Sale
  and Purchase Agreement (“Agreement”) dated as of the 5th
  day of May, 2009, by and between Doral Energy Corp.., (“Purchaser”),
  and [Flaming S, Inc.] Lonnie Slape, Individually (“Seller”). 

ARTICLE 1 SALE 

Sale of Stock 

          1.01
Seller agrees to sell, convey, transfer, assign, and deliver to Purchaser all of
the issued and outstanding capital stock of Flaming S Inc., a Texas Corporation,
(hereinafter referred to as “Company”), and Purchaser agrees to purchase such
stock. 

ARTICLE 2 

SELLER’S REPRESENTATIONS AND WARRANTIES 

          Seller
hereby represents and warrants to Purchaser that the following facts and
circumstances are and at all times up to the Closing Date will be true and
correct: 

Organization 

          2.01.
Company is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Texas (state of incorporation) and is qualified
to do business in the State of Texas. Company has all requisite power and
authority (corporate and, when applicable, government) to own, operate, and
carry on its business as now being conducted. Company’s certificate of
incorporation, articles of incorporation, and bylaws as currently in effect have
heretofore been made available for inspection to Purchaser or the agents of
Purchaser. 

Taxes 

          2.06.
All federal, state, local, and foreign income, ad valorem, excise, sales, use,
payroll, unemployment, and other taxes and assessments (“Taxes”) that are due
and payable by company or by Seller on behalf of Company have been properly
computed, duly reported, fully paid, and discharged. There are no unpaid Taxes
that are or could become a lien on the property or assets of Company or require
payment by Company, except for current Taxes not yet due and payable. Company
has not incurred any liability for penalties, assessments, or interest under the
Internal Revenue Code. No unexpired waiver executed by or on behalf of Company
with respect to any Taxes is in effect. Seller will be responsible for payment
of any unpaid taxes at the time of the closing hereof. In that connection,
Purchaser will be given credit at closing for the estimated 

1

income taxes owed by Company for the period of the calendar
year 2009 prior to the date of closing. 

Oil and Gas Properties 

          2.07.
Exhibit A, which is attached to this Agreement, contains, among other things, a
complete and accurate legal description of each oil and gas property owned by,
leased to, or leased by Company; All of the material oil and gas leases are
valid and in full force. There does not exist any default or event that with
notice, lapse of time, or both will constitute a default under any of these
lease agreements. All personalty used by Company in its business are set forth
on Exhibit B attached hereto. In that connection, it is acknowledged that
Purchaser has inspected the property and premises and satisfied itself as their
Physical and Environmental condition, both surface and subsurface, and that
Purchaser accepts all interest, described in Exhibit A attached hereto in their
"as is, where is” condition.

Inventories 

          2.08.
All inventories owned by Company (“Inventories”) consist of items of a quality
and quantity usable and saleable in the ordinary course of business by Company.
All items included in the Inventories are the property of Company, except for
sales made in the ordinary course of business. Purchaser acknowledges and agrees
the inventory of produced crude oil on hand at the end of the day on the day
immediately preceding the closing date, as defined in Section 7.03, hereof shall
be purchased by Purchaser at the actual prices received by the Seller for oil
and gas sales during the month of the Closing Date, and the proceeds of such
purchase shall be remitted by Purchaser to Seller at the closing hereof.

Other Tangible Personal Property 

          2.09.
The equipment, furniture, fixtures, and other personal property described in
Exhibit B attached to this Agreement constitute all the items of tangible
personal property owned by, in the possession of, or used by Company in
connection with Company’s business except Inventories. Except as stated, no
personal property used by Company in connection with its business is held under
any lease, security agreement, conditional sales contract, or other title
retention or security agreement or is located any place other than in the
possession of Company. 

Other Intangible Property 

          2.10.
Exhibit C attached to this Agreement is a true and complete list of all
intangible assets, other than those specifically referred to elsewhere in this
Agreement, and the location of evidences of title to such intangible assets.

2

Title to Assets and Properties 

          2.11.
Company has good and marketable title to all of its assets and properties,
tangible and intangible, that are material to Company’s business and future
prospects. These assets and properties constitute all of the assets and
interests in assets that are used in Company’s business. All of these assets are
free and clear of mortgages, liens, pledges, charges, encumbrances, equities,
claims, easements, rights of way, covenants, conditions, and restrictions. 

          Company
is in possession of all premises and oil and gas leases leased to Company from
others. Except as set forth in the appropriate exhibit listing such assets, no
officer, director, or employee of Company, nor any spouse, child, or other
relative of any of these persons owns or has any interest, directly or
indirectly, in any of the real or personal property owned by or leased by
Company or in any copyrights, patents, trademarks, trade names, or trade secrets
licensed by Company. Company does not occupy any real property in violation of
any law, regulation, or decree that would materially adversely affect its
business or future prospects. 

Insurance Policies 

          2.12.
Exhibit D attached to this Agreement is a list and description of all insurance
policies concerning the assets and properties and all officers, directors, and
employees of Company. Company has maintained and now maintains insurance on all
of the assets and properties of a type customarily insured. The insurance covers
property damage by fire or other casualty, as well as adequately protects
against all normal liabilities, claims, and risks against which it is customary
to insure. Purchaser acknowledges that Purchaser has had the opportunity to
inspect and approve such policies. 

Contracts 

          2.13.
Exhibit E attached to this Agreement contains true and corrects lists, with
copies when available, of all material oral and written contracts or
arrangements obligating Company, including without limitation, union contracts,
guarantees, bids, commitments, join venture or partnership agreements, contract
with municipalities, pledges and other security agreements, and copies of
standard form customer contracts and operating agreements relating to oil and
gas properties. For purposes of this Paragraph 2.13, the term “material
contract” means: (a) one, that, if in the ordinary course of business, obligates
Company in an amount in excess of $5,000.00, or if the aggregate total of all
contract from like transactions exceeds such amount; and (b) one that, if not in
the ordinary course of business, obligates Company in an amount in excess of
$5,000.00, or if the aggregate total of all such contracts for like transactions
exceeds such amount. Purchaser shall have the right to review any material or
nonmaterial contract upon request. Exhibit E also sets forth a list of all
persons or entities whose consents are required to be obtained under any
contract with respect to the consummation of this 

3

transaction by Seller and Company. There are no other consents
or approvals required from any other third party with respect to this
transaction. Except as set forth in Exhibit E, Company is not a party to, nor
are Company’s assets and properties bound by, any distributor’s or
manufacturer’s representative, agency agreement, output or requirements
agreement, agreement not entered into in the ordinary course of business,
indenture, mortgage, deed of trust, lease or any agreement that is unusual in
nature, duration, or amount. There is not default or event that with notice,
lapse of time, or both will constitute a default by any party to any of the
material contracts listed in Exhibit E. Company has not received any notice that
any party to any of the contracts listed in Exhibit E intends to cancel or
terminate any of the contracts or to exercise or not exercise any options under
any of the contracts. Neither Seller nor Company is a party to, nor are
Company’s assets or properties bound by, any contract that is materially adverse
to the business, property, or financial condition of Company. 

Laws and Regulations 

          2.14.
Company is not in default or in violation of any law; regulation; court order;
or order of any federal, state, municipal, foreign, or other government
department, board, bureau, agency, or instrumentality, wherever located, that
would materially adversely affect its business or future prospects. 

Litigation 

          2.15.
Except as disclosed in Exhibit F attached to this Agreement, there are no
pending, outstanding, or threatened claims; legal, administrative, or other
proceedings; or suits, investigations, inquiries, complaints, notices of
violation, judgments, injunctions, orders, directives, or restrictions against
or involving Company or any of the assets, properties, or business of Company or
any of Company’s officers, directors, employees, or stockholders that will
materially adversely affect Company, its assets, properties, or business. To the
best of Seller’s and Company’s knowledge and belief, after conducting a due
diligence investigation, there is no basis for any of these proceedings against
any of Company’s assets, properties, person, or entities. Seller has furnished
or made available to Purchaser copies of all relevant court papers and other
documents relating to the matters set forth in Exhibit F. Except as set forth in
Exhibit F, neither Seller nor Company is presently engages in any legal action
to recover moneys due Company or for damages sustained by Company. 

Fringe Benefit Plans; Employment Contracts 

          2.16.
Exhibit G attached to this Agreement contains a complete description and copies
of all employment agreements in effect with Company and a complete description
of all fringe benefits and perquisites available to Company’s officers,
directors, and employees (and, if any, furnished to consultants, agents, and
independent contractors), whether required by law or otherwise, including but
not limited to, pension, profit sharing, life insurance, medical, bonus,
incentive and similar plans, use of automobiles, credit cards, expense accounts
and allowances, club memberships, sharing of costs or 

4

expenses, vacation, and similar benefits, together with the
approximate annual cost of each benefit and perquisite. When available, copies
of the plans, agreements, or arrangements regarding each benefit are also
attached. The provisions and operations of all such programs and plans are in
compliance in all material respects with all applicable material laws and
government rules and regulations. There are no unfunded pension or similar
liabilities regarding any employee of Company. All pension plans have been
properly funded as to current and past service costs, have at all times been
administered in compliance in all material respects with all applicable
requirements of ERISA and any other applicable laws, and Company does not
maintain any “pension plan” as defined in ERISA that is unfunded, except as
disclosed in Exhibit G. Exhibit G also includes all states in which Company has
employees and the status of unemployment insurance accounts in each state. 

Receivables 

          2.17.
Exhibit H attached to this Agreement contains a true and correct list of all
accounts receivable of Company. Purchaser shall pay to Seller at an amount equal
to the receivables of Company related to the sale of oil and gas attributable to
Company’s interest in the oil and gas properties set forth on Exhibit A attached
hereto. 

Other Liabilities and Obligations 

          2.18.
Exhibit I attached to this Agreement contains a true and correct list of all
liabilities and obligations of Company not disclosed elsewhere in this Agreement
of any kind, character, and description whether accrued, absolute, contingent,
or otherwise, and whether or not required to be disclosed or accrued in the
financial statements of Company, that exceed $5,000.00 to any one creditor. In
the case of liabilities that are not fixed, an estimate of the maximum amount
that may be payable is also included. 

Reserves 

          2.19.
Exhibit J attached to this Agreement contains a true and correct list of all
reserves for contingent liabilities. 

Trade Names, Trademarks, Copyrights, and Patents 

          2.20.
Company owns no trademarks, trademark registrations or applications, service
marks, trade names, copyrights, copyright registrations or applications, trade
secrets, patents, inventions, industrial models, processes, designs, formulae,
and applications for patents (collectively called “Intellectual Properties”).

Bank Accounts 

          2.21.
Exhibit K attached to this Agreement contains a true and correct list of the
names and addresses of all banks or other financial institutions in which
Company has an account, deposit, or safe deposit box. Also included are the
names of all persons 

5

authorized to draw on these accounts or deposits or who have
access to them and the account numbers of each account. Purchaser and Seller
agree that Seller will withdraw all cash balances from the bank accounts of
Company on the day of closing. 

Business Operations 

          2.22.
The business operations of Company are and have been for the past five years in
material compliance with all laws, treaties, rulings, directives, and similar
regulations of all government authorities having jurisdiction over such business
insofar as failure to comply could materially adversely affect Company’s
business and future prospects. 

Authority 

          2.23.
Seller and Company each has full power and authority to execute, deliver, and/or
consummate this Agreement, subject to the conditions to closing set forth in
this Agreement. All reports and returns required to be filed by each with any
government and regulatory agency with respect to this transaction have been
properly filed. Except as otherwise disclosed in this Agreement, no notice to or
approval by any other person, firm, or entity, including governmental
authorities, is required of Seller or Company to consummate the transaction
contemplated by this Agreement. 

Full Disclosure 

          2.24. No
representation, warranty, or covenant made to Purchaser in this Agreement nor
any document, certificate, exhibit, or other information given or delivered to
Purchaser pursuant to this Agreement contains or will contain any untrue
statement of a material fact, or omits or will omit a material fact necessary to
make the statements contained in this Agreement or the matters disclosed in the
related documents, certificates, information, or exhibits not misleading. 

Brokers 

          2.25.
Neither the Individually nor any of the Company’s officers, directors,
employees, or stockholders, has retained consented to, or authorized any broker,
investment banker, or third party, directly or indirectly, to act on Company’s
behalf as a broker or finder in connection with the transactions contemplated by
this Agreement.

ARTICLE 3 

PURCHASER’S REPRESENTATIONS AND WARRANTIES 

         
Purchaser represents and warrants to Seller that: 

Authority 

6

          3.01.
Purchaser has full power and authority to execute, deliver, and consummate this
Agreement subject to the conditions to closing set forth in this Agreement. All
corporate acts, reports, and returns required to be filed by Purchaser with any
government or regulatory agency with respect to this transaction have been or
will be properly filed prior to the Closing Date. No provisions exist in any
contract, document, or other instrument to which Purchaser is a party or by
which Purchaser is bound that would be violated by consummation of the
transactions contemplated by this Agreement. 

Broker 

          3.02.
Neither Purchaser, nor any of Purchaser’s officers, directors, or employees, has
retained, consented to, or authorized any broker, investment banker, or third
party to act on its behalf, directly or indirectly, as a broker or finder in
connection with the transactions contemplated by this Agreement. 

Organization and Standing of Purchaser 

          3.03.
Purchaser is a corporation duly organized, validly existing, and in good
standing under the laws of the state of Nevada, with corporate power to own
property and carry on its business as it is now being conducted. 

ARTICLE 4 

COVENANTS 

          Seller
covenants with Purchaser that from and after the date of this Agreement until
the Closing Date, Seller will and will cause Company to: 

Business Operations 

          4.01.
Operate its business and conduct its activities in the normal course of business
and not introduce any material new method of management, operation, or
accounting. 

Maintenance of Assets and Properties 

          4.02.
Maintain all tangible assets and properties of Company in as good a state of
operating condition and repair as they are on the date of this Agreement, except
for ordinary depreciation, wear, and tear. 

Absence of Liens 

          4.03.
Not sell, pledge, lease, mortgage, encumber, dispose of, or agree to do any of
these acts regarding any of the assets or properties of Company, other than in
the normal course of business, without the prior written approval of
Purchaser.

7

Preservation of Business 

          4.04.
Use its best efforts to preserve intact its organization and personnel and to
keep available the services of all its employees, agents, independent
contractors, and consultants commensurate with Company’s business requirements.

Preservation of Customer Relations 

          4.05.
Use its best efforts to preserve intact the present customers of Company and the
goodwill of all customers and others with respect to the business. 

Maintain Insurance 

          4.06.
Keep in force all policies of insurance covering the Company’s business,
properties, and assets, including all insurance listed in this Agreement. If
Purchaser so requests in writing, to purchase additional insurance as may be
reasonably required at Purchaser’s expense. 

Absence of Contractual Obligations 

          4.07.
Not become obligated on any contract or commitment or incur or agree to incur
any liability beyond a period to the Closing Date as defined in Section 7.03 or
for an amount in excess of $15,000.00 or make any capital expenditures without
the prior written consent of Purchaser. 

Performance of Obligations 

          4.08.
Perform all of its obligations and not make any material amendment to its
obligations under all agreements relating to or affecting Company’s customers,
business, properties, and assets. 

Notification of Litigation 

          4.09.
Promptly notify Purchaser in writing of any outstanding or threatened claims;
legal, administrative, or other proceeding, suits, investigations, inquiries,
complaints, notices of violation, or other process; or other judgments, orders,
directives, injunctions, or restrictions against or involving Company or its
personnel that could adversely affect Company. 

Access to Books and Records 

          4.11.
Make available to Purchaser and its authorized agents and accountants for
inspection at reasonable times and under reasonable circumstances the following
items with respect to Company: assets; properties; business and financial
records; and tax 

8

returns, working papers, files, and memoranda of its public
accountants and outside legal counsel for the purposes of making an accounting
review, and investigation and examination of Company as deemed desirable by
Purchaser. Seller will use its best efforts to cause Company’s officers,
employees, public accountants, and outside legal counsel to cooperate fully with
Purchaser’s examination and to make a full and complete disclosure to Purchaser
of all facts regarding the financial condition and business operations of
Company. 

Employee Compensation 

          4.12.
Not increase the compensation payable to or to become payable to any executive
officer, key employee, or agent; and permit Purchaser to contact such employees,
agents, and officers at all reasonable times for the purpose of discussing with
them prospective employment by Purchaser on or after the Closing Date. Seller
shall use its best efforts to encourage all such persons to accept any
employment offered by Purchaser. 

Not Solicit 

          4.13.
Not negotiate with any person or entity, or solicit or entertain any proposal
concerning any acquisition in any form of Company. 

Resist Brokers 

          4.14.
Assist and cooperate with Purchaser in resisting any claim of any broker,
investment banker, or third party for any brokerage fee, finder’s fee, or
commission against Purchaser or Company in connection with the transactions
contemplated by this Agreement. 

Maintain Employee Benefit Plans 

          4.16.
Not add or discontinue any pension, welfare, or other employee benefit plans, or
make any alteration in any existing pension, welfare, or other employee benefit
plans. 

Payment of Liabilities and Waiver of Claims 

          4.17.
Not do, or agree to do, any of the following acts: 

	 	(a) 	
      Pay any obligations or liability, fixed or contingent,
      other than current liabilities.

	 	 	 
	 	(b) 	
      Waive or compromise any right or claim.

	 	 	 
	 	(c) 	
      Without full payment, cancel any note, loan, or other
      obligation owing to Company.

Maintain Existing Agreements 

9

          4.18.
Not modify, amend, cancel, or terminate any of Company’s existing contracts or
agreements, or agree to do so. 

Obtain Consents 

          4.19. As
soon as reasonably practical after the execution of this Agreement and in any
event before the Closing Date, obtain the written consents of all persons
described in Exhibits to this document and furnish to Purchaser copies of the
consents. 

Provide Sales and Use Tax Certificates 

          4.20.
Furnish to Purchaser clearance certificates from the appropriate agencies in all
states where Company is qualified to do business and any related certificates
that Purchaser may reasonably request as evidence that all sales, use, and other
tax liabilities of Company (other than income tax liabilities) accruing before
the Closing Date have been fully satisfied or provided for by Company. 

ARTICLE 5 

CONDITIONS TO PURCHASER’S OBLIGATION TO CLOSE 

          The
obligation of Purchaser to Close under this Agreement is subject to each of the
following conditions (any one of which may, at the option of Purchaser, be
waived in writing by Purchaser) existing on the Closing Date, or such earlier
date as the context may require. 

Representations and Warranties 

          5.01.
Each of the representations and warranties of Seller in this Agreement, the
disclosures contained in the exhibits to this Agreement, and all other
information delivered under this Agreement shall be true in all material
respects at and as of the Closing Date as though each representation, warranty,
and disclosure were made and delivered at and as of the Closing Date. 

Compliance With Conditions 

          5.02.
Company and Seller shall each comply with and perform all agreements, covenants,
and conditions in this Agreement required to be performed and complied with by
each of them. All requisite action (corporate and other) in order to consummate
this Agreement shall be properly taken by Company and Seller. Seller shall
deliver to Purchaser a compliance certificate verifying and warranting Seller’s
and Company’s compliance. 

Suit or Proceeding 

10

          5.03. No
suit or proceeding, legal or administrative, relating to any of the transactions
contemplated by this Agreement shall be overtly threatened or commenced that, in
the sole discretion of Purchaser and its counsel, would make it inadvisable for
Purchaser to Close this transaction. 

Government Approvals and Filings 

          5.04.
All necessary government approvals and filings regarding this transaction shall
be received or made prior to the Closing Date in substantially the from applied
for to the reasonable satisfaction of Purchaser and its counsel. Any applicable
waiting period for the approvals and filings shall be expired. 

Corporate and Stockholder Action 

          5.05.
All corporate and stockholder action necessary to consummate the transactions
contemplated in this Agreement shall be properly taken by Seller and Company.
Purchaser shall receive copies of all appropriate resolutions of Company’s and
Seller’s board of directors and shareholders relating to this Agreement. The
resolutions shall be certified by their respective corporate secretaries.

Consents of Others 

          5.06.
Purchaser shall receive written consents from all persons listed in Exhibit E to
this Agreement. 

Asset Appraisal and Title to Assets 

          5.07. At
the time of the execution by Purchaser, Purchaser represents and warrants that
Purchaser has had the opportunity to review and consider title to Company’s
assets, production reports relative to all oil and gas properties owned by
Company, operating agreements relative to all oil and gas properties owned by
Company, purchase agreements relating to the purchase of the oil and gas
properties owned by Company and all other financial and other records relative
to the existence and operation by Company of its oil and gas properties,
including the existence of payables, lien and litigation. Purchaser has accepted
title and other items described hereinabove and further represents that same are
not a basis for Purchaser refusing to close the sale described herein. 

Board of Directors Resignations 

          5.08. On
or before the Closing Date, Seller shall secure the resignations of all
directors and officers currently serving on the board of directors of Company.

Escrow Agreement 

11

          5.09.
Seller and Purchaser shall enter into a mutually agreeable Escrow Agreement with
Alan G. Moravcik, Attorney at Law (Escrow Agent), 4305 N. Garfield, Suite 203,
Midland, Texas 79705 for the purposes described in Article 9 below. Upon
execution of this agreement, Purchaser shall remit a total of 96,000 shares of
Doral common stock to the Sellers pro rata to the total number of outstanding
Slape Shares owned by each Seller. These shares must be delivered to the escrow
agent within 10 business days once dual execution of this agreement has been
completed. The issuance of the Deposit Shares to the Sellers will be dependent
upon an exemption from the registration requirements of the US Securities Act of
1933 (the “Securities Act”) being available for the issuance of all of the
Deposit Shares to all of the Sellers. The Sellers acknowledge and understand
that the Deposit Shares will be “restricted securities” as contemplated under
Rule 144 of the Securities Act and will be valued by the Buyer and the Sellers
at a price of $2.50 per share or $240,000.00 USD. These shares will contain
“piggyback registration rights”. If the Acquisition is not completed, the
Sellers will be entitled to keep the Deposit Shares, unless the Acquisition is
not completed due to a breach by the Seller of any of the terms, conditions,
representations, warranties or covenants of the Definitive Agreements
(including, but not limited to, the requirement that the Seller obtain all
necessary third party consents or authorizations prior to closing) or as a
result of the malfeasance of the Seller, (collectively, a “Sellers Breach”). If
the Acquisition is completed, or if the Acquisition is not completed due to a
Sellers Breach, the Sellers will return all of the Deposit Shares to the Buyer
for cancellation. Doral’s common stock trades on the OTC Bulletin Board under
the symbol DEGY. 

ARTICLE 6 

CONDITIONS TO SELLER’S OBLIGATION TO CLOSE 

          The
obligation of Seller to Close under this Agreement is subject to each of the
following conditions (any one of which at the option of Seller may be waived in
writing by Seller) existing on the Closing Date. 

Corporate Action 

          6.01.
Purchaser shall take appropriate corporate action regarding this transaction,
which shall be evidenced by resolutions of its board of directors and
shareholders and certified by Purchaser’s corporate secretary, authorizing
Purchaser to enter into and complete this transaction. 

Government Approvals 

          6.02.
All necessary government approvals regarding this transaction shall be received
prior to the Closing Date, in substantially the form applied for and to the
reasonable satisfaction of Purchaser and its counsel. 

ARTICLE 7 

PARTIES’ OBLIGATIONS AT THE CLOSING 

12

Seller’s Obligations at the Closing 

          7.01. At
the Closing, Seller shall deliver or cause to be delivered to Purchaser
instruments of assignment and transfer of all of the issued and outstanding
capital stock of Company, free and clear of all liens, claims, and encumbrances
in form and substance satisfactory to Purchaser’s counsel.

          Seller,
at any time before or after the Closing Date, shall execute, acknowledge, and
deliver to Purchaser, or cause Company to do so, any further deeds, assignments,
conveyances, other assurances, documents, and instruments of transfer reasonably
requested by Purchaser. Seller shall also take any other action consistent with
the terms of this Agreement that may be reasonably requested by Purchaser for
the purpose of assigning, transferring, granting, conveying, and confirming to
Purchaser or reducing to possession any or all property and assets to be
conveyed and transferred by this Agreement. If requested by Purchaser, Seller
further agrees to authorize Purchaser to prosecute or otherwise enforce in
Seller’s name for the benefit of Purchaser any claims, rights, or benefits of
Company that are transferred to Purchaser by this Agreement and that require
prosecution or enforcement in Seller’s name. Any prosecution or enforcement of
claims, rights, or benefits under this paragraph shall be solely at Purchaser’s
expense, unless the prosecution or enforcement is made necessary by a breach of
this Agreement by Seller. 

Purchaser’s Obligation at Closing 

7.02. At the Closing, Purchaser shall deliver to Seller either
a wire, a certified check, or cashier’s check in the amount of $1,200,000.00 USD
payable to Seller in federal funds currently available in Texas. Additionally,
in addition to the above described amounts, Purchaser shall deliver to Seller
the amount equal to the value of Company’s receivables and inventory of crude
oil on hand at the date of closing. 

	 	1. 	
      7.03 Closing Date - Subject to the
      conditions set forth in this Definitive Agreement, and subject to the
      approval of the Purchaser and the Purchaser’s creditors, the closing of
      the transaction contemplated herein is expected to occur on or before June
      30, 2009 (the “Closing Date”). If the Acquisition does not close on or
      before the Closing Date, the Purchaser will have the right to extend the
      closing date of the Acquisition to July 31, 2009 by paying to the Seller
      an installment in the amount of $105,000.00 USD (the “Extension
      Installment”) on or before July 1, 2009, as follows:

	 	 	 	 
	 		 •
	
      $105,000.00 USD to the Sellers pro rata to the total
      number of outstanding Flaming S Shares owned by each
  Seller.

The Extension Installment shall be
paid to the Seller as an installment against the Acquisition Price and shall not
increase the total Acquisition Price to be paid by the Purchaser for the
Acquisition. Should closing not occur, by July 31, 2009, Seller will retain the
“Extension Installment” and Buyer understands that it will forfeit all rights

13

associated to these funds. The closing
agent for this transaction will be Hockley County Absract located at 609 Austin
Street, Levelland, Texas 79336. All closing funds will be directed to Hockley
County Abstract escrow account where upon receipt of funding, shall dispurse
such funds in accordance per instructions provided by Seller. 

ARTICLE 8 

SELLER’S OBLIGATIONS AFTER THE CLOSING 

Preservation of Goodwill 

          8.01.
Following the Closing Date, Seller will restrict its activities so the
Purchaser’s reasonable expectations with respect to the goodwill, business
reputation, employee relations, and prospects connected with the assets and
properties purchased under this Agreement will not be materially impaired. 

Change of Name 

          8.02.
Purchaser agrees that 60 days after the Closing Date, it will not use or employ
in any manner, directly or indirectly, the name of Company or any variation of
the name. Purchaser also agrees that, in order to comply with this covenant, it
will take and cause to be taken all necessary action, including filing a
withdrawal notice for any assumed name certificate bearing Company’s name or any
variant of the name, that Seller has previously filed. 

Access to Records 

          8.03.
From and after the Closing Date, Seller shall allow Purchaser and its counsel,
accountants, and other representatives access to records that are, after the
Closing Date, in the custody or control of Seller. Seller shall give access as
Purchaser reasonably requires in order to comply with its obligations under law
or when reasonably necessary for the business operations of Company. 

ARTICLE 9 

INDEMNIFICATION 

Covenant to Indemnify and Hold Harmless 

          9.01.
Seller covenants and agrees to indemnify, defend, and hold harmless Purchaser
and Company from and against any and all claims, suits, losses, judgments,
damages, and liabilities including any investigation, legal, and other expenses
incurred in connection with and any amount paid in settlement of any claim,
action, suit, or proceeding (collectively called “Losses”), other than those
Losses disclosed in this Agreements or any Exhibit delivered pursuant to this
Agreement, to which Purchaser or 

14

Company may become subject, if such Losses arise out of or are
based upon any facts and circumstances (or alleged facts and circumstances) that
could result in or give rise to a misrepresentation, breach of warranty, or
breach of covenant by Seller to Purchaser in this Agreement. This right to
indemnification is in addition to any other right available to Purchaser and
Company, including the right to sue Seller for a misrepresentation, breach of
warranty, or breach of covenant under this Agreement. 

Income Taxes 

          9.02.
Without limiting the provisions of Paragraph 9.01, Seller shall indemnify,
defend, and hold harmless Purchaser and Company from and against any Losses to
which Company or Purchaser may become subject insofar as such Losses arise out
of or are based on any tax on or measured by the net income of Company in any
period on or before the Closing Date. The indemnifications provided in this
Paragraph 9.02 and in Paragraph 9.01, above, are cumulative and neither
provision shall limit or in any other way affect the right of Purchaser and
Company under the other provision. 

Limitations on Indemnification 

          9.03.
The maximum cumulative amount of Seller’s liability under this Agreement for any
and all Losses, other than Losses arising out of or based upon any federal tax
or measure by net income of Company shall be limited to $250,000.00. The
obligations of Seller to indemnify Purchaser and Company set forth in this
Article 9 shall expire 2 years after the Closing Date unless the obligation to
indemnify arises out of or is based on any federal tax on or measured by net
income of Company, in which event the obligation to indemnify shall expire 3
years after the Closing Date. 

Notifications and Defense of Claims or Actions 

          9.04.
When Purchaser proposes to assert the right to be indemnified under this Article
9 with respect to third-party claims, actions, suits, or proceedings, Purchaser
shall, within 30 days after the receipt of notice of the commencement of the
claim, action, suit, or proceeding, notify Seller in writing, enclosing a copy
of all papers served or received. On receipt of the notice, Seller shall have
the right to direct the defense of the matter, but Purchaser shall be entitled
to participate in the defense and, to the extent that Purchaser desires, to
jointly direct the defense with Seller with counsel mutually satisfactory to
Purchaser and Seller, at Seller’s expense. Purchaser shall also have the right
to employ its own separate counsel in any such action. The fees and expenses of
Purchaser’s counsel shall be paid by Purchaser unless: (a) the employment of the
counsel has been authorized by Seller; (b) Purchaser has reasonably concluded
that there may be a conflict of interest between Seller and Purchaser in the
conduct of the defense of such action; or (c) Seller has not, in fact, employed
counsel satisfactory to Purchaser to assume the defense of the action. In each
of these cases, the fees and expenses of Purchaser’s counsel shall be paid by
Seller. Neither Seller nor Purchaser shall be liable for any settlement of any
action or claim described in this Article 9 that is effected without their
consent. 

15

ARTICLE 10 

GENERAL PROVISIONS 

Survival of Representations, Warranties, and Covenants 

          10.01
The representations, warranties, covenants, and agreements of the parties
contained in this Agreement or contained in any writing delivered pursuant to
this Agreement shall survive the Closing Date for the period of time set forth
in this Agreement. 

Notices 

          10.02.
All notices that are required or that may be given pursuant to the terms of this
Agreement shall be in writing and shall be sufficient in all respects if give in
writing and delivered personally or by registered or certified mail, return
receipt requested, postage prepaid as follows: 

          If to
Seller: Alan G. Moravcik, Attorney at Law, 4305 N. Garfield, Suite 203, Midland,
Texas 79705. 

          If to
Purchaser: E. Will Gray, CEO, Doral Energy Corp., 415 W Wall Street, Suite 500,
Midland, Texas 79701.

Assignment of Agreement 

          10.03.
This Agreement shall be binding on and inure to the benefit of the parties to
this Agreement and their respective successors and permitted assigns. This
Agreement may not be assigned by any other party without the written consent of
all parties and any attempt to make an assignment without consent is void. 

Governing Law 

          10.04.
This Agreement shall be construed and governed by the laws of the state of
Texas. 

Amendments; Waiver 

          10.05.
This Agreement may be amended only in writing by the mutual consent of all of
the parties, evidenced by all necessary and proper corporate authority. No
waiver of any provision of this Agreement shall arise from any action or
inaction of any party, except an instrument in writing expressly waiving the
provision executed by the party entitled to the benefit of the provision. 

Entire Agreement 

16

          10.06.
This Agreement, together with any documents and exhibits given or delivered
pursuant to this Agreement, constitutes the entire agreements between the
parties to this Agreement. No party shall be bound by any communications between
them on the subject matter of this Agreement unless the communication is (a) in
writing, (b) bears a date contemporaneous with or subsequent to the date of this
Agreement, and (c) is agreed to by all parties to this Agreement. On execution
of this Agreement, all prior agreements or understanding between the parties
shall be null and void. 

Termination of Agreement 

          10.07.
In the event this Agreement is not closed by June 30, 2009, then this Agreement
shall terminate on and as of that date, unless otherwise extended by written
agreement by Purchaser and Seller. Any termination shall not affect in any
manner any rights and remedies that any party to this Agreement may have at the
time of termination. If this agreement terminates as described above, Escrow
Agent shall deliver all funds held by Escrow Agent hereunder to Seller and
Seller shall be entitled to retain such funds as liquidated damages hereunder.

		 	Purchaser: 
		 		
		 		
	5-18-09	 	By: 	/s/ E.W. Gray II
	Date 	 		
	 	 	 	CEO, Doral Energy Corp.
		 		       Title 
		 		
		 		Seller: 
		 		Lonnie Slape 
		 		
	5-18-09	 	By: 	/s/ Lonnie Slape
	Date 	 		

17

EXHIBIT A 

OIL AND GAS PROPERTIES 

18

EXHIBIT "A"

FLAMING S, INC.
LEASES,
WORKING INTERESTS, AND NET REVENUE
INTERESTS CONVEYED WITH PURCHASE

  	
 LEASE 
 NAME 	
 RRC 
 LEASE NO. 	
 GROSS 
 ACRES 	GROSS 
 WORKING 
 INTEREST
      	NET 
 REVENUE 
 INTEREST
      	
 LEASE 
 NRI 	
 
 COUNTY 	
 
 LEGAL DESCRIPTION 
	Deloache, J.I. NCT-3 	64138
      	160
      	 51.819446%
      	 35.500000% 	68.507100% 	Hockley 	Lab. 2, Lg. 78, Reeves CSL, Hockley County, Texas 
	Gem Lawson 	65079
      	160
      	 51.724138%
      	 37.500000% 	72.500000% 	Hockley 	Lab. 9, Lg. 73, Haskel CSL, Hockley County, Texas 
	Ivey 	65067
      	160
      	 37.077450%
      	 25.408000% 	68.526827% 	Hockley 	Lab. 16, Lg. 78, Reeves CSL, Hockley County, Texas 
	Lawson "A" #3 	67411
      	40 	 28.668234%
      	 18.872875% 	65.832011% 	Hockley 	Lab. 9, Lg. 73, Haskel CSL, Hockley County, Texas 
	Lawson (Gas) 	63702
      	40 	 31.231502%
      	 18.872875% 	60.428970% 	Hockley 	Lab. 9, Lg. 73, Haskel CSL, Hockley County, Texas 
	Palmer 	61877
      	40 	 52.205882%
      	 35.500000% 	68.000000% 	Hockley 	Lab. 8, Lg. 33, Baylor CSL, Hockley County, Texas 
	Phillips 	61415
      	160
      	51.426025%
      	 36.062500% 	70.125000% 	Hockley 	Lab. 11, Lg. 28, Hood CSL, Hockley County, Texas 
	Scott 	60824
      	160
      	 48.759191%
      	 33.156250% 	68.000000% 	Hockley 	SW/4 Sec. 9, Blk-A, RM Thompson Survey, Hockley County Texas 
	Stanley 	63766
      	80 	28.002115%
      	 19.414800% 	69.333333% 	Hockley 	S 1/2 Lb. 2, Lg. 73, Haskel CSL, Hockley County, Texas 
	Stanley "A" 	64677
      	80 	 32.735095%
      	 22.561200% 	68.920528% 	Hockley 	N 1/2 Lb. 2, Lg. 73, Haskel CSL, Hockley County, Texas 
	Whitley 	65269
      	40 	 29.342421%
      	 22.317500% 	76.058824% 	Hockley 	SW/4, SE/4, Sec. 9, Blk-A, RM Thompson Survey, Hockley County, Texas 
	TOTAL Gross Acreage 	1,120 	Gross Acres 	  	  	  	  
	TOTAL Net Acreage 	  	490 	Net Acres 	  	  	  	  

19

EXHIBIT B 

Other Tangible Personal Property 

          All
other tangible personal property of the Seller is located on the leases
described in Exhibit A hereto, to the extent of Company’s interest therein. 

20

EXHIBIT C 

INTANGIBLE ASSETS 

None 

21

EXHIBIT D 

INSURANCE POLICIES 

 

Bituminous Insurance Company 
Commercial General Liability

Policy #xxxxxxxxxxx 

Effective x/x/xx – x/x/xx 

National American Insurance Company 
Commercial General
Liability 

Policy #xxxxxxxxxx 

x/xx/xx – x/xx/xx 

22

EXHIBIT E 

CONTRACTS OBLIGATING COMPANY 

None 

23

EXHIBIT F 

LITIGATION TO WHICH COMPANY
 IS A PARTY 

None 

24

EXHIBIT G 

EMPLOYMENT AGREEMENTS, ETC. 

None 

25

EXHIBIT H 

RECEIVABLES 

Amounts due and owing from the following purchasers of crude,
natural gas or condensate for production prior to the date of the closing hereof
but unpaid as of the date of the closing hereof. Any and all amounts due from
working interest owners in any of the leases for services prior to closing
date.

 

Conoco Phillips Company 

Versado Gas Processors, LLC 

Occidental Permian, Ltd. 

26

EXHIBIT I 

LIABILITIES OF COMPANY 

None 

27

EXHIBIT J 

RESERVES 

None 

28

EXHIBIT K 

BANK ACCOUNTS 

29

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