Document:

CONSULTING
      AGREEMENT

     

    THIS
      CONSULTING AGREEMENT
      (“Agreement”) is made as of the 15th day of January, 2008, by and between
BLACKWOOD
      CAPITAL
      LIMITED having
      a
      place of business at Avenue de Collonge 36, Montreux, CH-1820, Switzerland
      (the
“Consultant”) and UNITED
      HERITAGE
      CORPORATION
      with its
      principal offices at 1310 North Wall Street, Midland, Texas 79701 (the
“Company”).

    

    WITNESSETH

    

    WHEREAS,
      the
      Consultant has been providing the Company with the type of consulting services
      described herein since September 1, 2007 (the “Service Commencement
      Date”).

    

    WHEREAS
      the
      Company desires to formally retain the Consultant and the Consultant desires
      to
      be retained by the Company, all pursuant to the terms and conditions hereinafter
      set forth.

    

    NOW,
      THEREFORE, in
      consideration of the foregoing and the mutual promises and covenants
      herein contained, it is agreed as follows:

    

    1. Retention. The
      Consultant is hereby retained by the Company to perform services related to
      corporate finance and other matters, and the Consultant hereby accepts such
      retention and shall perform for the Company the duties described herein,
      faithfully and to the best of its ability.

    

    2. Services. The
      Consultant agrees, to the extent reasonably required in the conduct of the
      business of the Company, to provide the Company with its judgment and experience
      with respect to business development services for the Company as it reasonably
      requests. The services may include, without limitation, the
      following:

     

    
      	 	
              (a)

            	
              Review
                business plans and projections;

            

    

     

    
      	 	
              (b)

            	
              Review
                and analyze financial data;

            

    

     

    
      	 	
              (c)

            	
              Advise
                on the Company’s capital structure and on alternatives structures for
                raising capital;

            

    

     

    
      	 	
              (d)

            	
              Review
                and advise on prospective mergers and
                acquisitions;

            

    

     

    
      	 	
              (e)

            	
              Advise
                on issues relating to public
                offerings;

            

    

     

    
      	 	
              (f)

            	
              Advise
                the Company on debt refinancing;

            

    

     

    
      	 	
              (g)

            	
              Review
                managerial needs and advise with respect to managerial candidates;
                and

            

    

     

    
      	 	
              (h)

            	
              Advise
                on issues relating to financial public
                relations.

            

    

    

    3. Term.  The
      Consultant’s retention hereunder shall be for a term of one year commencing on
      the date of this Agreement, unless sooner terminated in accordance herewith
      (the
“Term”). This Agreement may be terminated by either party upon 45 days written
      notice to the other. No termination shall affect the Company’s obligation to pay
      compensation owing pursuant to Paragraph 4.

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    4. Compensation. 

    

    (a) Warrants.
      In
      consideration of the services provided by the Consultant to the Company since
      the Service Commencement Date, and as an inducement to provide further services
      in accordance with this Agreement, the Company shall, upon obtaining approval
      of
      the Company’s shareholders in accordance with applicable federal securities laws
      and regulations, issue to the Consultant or its assigns Warrants
      (the “Warrants”) to purchase 1,500,000 shares of common stock (“Common Stock”)
      of the Company at a price of $1.05 per share (“Exercise Price”), exercisable
      through and including January 15, 2012 in the form attached hereto as
Exhibit
      A.

    

    (b) Cash.
      The
      Company agrees to pay monthly consulting fees of $15,000 for the services in
      Paragraph 2 above, to be calculated and paid as from the Service Commencement
      Date through the end of the Term.

    

    5. Nondisclosure.

    

    (a) Confidential
      Information. The
      Consultant agrees that from the Service Commencement Date until the end of
      the
      Term, , the Consultant has had and will have access to and become acquainted
      with confidential proprietary information (“Confidential Information”) which is
      owned by the Company and is regularly used in the operation of the Company’s
      business. The Consultant agrees that the term “Confidential Information” as used
      in this Agreement is to be broadly interpreted and includes (i) information
      that
      has, or could have, commercial value for the business in which the Company
      is
      engaged, or in which the Company may engage at a later time, and (ii)
      information that, if disclosed without authorization, could be detrimental
      to
      the economic interests of the Company. The Consultant agrees that the term
      “Confidential Information” includes, without limitation, any patent, patent
      application, copyright, trademark, trade name, service mark, service name,
      “know-how,” negative “know-how,” trade secrets, customer and supplier
      identities, characteristics and terms of agreement, details of customer or
      consultant contracts, pricing policies, operational methods, marketing plans
      or
      strategies, product development techniques or plans, business acquisitions
      plans, science or technical information, ideas, discoveries, designs, computer
      programs (including source codes), financial forecasts, unpublished financial
      information, budgets, processes, procedures, formulae, improvements or other
      proprietary or intellectual property of the Company, whether or not in written
      or tangible form, and whether or not registered, and including all memoranda,
      notes, summaries, plans, reports, records, documents and other evidence thereof.
      “Confidential Information” shall not include, however, information that
      (i) is or becomes generally available to the public other than as a result
      of a disclosure by the Consultant or its representatives in violation of this
      Agreement; (ii) was known to the Consultant on a non-confidential basis
      prior to its disclosure by the Company or its representatives;
      (iii) becomes available to the Consultant on a non-confidential basis from
      a person other than the Company or its representatives who is not known to
      the
      Consultant to be otherwise bound by a confidentiality agreement with the Company
      or any of its representatives, or is otherwise not known to the Consultant
      to be
      under an obligation to the Company or any of its representatives not to transmit
      the information to the Consultant; or (iv) was independently developed by
      the Consultant without reference to or use of the Confidential Information.
      The
      Consultant acknowledges that all Confidential Information, whether prepared
      by
      the Consultant or otherwise acquired by the Consultant in any other way, shall
      remain the exclusive property of the Company.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (b) No
      Unfair Use by Consultant.
      The
      Consultant promises and agrees that the Consultant (which shall include its
      employees and contractors) shall not misuse, misappropriate, or disclose in
      any
      way to any person or entity any of the Company’s Confidential Information,
      either directly or indirectly, nor will the Consultant use the Confidential
      Information in any way or at any time except as required in the course of the
      Consultant’s business relationship with the Company. The Consultant agrees that
      the sale or unauthorized use or disclosure of any of the Company’s Confidential
      Information constitutes unfair competition. The Consultant promises and agrees
      not to engage in any unfair competition with the Company and will take measures
      that are appropriate to prevent its employees or contractors from engaging
      in
      unfair competition with the Company.

    

    (c) Obligations
      Survive Agreement.
      The
      Consultant’s obligations under this section 4 shall survive the expiration or
      termination of this Agreement for a period of 1 year.

    

    6. Expenses
      The
      Company shall reimburse the Consultant for all approved direct out-of-pocket
      expenses incurred by the Consultant in connection with the services rendered
      hereunder.

    

    7. Non-exclusive
      Engagement. The
      Consultant shall not by this Agreement be prevented or barred from rendering
      services of the same or similar nature, as herein described, or services of
      any
      nature whatsoever for, or on behalf of, persons, firms, or corporations other
      than the Company. Similarly, the Company shall not be prevented or barred from
      seeking or requiring services of a same or similar nature from any person other
      than the Consultant.

    

    8. Disclaimer
      of Responsibility for Acts of the Company.
      The
      obligations of the Consultant described in this Agreement consist solely of
      financial advisory services to the Company and do not create a partnership,
      joint venture or any type of agency relationship between the Company and the
      Consultant. In no event shall Consultant be required by this Agreement to act
      as
      the agent of the Company or otherwise to represent or make decisions for the
      Company. All final decisions with respect to acts of the Company or its
      affiliates, whether or not made pursuant to or in reliance on information or
      advice furnished by the Consultant hereunder, shall be those of the Company
      or
      such affiliates and the Consultant shall under no circumstances be liable for
      any expenses incurred or loss suffered by the Company as a consequence of such
      decisions.

    

    9. Board of Directors.
      The
      Company agrees to provide the Consultant with notice of all regular and special
      meetings of the Board of Directors at the time such notice is given to members
      of the Board of Directors. Subject to the proscriptions of the attorney/client
      privilege, if applicable, the Consultant shall also be provided with all
      materials delivered to members of the Board of Directors at the time such
      materials are delivered to board members and a designated representative shall
      be allowed to be present at meetings of the Board of Directors solely as an
      observer.

    

    10. Amendment.
      No
      amendment to this Agreement shall be valid unless such amendment is in writing
      and is signed by authorized representatives of all the parties to this
      Agreement.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    11. Indemnity.

    

    (a) The
      Company agrees to indemnify and hold the Consultant, its affiliates, control
      persons, officers, employees and agents harmless from and against all losses,
      claims, damages, liabilities, costs or expenses (including reasonable attorneys’
and accountants’ fees and the cost of any of the Consultant’s personnel involved
      in any such matter) of any kind or nature whatsoever arising out of the
      Consultant’s entering into or performing under this Agreement, including costs
      arising out of any dispute whether or not the Consultant is a party to such
      dispute.

    

    (b) The
      Consultant agrees to indemnify and hold the Company, its affiliates, control
      persons, officers, employees, and agents harmless from and against all losses,
      c1aims, damages, liabilities, costs or expenses (including reasonable attorneys’
and accountants’ fees and the cost of any of the Company’s personnel involved in
      any such matter) of any kind or nature whatsoever arising out of the Company’s
      entering into or performing under this Agreement, including costs arising out
      of
      any dispute whether or not the Company is a party to such dispute.

    

    (c) The
      provisions of this Paragraph 11 shall survive the termination and expiration
      of
      this Agreement.

    

    12. Waiver.
      Any of
      the terms and conditions of this Agreement may be waived at any time and from
      time to time in writing by the party entitled to the benefit thereof, but a
      waiver in one instance shall not be deemed to constitute a waiver in any other
      instance. A failure to enforce any provision of this Agreement shall not operate
      as a waiver of this provision or of any other provision hereof.

    

    13. Severability.
      In the
      event that any provision of this Agreement shall be held to be invalid, illegal,
      or unenforceable in any circumstances, the remaining provisions shall
      nevertheless remain in full force and effect and shall be construed as if the
      unenforceable portion or portions were deleted.

    

    

    14. Assignment.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and permitted assigns. Any attempt by either party
      to assign any rights, duties, or obligations which may arise under this
      Agreement without the prior written consent of the other party shall be
      void.

    

    15. Governing
      Law.
      The
      validity, interpretation and construction of this Agreement and each part
      thereof will be governed by the laws of the State of Texas without reference
      to
      its conflicts of laws, rules or principles.

    

    16. Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which may
      be
      deemed an original and all of which together will constitute one and the same
      instrument.

    

    17. Interpretation.
      The
      parties hereto acknowledge and agree that (a) the rule of construction to the
      effect that any ambiguities are resolved against the drafting party shall not
      be
      employed in the interpretation of this Agreement, and (b) the terms and
      provisions of this Agreement shall be construed fairly as to all parties hereto
      and not in favor of or against any party, regardless of which party was
      generally responsible for the preparation of this Agreement.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    18. Headings
      and Captions.
      The
      headings and captions of the various subdivisions of this Agreement are for
      convenience of reference only and shall in no way modify, or affect, or be
      considered in construing or interpreting the meaning or construction of any
      of
      the terms or provisions hereof.

    

    19. Notices.
      All
      notices, requests, consents, and other communications hereunder shall be in
      writing, shall be addressed to the receiving party’s address set forth below or
      to such other address as the party may designate by notice hereunder, and shall
      be either (a) delivered by hand, (b) sent by recognized overnight courier,
      (c)
      sent by facsimile transmission, or (d) sent by registered or certified mail,
      return receipt requested, postage prepaid.

    

      
        	
                If
                  to the Consultant:

              	 
	 	 	 
	
                 

              	
                BLACKWOOD
                  CAPITAL LIMITED

              	 
	
                 

              	
                546
                  Fifth Avenue, 14th
                  Floor

              	 
	
                 

              	
                New
                  York, NY 10036 

              	 
	
                 

              	
                 

              	 
	
                 

              	
                Attn:
                  Andrew Taylor-Kimmins

              	 
	
                 

              	
                Facsimile:
                  646 219 8532

              	 
	
                 

              	
                 

              	 
	
                If
                  to the Company:

              	 
	 	 	 
	
                 

              	
                UNITED
                  HERITAGE CORPORATION

              	 
	
                 

              	
                1310
                  North Wall Street 

              	 
	
                 

              	
                Midland,
                  Texas 79701

              	 
	
                 

              	
                 

              	 
	
                 

              	
                Attn:
                  Chip Langston

              	 
	
                 

              	
                Facsimile:
                  972 862 4892

              	 

      

    

     

    All
      notices, requests, consents and other communications hereunder shall be deemed
      to have been given (i) if by hand, at the time of delivery thereof to the
      receiving party at the address of such party set forth above, (ii) if sent
      by
      overnight courier, on the next business day following the day such notice is
      delivered to the courier service, (iii) sent by facsimile transmission, at
      the
      time the receipt thereof has been acknowledged by electronic confirmation of
      otherwise, or (iv) if sent by registered of certified mail, on the fifth
      business day following the day such mailing is sent. The address of any party
      herein may be changed at any time by written notice to the parties in accordance
      with the preceding provisions.

    

    20. Total
      Agreement.
      This
      Agreement contains all of the agreements of the parties with respect to the
      subject matter hereof and supersedes all prior oral or written agreements and
      understandings relating to the subject matter hereof. No statement,
      representation, warranty, covenant or agreement of any kind or nature not
      expressly set forth in this Agreement shall affect, or can be used to interpret,
      change or restrict the express terms and provisions of this agreement. This
      agreement shall not be modified or amended unless agreed to in writing by all
      parties.

    

    Agreed,
      accepted and effective as of the date first above written:

    

    

    
      
        
        

      

      
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	 	UNITED
              HERITAGE
              CORPORATION 
	 
 	 
 	 
 
	 	By:  	
              /s/
                Paul Watson

            
	 	
              
Name:
Paul
              Watson
	 	Title:
              Chief Executive Officer

    

     

    
      	 	 	 
	 	BLACKWOOD
              CAPITAL
              LIMITED
	 
 	 
 	 
 
	 	By:  	/s/ Andrew Taylor-Kimmins
	 	
              
Name:
              Andrew Taylor-Kimmins
	 	Title:
              Authorized Signatory

    

     

    

    

    
      
        
        

      

      
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    Exhibit
      A

    

    Form
      of
      BCL Warrant

    

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND
      MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
      A
      REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO UNDER THE ACT AND
      APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT
      AND APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
      SUCH REGISTRATION IS NOT REQUIRED.

     

    

     

    
      	
              Certificate
                No. WC-___

            	
              Warrant
                to Purchase 1,500,000 Shares of

            
	
              Dated:
                ___________, 2008

            	
              Common
                Stock (subject to adjustment)

            

    

     

    

     

    WARRANT
      TO PURCHASE COMMON STOCK

    of

    UNITED
      HERITAGE CORPORATION 

    

     

    This
      certifies that, for value received, BLACKWOOD CAPITAL LIMITED, or its registered
      assigns (the “Holder”)
      is
      entitled, subject to the terms set forth below, to purchase from United Heritage
      Corporation, a Utah corporation (the “Company”),
      up to
      1,500,000 shares of common stock, par value $0.001 per share (the “Common
      Stock”),
      as
      constituted on the date hereof (the “Warrant
      Issue Date”),
      upon
      surrender hereof, at the principal office of the Company referred to below,
      with
      the Notice of Exercise form annexed hereto duly executed, and simultaneous
      payment therefor in lawful money of the United States or otherwise as
      hereinafter provided, at the Exercise Price set forth in Section 2 below. The
      number and character of such shares of Common Stock and the Exercise Price
      are
      subject to adjustment as provided herein. The term “Warrant” as used herein
      shall include this Warrant and any warrants delivered in substitution or
      exchange therefor as provided herein. This Warrant is being issued pursuant
      to
      the Consulting Agreement, dated January 15, 2008, by and between the Company
      and
      the Holder. 

     

    1. Term
      of Warrant. Subject
      to the terms and conditions set forth herein, this Warrant shall be exercisable,
      in whole or in part, during the term commencing on the Warrant Issue Date and
      ending at 5:00 p.m., Eastern Standard Time, on the four (4) year anniversary
      of
      the Warrant Issue Date (the “Term”),
      and
      shall be void thereafter.

     

    2. Exercise
      Price.
      The
      exercise price at which this Warrant may be exercised shall be $1.05 per share
      of Common Stock (the “Exercise
      Price”),
      as
      such Exercise Price may be adjusted from time to time pursuant to Section 11
      hereof.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    3. Vesting
      and Exercise of Warrant.

     

    (a) Exercisability.
      Notwithstanding anything herein to the contrary, this Warrant will only become
      exercisable (“Vest”) when the Company has obtained shareholder approval of this
      Warrant in accordance with applicable federal securities laws and the rules
      and
      regulations of any national securities exchange or inter-dealer quotation system
      upon which the Company’s Common Stock is then traded.

     

    (b) Exercise
      of Warrant.

     

    (i) Method
      of Exercise.
      Subject
      to section 3(a) above, the purchase rights represented by this Warrant are
      exercisable by the Holder in whole or in part, at any time, or from time to
      time, during the Term, by the surrender of this Warrant and the Notice of
      Exercise annexed hereto duly completed and executed on behalf of the Holder,
      at
      the principal office of the Company (or such other office or agency of the
      Company as it may designate by notice in writing to the Holder at the address
      of
      the Holder appearing on the books of the Company), upon payment in cash by
      wire
      transfer or by check acceptable to the Company of the purchase price of the
      shares to be purchased.

     

    (ii) Net
      Issue Exercise. Notwithstanding
      any provisions herein to the contrary, if the fair market value of one share
      of
      Common Stock is greater than the Exercise Price (at the date of calculation
      as
      set forth below), in lieu of exercising this Warrant for cash, the Holder may
      elect to receive shares equal to the value (as determined below) of this Warrant
      (or the portion thereof being canceled) by surrender of this Warrant at the
      principal office of the Company together with the properly endorsed Notice
      of
      Exercise and notice of such election, in which event the Company shall issue
      to
      the Holder a number of shares of Common Stock computed using the following
      formula:

     

    
      	
              X
                =  

            	
               
                Y (A-B)  

            
	
                    
                 A

            
	 	 	 	 
	
              Where

            	
              X

            	
              =

            	
              The
                number of shares of Common Stock to be issued to the
                Holder

            
	 	 	 	 
	 	
              Y

            	
              =

            	
              the
                number of shares of Common Stock purchasable under this Warrant or,
                if
                only a portion of this Warrant is being exercised, the portion of
                this
                Warrant being canceled (at the date of such
                calculation)

            
	 	 	 	 
	 	
              A

            	
              =

            	
              the
                fair market value of one share of the Common Stock (at the date of
                such
                calculation)

            
	 	 	 	 
	 	
              B

            	
              =

            	
              Exercise
                Price (as adjusted to the date of such
                calculation).

            

    

    

    For
      purposes of the above calculation, fair market value of one share of Common
      Stock shall be determined by the Company’s Board of Directors in good faith;
      provided, however, that where there exists a public market for the Common Stock
      at the time of such exercise, the fair market value of one share of Common
      Stock
      shall be the average of the closing bid and asked prices of the Common Stock
      quoted in the Over-The-Counter Market Summary or the last reported sale price
      of
      the Common Stock or the closing price quoted on the Nasdaq Capital Market or
      on
      any exchange on which the Common Stock is listed, whichever is applicable,
      as
      reported by Bloomberg L.P. for the five (5) trading days prior to the date
      of
      the Company’s receipt of this Warrant and delivery of the properly endorsed
      Notice of Exercise and notice of Holder’s election to exercise without
      cash.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (c) Issuance
      of Shares.
      This
      Warrant shall be deemed to have been exercised immediately prior to the close
      of
      business on the date of its surrender for exercise as provided above, and the
      person entitled to receive the Warrant Shares issuable upon such exercise shall
      be treated for all purposes as the holder of record of such shares as of the
      close of business on such date. As promptly as practicable on or after such
      date
      and in any event within ten (10) days thereafter, the Company at its expense
      shall issue and deliver to the person or persons entitled to receive the same
      a
      certificate or certificates for the number of Warrant Shares issuable upon
      such
      exercise. In the event that this Warrant is exercised in part, the Company
      at
      its expense will execute and deliver a new Warrant of like tenor exercisable
      for
      the remaining number of Warrant Shares for which this Warrant may then be
      exercised.

     

    4. No
      Fractional Shares or Scrip. No
      fractional shares or scrip representing fractional shares shall be issued upon
      the exercise of this Warrant. In lieu of any fractional share to which the
      Holder would otherwise be entitled (after aggregating all shares that are being
      issued upon such exercise), the Company shall make a cash payment equal to
      the
      Exercise Price multiplied by such fraction.

     

    5. Replacement
      of Warrant. On
      receipt of evidence reasonably satisfactory to the Company of the loss, theft,
      destruction or mutilation of this Warrant and, in the case of loss, theft or
      destruction, on delivery of an indemnity agreement reasonably satisfactory
      in
      form and substance to the Company or, in the case of mutilation, on surrender
      and cancellation of this Warrant, the Company at its expense shall execute
      and
      deliver, in lieu of this Warrant, a new warrant of like tenor and
      amount.

     

    6. Rights
      of Stockholders. Subject
      to Sections 9 and 11 of this Warrant, the Holder shall not be entitled to vote
      or receive dividends or be deemed the holder of the Warrant Shares or any other
      securities of the Company that may at any time be issuable on the exercise
      hereof for any purpose, nor shall anything contained herein be construed to
      confer upon the Holder, as such, any of the rights of a stockholder of the
      Company or any right to vote for the election of directors or upon any matter
      submitted to stockholders at any meeting thereof or to give or withhold consent
      to any corporate action (whether upon any recapitalization, issuance of stock,
      reclassification of stock, change of par value, or change of stock to no par
      value, consolidation, merger, conveyance, or otherwise) or to receive notice
      of
      meetings, or to receive dividends or subscription rights or otherwise until
      this
      Warrant shall have been exercised as provided herein.

     

    7. Transfer
      of Warrant.

     

    (a) Warrant
      Register. The
      Company will maintain a register (the “Warrant
      Register”)
      containing the names and addresses of the Holder or Holders. Any Holder of
      this
      Warrant or any portion thereof may change its address as shown on the Warrant
      Register by written notice to the Company requesting such change. Any notice
      or
      written communication required or permitted to be given to the Holder may be
      delivered or given by mail to such Holder as shown on the Warrant Register
      and
      at the address shown on the Warrant Register. Until this Warrant is transferred
      on the Warrant Register of the Company, the Company may treat the Holder as
      shown on the Warrant Register as the absolute owner of this Warrant for all
      purposes, notwithstanding any notice to the contrary.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (b) Warrant
      Agent. The
      Company may, by written notice to the Holder, appoint an agent for the purpose
      of maintaining the Warrant Register referred to in Section 7(a) above, issuing
      the Warrant Shares or other securities then issuable upon the exercise of this
      Warrant, exchanging this Warrant, replacing this Warrant, or any or all of
      the
      foregoing (the “Warrant
      Agent”).
      Thereafter, any such registration, issuance, exchange or replacement, as the
      case may be, shall be made at the office of the Warrant Agent.

     

    (c) Transferability
      and Negotiability of Warrant. This
      Warrant may not be transferred or assigned in whole or in part without
      compliance with all applicable federal and state securities laws by the
      transferor and the transferee (including the delivery of investment
      representation letters and legal opinions reasonably satisfactory to the
      Company, if such are requested by the Company). Subject to the provisions of
      this Warrant with respect to compliance with the Securities Act of 1933, as
      amended (the “Act”),
      title
      to this Warrant may be transferred by endorsement (by the Holder executing
      the
      Assignment Form annexed hereto) and delivery in the same manner as a negotiable
      instrument transferable by endorsement and delivery.

     

    (d) Exchange
      of Warrant Upon a Transfer. Upon
      surrender of this Warrant for exchange, properly endorsed on the Assignment
      Form
      and subject to the provisions of this Warrant with respect to compliance with
      the Act and with the limitations on assignments and transfers contained in
      this
      Section 7, the Company at its expense shall issue to or on the order of the
      Holder a new warrant or warrants of like tenor, in the name of the Holder or
      as
      the Holder (on payment by the Holder of any applicable transfer taxes) may
      direct, for the number of shares issuable upon exercise hereof.

     

    (e) Compliance
      with Securities Laws.

     

    (i) The
      Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
      and
      the Warrant Shares to be issued upon exercise hereof are being acquired for
      investment purposes, and that the Holder will not offer, sell or otherwise
      dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof
      except under circumstances that will not result in a violation of the Act or
      any
      state securities laws.

     

    (ii) This
      Warrant and all Warrant Shares issued upon exercise hereof or conversion thereof
      shall be stamped or imprinted with a legend in substantially the following
      form
      (in addition to any legend required by state securities laws):

     

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
      SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
      STATEMENT IN EFFECT WITH RESPECT THERETO UNDER SUCH ACT AND APPLICABLE LAWS
      OR
      AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE
      LAWS
      OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
      IS
      NOT REQUIRED.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    8. Reservation
      of Stock. The
      Company covenants that during the Term, the Company will reserve from its
      authorized and unissued Common Stock a sufficient number of shares to provide
      for the issuance of the Warrant Shares upon the exercise of this Warrant and,
      from time to time, will take all steps necessary to amend its Certificate or
      Articles of Incorporation (the “Certificate”)
      to
      provide sufficient reserves of Warrant Shares issuable upon exercise of this
      Warrant. The Company further covenants that all Warrant Shares that may be
      issued upon the exercise of rights represented by this Warrant and payment
      of
      the Exercise Price, all as set forth herein will be duly and validly authorized
      and issued, fully paid and nonassessable and free from all taxes, liens and
      charges in respect of the issue thereof (other than taxes in respect of any
      transfer occurring contemporaneously therewith). The Company agrees that its
      issuance of this Warrant shall constitute full authority to its officers who
      are
      charged with the duty of executing stock certificates to execute and issue
      the
      necessary certificates for the Warrant Shares upon the exercise of this
      Warrant.

     

    9. Notices.

     

    (a) Whenever
      the Exercise Price or the shares purchasable hereunder shall be adjusted
      pursuant to Section 11 hereof, the Company shall issue a certificate signed
      by
      its Chief Financial Officer setting forth, in reasonable detail, the event
      requiring the adjustment, the amount of the adjustment, the method by which
      such
      adjustment was calculated, and the Exercise Price and the shares purchasable
      hereunder after giving effect to such adjustment, and shall cause a copy of
      such
      certificate to be mailed (by first-class mail, postage prepaid) to the Holder
      of
      this Warrant.

     

    (b) In
      case:

     

    (i) the
      Company shall take a record of the holders of its Common Stock (or other stock
      or securities at the time receivable upon the exercise of this Warrant) for
      the
      purpose of entitling them to receive any dividend or other distribution, or
      any
      right to subscribe for or purchase any shares of stock of any class or any
      other
      securities, or to receive any other right, or

     

    (ii) of
      any
      capital reorganization of the Company, any reclassification of the capital
      stock
      of the Company, any consolidation or merger of the Company with or into another
      corporation or entity, or any conveyance of all or substantially all of the
      assets of the Company to another corporation or entity, or

     

    (iii) of
      any
      voluntary or involuntary dissolution, liquidation or winding-up of the
      Company,

     

    then,
      and
      in each such case, the Company will mail or cause to be mailed to the Holder
      or
      Holders a notice specifying, as the case may be, (A) the date on which a record
      is to be taken for the purpose of such dividend, distribution or right, and
      stating the amount and character of such dividend, distribution or right, or
      (B)
      the date on which such reorganization, reclassification, consolidation, merger,
      con-veyance, dissolution, liquidation or winding-up is to take place, and the
      time, if any is to be fixed, as of which the holders of record of Common Stock
      (or such stock or securities at the time receivable upon the exercise of this
      Warrant) shall be entitled to exchange their shares of Common Stock (or such
      other stock or securities) for securities or other property deliverable upon
      such reorganization, reclassification, consolidation, merger, conveyance,
      dissolution, liquidation or winding-up. Such notice shall be mailed at least
      20
      days prior to the record date specified in (A) above or 30 days prior to the
      date specified in (B) above.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    10. Amendments
      and Waivers.

     

    (a) Except
      as
      provided in Section 10(b) below, this Warrant, or any provision hereof, may
      be
      amended, waived, discharged or terminated only by a statement in writing signed
      by the party against which enforcement of the change, waiver, discharge or
      termination is sought.

     

    (b) Any
      term
      or condition of this Warrant may be amended with the written consent of the
      Company and the Holder. Any amendment effected in accordance with this Section
      10(b) shall be binding upon the Holder and each future holder of this Warrant
      and the Company. 

     

    (c) No
      waivers of, or exceptions to, any term, condition or provision of this Warrant,
      in any one or more instances, shall be deemed to be, or construed as, a further
      or continuing waiver of any such term, condition or provision.

     

    11. Adjustments.
      The
      Exercise Price and the shares purchasable hereunder are subject to adjustment
      from time to time as follows:

     

    (a) Merger,
      Sale of Assets, etc.
      If at
      any time while this Warrant is outstanding and unexpired there shall be (i)
      a
      reorganization (other than a combination, reclassification, exchange or
      subdivision of shares otherwise provided for herein), (ii) a merger or
      consolidation of the Company with or into another corporation in which the
      Company is not the surviving entity, or (iii) a sale or transfer of the
      Company’s properties and assets as, or substantially as, an entirety to any
      other corporation or other entity, then, as a part of such reorganization,
      merger, consolidation, sale or transfer, lawful provision shall be made so
      that
      the holder of this Warrant shall thereafter be entitled to receive upon exercise
      of this Warrant, during the period specified herein and upon payment of the
      Exercise Price then in effect, the number of shares of stock or other securities
      or property of the successor corporation or other entity resulting from such
      reorganization, merger, consolidation, merger, sale or transfer that a holder
      of
      the shares deliverable upon exercise of this Warrant would have been entitled
      to
      receive in such reorganization, consolidation, merger, sale or transfer if
      this
      Warrant had been exercised immediately before such reorganization, merger,
      consolidation, sale or transfer, all subject to further adjustment as provided
      in this Section 11. The foregoing provision of this Section 11(a) shall
      similarly apply to successive reorganizations, consolidations, mergers, sales
      and transfers and to the stock or securities of any other corporation or other
      entity that are at the time receivable upon the exercise of this Warrant. If
      the
      per-share consideration payable to the Holder for shares in connection with
      any
      such transaction is in a form other than cash or marketable securities, then
      the
      fair market value of such consideration shall be determined in accordance with
      Section 3(b)(ii). In all events, appropriate adjustment (as determined in good
      faith by the Company’s Board of Directors) shall be made in the application of
      the provisions of this Warrant with respect to the rights and interests of
      the
      Holder after the transaction, to the end that the provisions of this Warrant
      shall be applicable after that event, as near as reasonably may be, in relation
      to any shares or other property deliverable after that event upon exercise
      of
      this Warrant.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (b) Reclassification,
      etc.
      If the
      Company, at any time while this Warrant remains outstanding and unexpired,
      by
      reclassification of securities or otherwise, shall change any of the securities
      as to which purchase rights under this Warrant exist into the same or a
      different number of securities of any other class or classes, this Warrant
      shall
      thereafter represent the right to acquire such number and kind of securities
      as
      would have been issuable as the result of such change with respect to the
      securities that were subject to the purchase rights under this Warrant
      immediately prior to such reclassification or other change and the Exercise
      Price therefor shall be appropriately adjusted, all subject to further
      adjustment as provided in this Section 11.

     

    (c) Split,
      Subdivision or Combination of Shares.
      If the
      Company at any time while this Warrant remains outstanding and unexpired shall
      split, subdivide or combine the securities as to which purchase rights under
      this Warrant exist, into a different number of securities of the same class,
      the
      Exercise Price for such securities shall be proportionately decreased in the
      case of a split or subdivision or proportionately increased in the case of
      a
      combination and the number of such securities shall be proportionately increased
      in the case of a split or subdivision or proportionately decreased in the case
      of a combination.

     

    (d) Adjustments
      for Dividends in Stock or other Securities or Property.
      If
      while this Warrant remains outstanding and unexpired, the holders of the
      securities as to which purchase rights under this Warrant exist (including
      without limitation securities into which such securities may be converted)
      at
      the time shall have received, or, on or after the record date fixed for the
      determination of eligible stockholders, shall have become entitled to receive,
      without payment therefor, other or additional stock or other securities or
      property (other than cash) of the Company by way of dividend, then and in each
      case, this Warrant shall represent the right to acquire, in addition to the
      number of shares of the security receivable upon exercise of this Warrant,
      and
      without payment of any additional consideration therefor, the amount of such
      other or additional stock or other securities or property (other than cash)
      of
      the Company that such holder would hold on the date of such exercise had it
      been
      the holder of record of the security receivable upon exercise of this Warrant
      (or upon such conversion) on the date hereof and had thereafter, during the
      period from the date hereof to and including the date of such exercise, retained
      such shares and/or all other additional stock available by it as aforesaid
      during such period, giving effect to all adjustments called for during such
      period by the provisions of this Section 11.

     

    (e) Calculations.
      All
      calculations under this Section 11 shall be made to the nearest four decimal
      points.

     

    (f) No
      Impairment.
      The
      Company will not, by amendment of its charter or through reorganization,
      consolidation, merger, dissolution, sale of assets or any other voluntary
      action, avoid or seek to avoid the observance or performance of any of the
      terms
      of this Warrant, but will at all times in good faith assist in the carrying
      out
      of all such terms and in the taking of all such action as may be necessary
      or
      appropriate in order to protect the rights of the holder of this Warrant against
      impairment.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    12. Saturdays,
      Sundays and Holidays.
      If the
      last or appointed day for the taking of any action or the expiration of any
      right granted herein shall be a Saturday, Sunday or legal holiday, then
      (notwithstanding anything herein to the contrary) such action may be taken
      or
      such right may be exercised on the next succeeding day that is not a Saturday,
      Sunday or legal holiday.

     

    13. Call
      Provision.
      If,
      after the Warrant Issue Date and the date when all the shares underlying this
      Warrant Vest, the closing price of the Common Stock for each of 20 consecutive
      trading days (the “Measurement
      Period”,
      which
      20 consecutive trading day period shall not have commenced prior to the Warrant
      Issue Date) equals or exceeds 214.29% of the then Exercise Price (the
“Threshold
      Price”),
      at
      any time during a calendar month commencing after December 31, 2007, the Company
      shall have the right, within one trading day following the end of such
      Measurement Period, to call for cancellation all or any portion of this Warrant
      for which a Notice of Exercise has not yet been delivered by the Holder (such
      right, a “Call”).
      To
      exercise this right, the Company shall deliver to the Holder an irrevocable
      written notice (a “Call
      Notice”),
      indicating therein the portion of the unexercised portion of this Warrant to
      which such notice applies, along with cash consideration equal to $.001 for
      each
      Warrant Share subject to the Call. Any portion of this Warrant subject to such
      Call Notice for which a Notice of Exercise shall not have been received by
      the
      Call Date will be cancelled at 5:00 p.m. (Eastern Standard Time) on the tenth
      trading day after the date the Call Notice is received by the Holder (such
      date
      and time, the “Call
      Date”).
      Any
      unexercised portion of this Warrant to which the Call Notice does not pertain
      will be unaffected by such Call Notice. In furtherance thereof, the Company
      covenants and agrees that it will honor all Notices of Exercise with respect
      to
      Warrant Shares subject to a Call Notice that are tendered through 5:00 p.m.
      (Eastern Standard Time) on the Call Date. The parties agree that any Notice
      of
      Exercise delivered following a Call Notice which Calls less than all the
      Warrants shall first reduce to zero the number of Warrant Shares subject to
      such
      Call Notice prior to reducing the remaining Warrant Shares available for
      purchase under this Warrant. For example, if (x) this Warrant then permits
      the
      Holder to acquire 100 Warrant Shares, (y) a Call Notice pertains to 75 Warrant
      Shares, and (z) prior to 5:00 p.m. (Eastern Standard Time) on the Call Date
      the
      Holder tenders a Notice of Exercise in respect of 50 Warrant Shares, then (1)
      on
      the Call Date the right under this Warrant to acquire 25 Warrant Shares will
      be
      automatically cancelled, (2) the Company, in the time and manner required under
      this Warrant, will have issued and delivered to the Holder 50 Warrant Shares
      in
      respect of the exercises following receipt of the Call Notice, and (3) the
      Holder may, until the last day of the Term, exercise this Warrant for 25 Warrant
      Shares (subject to adjustment as herein provided and subject to subsequent
      Call
      Notices). Subject again to the provisions of this Section 2(f), the Company
      may
      deliver subsequent Call Notices for any portion of this Warrant for which the
      Holder shall not have delivered a Notice of Exercise.

     

    14. Governing
      Law.
      This
      Warrant shall be governed by and construed in accordance with the laws of the
      State of Delaware applicable to agreements made and to be performed entirely
      within such State, without regard to the conflicts of law principles of such
      State.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    15. Binding
      Effect.
      The
      terms of this Warrant shall be binding upon and inure to the benefit of the
      Company and the Holder and their respective successors and assigns.

     

    

     

    [SIGNATURE
      PAGE FOLLOWS]

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      United
      Heritage Corporation has caused this Warrant to be executed by its officers
      thereunto duly authorized.

     

    
      	Dated:
              _____________________________________	 	 
	 	 	 	 
	HOLDER:
              Blackwood Capital Limited	UNITED
              HERITAGE CORPORATION
	 	 	 	 
	By:	
            	By:	
            
	 	
              
                

              

              Name:
                Andrew Taylor-Kimmins

              Its:
                Authorized Signatory

            	 	
              
                
Name:

              Title:

            

    

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    NOTICE
      OF EXERCISE

     

    (1) The
      undersigned hereby (A) elects to purchase _______ shares of Common Stock of
      UNITED
      HERITAGE CORPORATION,
      pursuant to the provisions of Section 3(b)(i) of the attached Warrant, and
      tenders herewith payment of the purchase price for such shares in full, or
      (B)
      elects to exercise this Warrant for the purchase of_______ shares of Common
      Stock, pursuant to the provisions of Section 3(b)(ii) of the attached
      Warrant.

     

    (2) In
      exercising this Warrant, the undersigned hereby confirms and acknowledges that
      the shares of Common Stock to be issued upon exercise hereof are being acquired
      for investment purposes, and that the undersigned will not offer, sell or
      otherwise dispose of any such shares of Common Stock except under circumstances
      that will not result in a violation of the Securities Act of 1933, as amended,
      or any applicable state securities laws.

     

    (3) Please
      issue a certificate or certificates representing said shares of Common Stock
      in
      the name of the undersigned or in such other name as is specified
      below:

     

     

    
      	 	 	 	  

	 	 	 	(Name)
	 	 	 	 
	 	 	 	 
	 	 	 	  
	 	 	 	(Name)

    

     

    (4) Please
      issue a new Warrant for the unexercised portion of the attached Warrant in
      the
      name of the undersigned or in such other name as is specified
      below:

     

    
       

      
        	 	 	 	 	  

	 	 	 	 	(Name)
	 	 	 	 	 
	 	 	 	 	 
	  	 	   	 	 
	(Date)	 	(Signature)	 	 

      

       

    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    ASSIGNMENT

     

    FOR
      VALUE RECEIVED,
      the
      undersigned registered owner of this Warrant hereby sells, assigns and transfers
      unto the Assignee named below all of the rights of the undersigned under the
      within Warrant, with respect to the number of shares of Common Stock set forth
      below:

     

    
      	
              Name
                of Assignee

            	
              Address

            	
              No.
                of Shares

            
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

    

    

    and
      does
      hereby irrevocably constitute and appoint ____________________________ Attorney
      to make such transfer on the books of UNITED
      HERITAGE CORPORATION,
      maintained for the purpose, with full power of substitution in the
      premises.

     

    The
      undersigned also represents that, by assignment hereof, the Assignee
      acknowledges that this Warrant and the shares of stock to be issued upon
      exercise hereof are being acquired for investment purposes, and that the
      Assignee will not offer, sell or otherwise dispose of this Warrant or any shares
      of stock to be issued upon exercise hereof except under circumstances which
      will
      not result in a violation of the Securities Act of 1933, as amended, or any
      applicable state securities laws. 

    

    Dated:
      _________________________

     

    
      	 	 	  

	 	 	Signature of
              Holder

    

     

     

    
      
        
        

      

      
        18exhibit_10-4.htm

    
      
        

      

    

    Exhibit
      10.4

     

    Purchase
      and Sale Agreement

    

    CANDAK
      AREA, NORTH DAKOTA

    

     

    This
      Agreement made January 16, 2008

     

    BETWEEN:

     

    JED
      OIL (USA) INC.,

    a
      body
      corporate, registered to carry on business in the State of Nevada

     and
      having an office in the town of Didsbury, Alberta

    (hereinafter
      called the “Transferor”)

     

    -
      and
      -

     

    JAYHAWK
      ENERGY INC.,

    a
      body
      corporate, registered to carry

    on
      business in the State of Colorado and having an office in the town of
      Broomfield

    (hereinafter
      called the “Transferee”)

     

     

    Whereas
      Transferor wishes to sell and the Transferee wishes to purchase the Assets,
      the
      Parties agree as follows:

    

    

    
      	
              1.

            	
              Definitions

            

    

    

    
      	
               

            	
              Each
                capitalized term used in this Head Agreement will have the meaning
                given
                to it in the 2000 CAPL Property Transfer Procedure (hereinafter referred
                to as the “Property Transfer Procedure”). In
                addition:

            

    

    

    
      	
              (a)  

            	
              “Closing
                Date” means 3:00 p.m. on January 25th, 2008, or such other time and date
                as may be agreed upon in writing by the
                Parties.

            

    

    

    
      	
              (b)  

            	
              “Effective
                Date” means January 1, 2008.

            

    

    

    

    
      	
              2.

            	
              Schedules

            

    

    

    
      	
               

            	
              The
                following Schedules are attached hereto and made part of this
                Agreement:

            

    

    

    
      	
              (a)  

            	
              Schedule
                “A”, which is the Land Schedule, and
                identifies:

            

    

    

    
      	
               

            	
                    
                  (i)

            	
              the
                Lands;

            

    

    

    
      	
               

            	
                    
                 (ii)

            	
              the
                Leases;

            

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
                    
                 (iii)

            	
               
                any other agreements, documents or data that are to be excluded from
                the
                Miscellaneous Interests under that
                definition;

            

    

    

    
      	
              (iv)  

            	
                 any
                encumbrances;

            

    

    

    
      	
              (v)  

            	
                 any
                Rights of First Refusal;

            

    

    

    
      	
              (vi)  

            	
                 production
                sale agreements;

            

    

    

    
      	
               (vii)  

            	
                 other
                agreements, penalties or restrictions by contract on the use of the
                Assets
                required to be included in the Land Schedule under the definition
                of
                Permitted Encumbrances or the definition of Title and Operating
                Documents;

            

    

     

    
      	
               (viii)  

            	
                 any
                Facilities required to be included in the Land Schedule under the
                definition of Facilities, any other Tangibles described in Paragraph
                (c)
                of the definition of Tangibles and any assets otherwise falling within
                the
                definition of Tangibles that are specifically excluded therefrom;
                and

            

    

    

    
      	
              (ix)  

            	
                  the
                Wells;

            

    

    

    
      	
              (x)  

            	
                 any
                lawsuits and claims;

            

    

    

    
      	
              (xi)  

            	
                 any
                default notices;

            

    

    

    
      	
              (xii)  

            	
                 any
                outstanding AFE’s;

            

    

    

    
      	
              (xiii)  

            	
                
                any knowledge of environmental matters under Clause 6.02(k) of the
                Property Transfer Procedure;

            

    

    

    
      	
              (xiv)  

            	
                
                any areas of mutual interest; and

            

    

    

    
      	
              (xv)  

            	
                
                any commitments to deliver under Clause 6.02(t) of the Property Transfer
                Procedure.

            

    

    

    
      	
              (b)  

            	
              Schedule
                “B”, which is the Property Transfer Procedure, including the Exhibit
                thereto that is the form of the General Conveyance.  For
                clarity, this Schedule “B” to the Agreement includes a summary sheet that
                indicates the elections and rates in the Property Transfer Procedure
                that
                have been agreed to by the Parties.  A blank copy of the
                Property Transfer Procedure, including the Exhibit thereto that is
                the
                form of the General Conveyance, is attached to such summary sheet
                of the
                elections and rates for the Property Transfer Procedure.  The
                Parties shall deem that such summary sheet of the elections and rates
                of
                the Property Transfer Procedure shall operate as having the same
                effect as
                if such elections and rates were physically typed into the copy of
                the
                Property Transfer Procedure included in Schedule
                “B”.

            

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    
      	
              3.

            	
              Purchase
                and Sale

            

    

    

    

    
      	
               

            	
              (a)

            	
              The
                Transferor agrees to dispose of the Assets to the Transferee and
                the
                Transferee agrees to purchase the Assets from the Transferor on the
                terms
                and conditions set forth in this
                Agreement.

            

    

    

    
      	
               

            	
              (b)

            	
              Subject
                to the modifications that may be made under the Property Transfer
                Procedure, the consideration payable by the Transferee to the Transferor
                for the Assets is $ 3,500,000.00, plus any interest that accrues
                under
                Clause 2.04 of the Property Transfer Procedure.  The Purchase
                Price shall be allocated among the Assets as
                follows:

            

    

    

    
      	
               

            	
               

            	
               

            
	
                       (i)
                To Petroleum and Natural Gas Rights

            	
              $    
                2,799,990.00

            	
               

            
	
              (ii)    (ii) To
                Tangibles

            	
              $      
                 700,000.00

            	
               

            
	
              (iii)   (iii)
                To Miscellaneous Interests

            	
              $                
                10.00

            	
               

            
	
              Total

            	
               $3,500,000.00

            	
               

            

    

    

    
      	
               

            	
                   The GST
                payable on the Tangibles and Miscellaneous Interests
                totals

            
	
               

            	
                   $
                NOT APPLICABLE

            

    

     

    **(Note
      that Parties will have to examine the GST issue where any fee simple/freehold
      interests or other real

        property
      interests are to be purchased by Transferee prior to finalizing this Clause
      and
      Clause 2.03 A of the

        Property
      Transfer Procedure).

    

    
      	
              (c)  

            	
              The
                Transferee will pay the Purchase Price to the Transferor
                as

            

    

             follows:

    

    
      	
              (i)  

            	
              the
                delivery of ten percent (10%) of the Purchase Price, representing
                a
                Deposit towards the Purchase Price, payable on or before January
                18, 2008;
                and

            

    

    

    
      	
              (ii)  

            	
              at
                Closing, the delivery of the remainder of the Purchase Price (ie.
                the
                Purchase Price less the Deposit made under Clause 3(c)(i) hereof),
                any
                interest that accrues under Clause 2.04 of the Property Transfer
                Procedure.

            

    

    

    
      	
              4.

            	
              Additional
                Conditions

            

    

    

    
      	
              (a)  

            	
              The
                following additional condition precedent is included for the benefit
                of
                the

            

    

    Transferee
      under Clause 10.02(d) of the Property Transfer Procedure:

    

    (i)
      Environmental Review:   The Transferee will have completed
      a review of

        the
      environmental condition of the Assets prior to January 15, 2008,
      through

        which
      the Transferee is satisfied, acting reasonably, with the
      environmental

        condition
      of the Assets.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    In
      witness whereof the Parties have duly executed this Agreement.

     

     

    
      	
               

              JED
                OIL (USA) INC.

               

              Per:____________________

               

               

              Per:____________________

               

            	
               

              JAYHAWK
                ENERGY INC.

               

              Per:____________________

               

               

              Per:____________________

            

    

     

    This
      is
      the execution page of that certain Purchase and Sale Agreement dated January
      16,
      2008 between JED OIL (USA) INC., as Transferor, and JAYHAWK ENERGY INC., as
      Transferee.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    This
      is SCHEDULE "A" to a Purchase and Sale Agreement dated

    

    January
      16, 2008

    

    between
      JED OIL (USA) INC. and JAYHAWK ENERGY INC.

    

    (1)
      162
      pages constitute the Land Schedule for the Agreement.

    (2)  see
      item (1)

    (3)  see
      item (1)

    (4)  see
      item (1)

    (5)  no
      Rights of First Refusal

    (6)  See
      attachment dated August 25, 2006 between SemCrude and Jed Oil
      USA  Contract Number SC060032.

    (7)
      C
      01245 Lease Acquisition and Exploration Agreement with attached AAPL
      Form   610 – 1989 Operating Agreement

    (8)
      See
      attachment labeled Surface Lease Equipment

    (9)
      Kearney 4-25H-T164N R97W5PM

         Erickson
      1-27H T164N R97W5PM

         Landstrom  1-33H
      T164N R97W5PM

         Burner
      1-34H T164N R97W5PM

         Schultz
      5-26H T164N R97W5PM

    (10)
      $3.6
      million against Jed Oil Inc. by Portside Growth and Opportunity Fund, breach
      of
      10% convertible note

     (contact
      Marcia Johnston V.P. legal and Corporate affairs, at
      1-403 335-2105)

    (11)
      No
      Default Notices

    (12)
      No
      Outstanding A.F.E.’s

    (13)No
      knowledge of any environmental concerns

    (14)
      Yes,
      AMI contained in Contract 01245

    (15)
      None

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    This
      is Schedule “B” to a Purchase and Sale Agreement dated

    January
      16, 2008

    

    between
      JED OIL (USA) INC. and JAYHAWK ENERGY INC.

    

    SUMMARY
      SHEET OF ELECTIONS AND RATES FOR THE

    PROPERTY
      TRANSFER PROCEDURE

    

    

    1.         GST
      (Subclause 2.03A):     (i)   GST
      Election:  Alternate __NA (USA
      Properties)_

                                                              
      (ii)  GST Business #: NA

    

    2.         Interest
      Accrual (Clause 2.04):  Alternate 1
.

    

    3.         Place
      of Closing (Clause 3.01):  Office of: Western Divestments,
      2020, 801- 6th

    Avenue
      S.W Calgary, AB T2P 3W2

    

    4.         Access
      to Transferee’s Files (Subclause 3.04B):  60
      months

    

    5.         Distribution
      of Specific Conveyances (Clause 3.05):   Alternate
__2___

    

    6.         Final
      Statement of Adjustments (Paragraph
      4.02A(b))   _180_day period

    

    7.         Treatment
      of Income During Interim Period (Clause 4.03):  Alternate
1

    Income
      Tax Adjustment if Alternate 1 applies: ___%  NOT
      APPLICABLE

    Exception
      to 4.03A if Alt. 1 applies (Subclause
      4.03B):  will__X_/ will
      not_____

    apply
      NOT APPLICABLE

    

    
      	
              8.

            	
              Transferor’s
                Representations and Warranties (Clause 6.02).  Those
                representations and warranties in that Clause that apply are indicated
                by
                a Y below.

            
	
               

              __   (a)
                Residency for Tax Purposes

              _Y_
                (b) Lawsuits and Claims

              _Y_
                (c) No Default Notices

              _Y_
                (d) Compliance with Leases

              _Y_
                (e) Payment of Royalties

              _Y_
                (f) Encumbrances

              _Y_
                (g) No Reduction

              _Y_
                (h) Sale Agreements

              _Y_
                (i) Provision of Documents

              _Y_
                (j) Authorized Expenditures

              _Y_
                (k) Environmental Matters

              _Y_
                (l) Condition of Wells

               

            	
               

              _Y_
                (m) Abandonment of Wells

              _Y_
                (n) Condition of Tangibles

              _Y_
                (o) Well/Tangibles Lic. Transfers

              _  _
                (p) Reg. Production Penalties

              __   (q)
                Reg. Production Allowables

              _Y_
                (r) Area of Mutual Interest

              ___
                (s) No Offset Obligations

              _Y__
                (t) Commitment to Deliver

              ___
                (u) ARTC

              _Y_
                (v) Quiet Enjoyment

              ___
                (w) Additional Representations

            

    

    9.        
      Survival of Representations and Warranties (Clause
      6.04)  __12___ months.

    

    10.       Option
      to Terminate Re ROFR Exercises (Subclause 7.01D): will___/ will
      not__X__apply

    

    11.      
      Delivery of Title Defects Notice (Subclause
      8.02A):  _5_ Business Days.

    

    12.      
      Title Defects Mechanism (Subclause
      8.02B):  Alternate:__1__

           
If
      Alternate
      2 applies  (i)   $ Value threshold (Sublclause
      8.02B): 

                                                             
        ten percent (10%) of the Purchase Price

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

                         (ii)  Transferor’s
      termination threshold (Paragraph 8.02B(c))):

                                                             
       Not Applicable

    

                        
      (iii) Transferee’s termination threshold (Paragraph 8.02B(d)):

                                                            
       Not Applicable

    

    13.         Responsibility
      of Transferor (Clause 13.01):

     

    
                            (i) 
        Subclause 13.01A:  Alternate __2__

                        (ii)  Subclause
        13.01B:  _12_ months

    

        

    14.        
      Limit of Transferor’s Responsibility (Subclause
      13.03A):  will _X_ / will not__apply.

    

    15.         Minimum
      Claim Threshold (Subclause 13.03B):  will ___ / will
      not__X__
      apply.

                                  $
      Threshold if Subclause B applies: $____________.

    

    16.         Address
      for Service (Clause 15.02):

    
      	
               

              JED
                OIL (USA) INC.

              Box
                1420

              1601-15th
                Avenue

              Didsbury,
                Alberta

              T0M
                0W0

               

              Attention:  Land
                Department

               

              Fax
                No. (403) 335-8391

               

            	
               

              Jayhawk
                Energy Inc.

              370
                Interlocken Blvd Suite 400

              Broomfield,
                CO 80021

               

               

               

              Attention:  Land
                Department

               

              Fax
                No. (303) 327-1574

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    SURFACE
      LEASE EQUIPMENT

     

    Burner
      1-34

    

    1           HG
      640-365-192 Pumping
      unit                                                              2005

    1           32
      HP  C-106 Gas Engine

    1           12’X12’
      Engine
      House                                                                          2005

    1           50#
      WP 6’x32’ Vertical
      Treater                                                            2005

    1           10’x12’
      Treater
      House                                                                           2005

    1           Solar
      Ignitor at pit

    1           400
      BBL Fibreglass Water
      Tank                                                          2005

    2           400
      BBL welded cone bottom oil
      tanks                                              2005

    1           Monel
      35601 recycle pump w/5.5 hp Honda

    1           Superior
      Beam chemical pump

    

    

    Landstrom  1-33

    

    1           HG
      640-365-192 Pumping
      Unit                                                             2005

    1           Ajax
      Gas Engine

    1           12’X12’
      Engine
      House                                                                          2005

    1           75#WP
      6’x20’ Vertical
      Treater                                                             2005

    1           12’x12’
      Treater
      House                                                                           2005

    1           Solar
      Ignitor at pit

    1           400
      BBL Fibreglass Water
      Tank                                                          2005

    2           400
      BBL steel welded Oil
      Tanks                                                          2005

    1           Monel
      35601 recycle pump w/5.5 hp Honda

    

    Kearney  4-24

    

    1           HG
      912-365-192 Pumping
      Unit                                                              2005

    1           32HP
      C-106 Gas Engine

    1           12’X12’
      Engine
      House                                                                           2005

    1           75#WP
      6’x20’ Vertical
      Treater                                                              2005

    1           12’x12’
      Treater
      House                                                                           
2005

    1           Solar
      Ignitor at pit

    1           400
      BBL Fibreglass Water
      Tank                                                           2005

    2           400
      BBL steel welded Oil
      Tanks                                                           2005

    1           Monel
      35601 recycle pump w/5.5 hp Honda

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    Schutz
      5-26H

    

    1           HG
      912-365-192 Pumping
      Unit                                                              2005

    Ser#
      QB050808.16109

    1           32HP
      C-106 Gas Engine

    Ser#
      302981

    1           12’X12’
      Engine
      House                                                                           2005

    1           75#WP
      6’x20’ Vertical Treater
      coated                                                 2005

    1           12’x12’
      Treater
      House                                                                           
2005

    1           Solar
      Ignitor at pit

    1           400
      BBL Fibreglass Water Tank
      Ser#1178                                        
2005

    2           400
      BBL steel welded Oil
      Tanks                                                          2005

    Ser#
      7273,7262, 7263

    1           Monel
      35601 recycle pump w/5.5 hp Honda

    Ser#
      ZM1541605

    1           Superior
      Beam chemical pump

    

    Erickson
      1-27

    

    1           HG
      912-365-192 Pumping
      Unit                                                              2005

    1           Ajax
      Gas Engine

    1           12’X12’
      Engine
      House                                                                           2005

    1           75#WP
      6’x20’ Vertical
      Treater                                                              2005

    1           12’x15’
      Treater
      House                                                                           
2005

    1           Solar
      Ignitor at pit

    1           400
      BBL Fibreglass Water
      Tank                                                           2005

    3           400
      BBL welded cone bottom oil
      tanks                                               2005

    1           Monel
      35601 recycle pump w/5.5 hp Honda

    1           Superior
      Beam chemical pump

    

    GENERAL
      AREA EQUIPMENT

    

    H2S
      personal monitoring device

    2
      Portable Scott Air Packs

    Trailer
      Mounted Portable Gas Meter

    Centrifuge

    Fax/Copier

    Office
      Trailer and Lot located at Crosby City – Crosby Acres Lot 1A Block
      1

    2
      Pop
      Tanks

    Any
      remaining material is property of Jayhawk

    1
      Fluid
      Level Gun (Jed invoice # 13331 for $9,000.00)

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