Document:

Unassociated Document

    EXHIBIT
      10.1

     

    ASSIGNMENT

    OF

    FARMOUT
      INTEREST

    

    THIS
      ASSIGNMENT is made and entered into, by and between, West Canyon Energy Corp.,
      also known as PetroSouth Energy Corp. hereinafter collectively referred to
      as
“Assignor”, and Cobra Oil & Gas Company, hereinafter
      referred to as “Assignee”.

    

    WHEREAS,
      this Assignment concerns and effects a change in ownership of a 25% interest
      in
      and to that certain Farmout Agreement dated February 1, 2008 (FOA copy attached)
      by and between Transco Oil & Gas, Inc. (TOG) as Farmor and the Assignor (set
      out above) to this Assignment. Assignor is the owner and holder of a 25%
      interest in and to the FOA to the “North Semitropic Prospect” (Prospect) more
      fully described in the FOA and located in Kern County, California. Assignor
      hereby agrees to transfer Assignor’s 25% interest in the FOA to Assignee along
      with all rights, benefits and obligations therein stated. Assignee hereby agrees
      to accept said 25% interest in the FOA herein assigned along with all rights,
      benefits and obligations therein stated. Assignee acknowledges that the drilling
      and testing of the Prospect is eminent, and failure to meet cash calls as per
      the FOA will result in a loss of interest in the FOA and Prospect. Assignee
      states that it has read and fully understands the FOA and hereby accepts same
      and agrees to abide by all the terms and conditions therein stated.

    

    WHEREAS,
      this Assignment is made in accordance with and expressly subject to the terms
      and provisions of the FOA and shall become immediately affective upon execution
      by both Assignor and Assignee and approval of TOG as Farmor to the FOA stated
      above.

    

    NOW,
      THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and other good
      and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, Assignor does hereby convey, transfer and assign to Assignee
      all
      of Assignor’s right, title and interest in and to the said FOA and Prospect
      described above. 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    This
      Assignment shall inure to and be binding upon the respective successors and
      assigns of the parties hereto.

    

    IN
      WITNESS WHEREOF, this Assignment is executed the day and year as set out
      below.

    

    
      	
              ASSIGNOR:

              Dated:  16
                June 2008

              West Canyon Energy Corp.

              (aka PetroSouth Energy Corp.)

            	
              ASSIGNEE:

              Dated:  16
                June 2008

              Cobra
                Oil & Gas Company

            

    

    
      	 	 	 	 	 
	By:	/s/
              Fred B.
              Zaziski	 	By:	/s/
              Massimiliano
              Pozzoni
	 	
              
Fred
              B. Zaziski - Chairman
              
              20333
                State Hwy. 249

              Suite
                200 - 113

              Houston,
                TX 77070

            	 	 	
              
                

              

              Max Pozzoni - President

              Uptown Center

              2100 West Loop South

              Suite 900

              Houston, TX 77027

            

    

     

     

    APPROVED
      by TOG as Farmor:

    Dated:  17
      June
      2008

    Transco
      Oil & Gas, Inc.

     

    
      	 	 	 	 	 
	By:	/s/
              Larry J.
              Messmer	 	 	 
	 	
              

              Larry
                J. Messmer - President

              11605
                Meridian Market View

              Unit
                124, # 303

              Falcon,
                CO 80831

            	 	 	
            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

       

    

    Farmout
      Agreement

     

    “North
      Semitropic Prospect”

     

    This
      Farmout Agreement (“FOA”), when accepted and agreed to by the undersigned
      parties, shall set forth the terms, conditions and covenants under which Transco
      Oil & Gas, Inc. hereinafter referred to as “Farmor” and those entities
      listed on the signature page, hereinafter referred to collectively as “Farmee”
shall pursue the exploration and development of the North Semitropic Prospect
      Area (prospect). This is a “Drill to Earn” Farmout Agreement and interest will
      be earned in the entire +/-2.390 acre leasehold by Farmee after drilling the
      initial test well as set out below. All operations will be conducted in
      accordance with the mineral lease agreements. In consideration of the mutual
      terms and covenants provided in this FOA, Farmor and Farmee agree as
      follows:

     

    
      	 	
              1.

            	
              Farmor
                is the owner of certain Oil & Gas Leases covering +/-2,390 net acres
                located in Kern County, California and more specifically set out
                in the
                attached Exhibit “A” and the Lease Schedule. This FOA is a binding
                agreement and is entered into by the parties concurrently with the
                industry model form Joint Operating Agreement (JOA), attached as
                Exhibit
                “B” and covering the operations to be conducted on the North Semitropic
                Prospect. Execution of this FOA will serve as constructive execution
                of
                the JOA which is attached as Exhibit “B”. The specific intent of Farmor in
                granting this Farmout Agreement is to cause the drilling of the first
                test
                well to +/- 14.000' to exploit the productive potential of two (2)
                specific target horizons, the fractured Monterey Shale at +/- 10,000
                ft.
                estimated vertical depth and the Freeman Jewett/Vedder Sand at +/-
                14,000
                ft. estimated vertical depth. The operations for drilling and testing
                shall be conducted as per the AFE & Drilling Program attached to the
                JOA as Exhibit “H” and are subject to change by the
                Operator.

            

    

     

    
      	 	
              2.

            	
              Property
                subject to this FOA is described on Exhibit “A” attached hereto and hereby
                made apart of this FOA, as well as the Lease Schedule. Also described
                on
                Exhibit “A” is the Area of Mutual Interest (AMI) between Farmor and
                Farmee. The current Net Leasehold Acreage is +/- 2,390. The net leasehold
                is subject to updates as additional leases are acquired within the
                AMI.
                Subsequent to executing this FOA and payment of the Prospect Acquisition
                Fee, Farmee shall be responsible for its pro-rata share of delay
                rentals
                on the leasehold. The decision to acquire new leases within the AMI
                shall
                be by mutual agreement between Farmor and Farmee. The costs to acquire
                new
                leases within the AMI shall be shared proportionately among Farmee
                according to interest held in the
                Prospect.

            

    

     

    
      	 	
              3.

            	
              Farmor
                and Farmee agree that Farmor and/or its assignees including Farmor’s
                originating geologist will collectively retain the specified 6% of
                8/8ths
                Overriding Royalty Interests (ORR!) and 15% Back-In Working Interests
                (BIWI) as set out in Exhibit “A”. Said ORRI and BIWI shall cover the
                current Leaseholds, future Leaseholds and all Lands within the AMI
                as set
                out in the attached Exhibit “A”. The ORRI shall be free and clear of any
                and all costs for lease acquisitions, drilling, completions, operating,
                re­ works, etc. and shall receive their specific ORRI percentage of
                gross revenues based on 100% of production sales. Farmor’s 15% WI shall
                have the option, on a well by well basis, to participate on a follow
                up
                well or maintain the 15% BIWI which shall be on a per well basis
                and after
                payout of all new lease acquisitions, hard drilling & completion costs
                and well operating costs.

            

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	 	
              4.

            	
              Transco
                Oil & Gas, Inc. or its appointee shall be the initial Operator and win
                deliver to the drilling partners (Farmee) a 77.00% Net Revenue Interest
                (NRI) on the drill site acreage. Farmee collectively will earn 100%
                Working Interest in the first test well Before Pay Out (BPO), to
                become an
                85% Working Interest After Pay Out (APO) on a per well basis. Farmees
                collectively, shall be responsible for 100% of the Prospect acquisition,
                estimated drilling, testing and completion cost for the first test
                well,
                T.D. +/- 14,000 ft. (Monterey & FJ/Vedder
                test).

            

    

     

    
      	 	
              5.

            	
              Originating
                Geologist Fee: A fee of $10,000 on follow up wells shall be paid
                to Tom
                Fassio which includes updating all geology/geophysical interpretations
                based on new data acquired from previous wells. This fee will also
                cover
                well site geology/geophysics consulting during drilling and completion
                operations.

            

    

     

    
      	 	
              6.

            	
              Estimated
                costs for the first test well.

            

    

     

    
      	
              Prospect
                Acquisition:

            	
              $537,750

            	
              +/-
                $225 / acre for GG&L + OH

            
	
              Drilling
                14,000':

            	
              1,500,000*

            	
              Variable
                Costs, as per current AFE.

            
	
              Completion:

            	
              900,000*

            	
              Completion
                in FJ/Vedder.

            
	 	
              $2,937,750

            	
              *See
                attached AFEs, subject to change.

            
	 	 	 
	 	 	 

    

    
      	 	
              7.

            	
              Should
                the +/- 14,000' test of the FJ/Vedder result in a dry hole, the well
                will
                be plugged back and based on favorable log evaluations, a completion
                made
                in the fractured Monterey Shale at +1- 10,000'. As per current AFE,
                the
                call for completion in the Monterey Shale will be about $1,100,000
                including a +/- 1,000' horizontal
                leg.

            

    

     

    
      	 	
              8.

            	
              Additional
                Test Wells: An election (drilling commitment) by Farmee for a test
                well to
                evaluate the deep Eocene structure (+/-16,500') must be made within
                12
                months and spud no longer than 18 months from date of spudding the
                first
                test well as called for herein. Failure by Farmee to elect and spud
                will
                result in deep rights reverting to Farmor and Farmee retaining all
                rights
                to 100 ft. below deepest vertical drill
                depth.

            

    

     

    
      	 	
              9.

            	
              The
                designated Operator will., as soon as practical after full execution
                of
                Agreements covering 100% of the working interest and payment in full
                of
                the Prospect Acquisition Fee, initiate the permitting process and
                contract
                for a drilling rig for a mutually agreeable move in date. The first
                test
                well shall be drilled to +/14,000'.

            

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
      	 	
              10.

            	
              The
                Prospect Acquisition fee listed above is due and payable to Farmor
                upon
                signing of this FDA. Farmee shall retain that percentage of the Prospect
                in relation to the percentage of the Prospect Acquisition Fee paid
                by
                Farmee to Farmor. All subsequent «Cash Calls” by the Operator for the
                above listed Drilling & Completion funds as per the latest AFE shall
                be made following full execution of this FDA. All Cash Calls for
                Drilling
                & Completion funds and/or any cost overruns are due within 10 days
                after Operator issues a Cash Call. Failure to meet a Cash Call for
                funds
                as called for herein shall result in Farmee forfeiting all working
                interest ownership and previously paid in funds to
                Farmor.

            

    

     

    
      	 	
              11.

            	
              Farmee
                acknowledges it has reviewed the attached IDA (Exhibit «B''), all
                leasehold and technical data to Farmee's satisfaction. Farmee agrees
                to
                and acknowledges that upon execution of this FOA and thereafter,
                all or
                any portion of this Prospect is subject to prior sale until such
                time as
                Farmee has paid the Farmee entire pro-rata share (see signature page)
                of
                the Prospect Acquisition Fee due to Farmor. Farmee further acknowledges
                that Farmor has granted an option on at least 25% of the Prospect
                to
                another company until March 31, 2008. In the event of a prior sale
                any
                refund of previously paid funds due Farmee shall be paid to Farmee
                promptly by Farmor.

            

    

     

    
      	 	
              12.

            	
              Confidentiality
                & Representation: Farmee may utilize the displays and exhibits that
                Farmor has delivered to Farmee for the purpose of evaluating the
                Prospect
                and facilitating the drilling of the first test well. However, Farmee
                agrees not to use Farmor’s name in verbal discussions or on any copies
                that Farmee intends to show to any 3rd parties. Farmee agrees that
                all
                data relating to the Prospect is highly proprietary in nature and
                no
                copies of said data will be given to 3rd parties without Farmor's
                written
                approval. Farmee agrees that no interests of any nature in the Prospect
                will be pledged, conveyed or placed of record without Farmor's written
                approval. This FOA, all Prospect data and dealings between Farmee
                and
                Farmor are to be held strictly confidential and not to be disclosed
                to any
                3rd party without written approval from both parties to this FOA.
                Excepting that this FOA may be disclosed to the company that is currently
                holding an option on the Prospect which is referred to in paragraph
                II
                above.

            

    

     

    
      	 	
              13.

            	
              Hold
                Harmless & Indemnification: Farmee, its individual principal officers,
                directors and affiliates (Farmee, etal) hereby agree to fully indemnify,
                defend and hold harmless Farmor from any and all losses, legal actions
                and
                liabilities of any nature that arise as a result of Farmee, etal
                discussions or dealings with any 3rd party with regard to the Prospect.
                Farmee, etal agrees that the Prospect shall be kept free and clear
                of any
                liens, encumbrances and/or legal actions so as to allow Farmor the
                full
                enjoyment of the Prospect. In the event the Prospect is clouded as
                a
                result of Farmee, etal actions, then Farmee, etal agrees to individually
                and corporately stand ready to reimburse Farmor for all losses and/or
                expenses incurred to clear Prospect of any and all
                clouds.

            

    

     

    
      	 	
              14.

            	
              Prospect
                Acquisition Fee: It is agreed that Farmee shall pay to Farmor a deposit
                of
                $34,000 toward the Prospect Fee set out below. The balance due shall
                be
                paid to Farmor immediately once 100% of the Prospect is sold. In
                the event
                the Prospect is not fully sold within 90 days from the date below
                then
                Farmee may request and receive a full refund of the
                deposit.

            

    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

       

    

    This
      FOA
      may be signed in counterparts all constituting a single agreement. Farmee and
      Farmor have signed this FOA which will act as constructive execution of the
      accompanying JOA (Exhibit “B”). This FOA when signed will become the governing
      agreement and will prevail over any conflicts between this FOA and the
      JOA.

     

    
      	 	 	
              Farmor:
                Transco Oil & Gas, Inc.

            
	 	 	 
	 	 	
              By: 
                /s/ Larry J. Messmer 

            
	
               

              Dated:
                1 February 2008

            	 	
              Larry
                J. Messmer - President

              7643
                McLaughlin Rd., # 215

              Falcon,
                CO 80831

              (719)
                520-3208 / (719) 635-6181

            
	 	 	 
	
              Farmee:

            	 	
              WI
                BPO

            	
              WI
                APO

            	
              %
                of Cost

            	
              Prospect
                Fee

            
	
              PetroSouth
                Energy Corp.

            	 	 	 	 	 
	 	 	
              25%

            	
              21.25%

            	
              25%

            	
              $134,437.50

            
	
              By: /s/
                Fred B. Zaziski  

            	 	 
	
              Fred
                B. Zaziski - Chairman

            	 	
              Above
                percentages and dollars to be adjusted as per exercise of prior sales
                or
                options and proportionate to the amount of the total prospect fee
                paid by
                Farmee.

            
	
              Print
                Name & Title

            
	 	 	 
	
              Address:

            	 	 
	 	 	 
	
              20333
                State Highway 249, Ste. 200 - 113

              Houston,
                TX 77070

              (281)
                378-1563 / (281) 271-8600

            	 	 
	
              Phone
                & Fax

            	 	 

    

     

    
      
         

      

      
        6Unassociated Document

    EXHIBIT
      10.2

     

    FORMAL
      AGREEMENT

    

    This
      formal farm-out agreement (hereinafter referred to as the “Agreement”) is
      between Coastal Petroleum Company (hereinafter referred to as “Coastal”) and
      Cobra Oil & Gas Company (hereinafter referred to as “Cobra”). Coastal and
      Cobra are sometimes collectively referred to as the “Parties”.

    

    This
      Agreement is referred to in a Memorandum of Intent signed by the Parties on
      May
      22, 2008, and when executed will replace that Memorandum of Intent and govern
      the rights of the Parties.

    

    In
      consideration of the premises, mutual covenants and obligations herein
      contained, the Parties agree as follows:

    

    
      	 	
              A.

            	
              LEASES

            

    

    

    Coastal
      has identified an area containing a series of shallow and deep prospects, the
      Starbuck Prospects. Coastal owns leases on 82,801.38 gross mineral acres
      (82,801.38 net acres) in Valley County, Montana (the “Leases”) that include the
      Starbucks Prospects. The Leases are 100% working and at least between 75.5
      and
      80.5% net revenue leases. A copy of the Schedule of Leases is enclosed herewith
      as Attachment A.

    

    
      	 	
              B.

            	
              AREA
                OF MUTUAL INTEREST

            

    

    

    An
      Area
      of Mutual Interest (AMI) shall exist within four miles of the boundaries of
      the
      Leases. Areas of Mutual Interest established under Coastal’s prior third party
      agreements that are still in effect are excluded from this AMI. 

    

    
      	 	
              C.

            	
              INTENTION
                OF THE PARTIES

            

    

    

    Coastal’s
      intention is to grant to Cobra a right to purchase a 50% working interest in
      the
      Leases for a period of two years from the date of the MOI, for a consideration
      of $180,000. To exercise the right to purchase, notice must be given of Cobra’s
      agreement to pay $1,000,000 toward Coastal’s drilling costs and the requirements
      under section E herein must be fulfilled. Following the exercise of Cobra’s
      right to purchase, the Parties would each pay 50% of the cost of wells in which
      they both participate and each be entitled to 50% of the revenues of wells
      in
      which they both participate. Cobra’s intention is to acquire the total of the
      working interests Coastal intends to farmout.

    

    
      	 	
              D.

            	
              COBRA
                TO ACQUIRE A RIGHT TO PURCHASE A 50%

              WORKING
                INTEREST IN THE
                LEASES.

            

    

     

    In
      order
      to acquire the right to purchase a 50% interest in the Leases (“the Interest”)
      for a period of two years, Cobra has paid Coastal the sum of $180,000. During
      this two year period Cobra is not obligated to drill any well on the property,
      until and unless it exercises the right to purchase the Interest. However,
      if
      Cobra desires to perform geologic analyses or drill a well before it has
      purchased the Interest, it shall pay the full cost of such analyses or well
      or
      wells and be entitled to a 50% working interest in the spacing unit of the
      well
      or wells if a successful well is drilled. No portion of the cost paid by Cobra
      to perform such analyses or drill such wells shall apply to the $1,000,000
      required to be paid by Cobra to complete the acquisition of the Interest. If
      Coastal desires to drill a well before Cobra has given notice of its intent
      to
      exercise its right to acquire the Interest and Cobra does not participate in
      the
      well, Coastal will pay the full cost of the well and be entitled to 100% of
      the
      working interest in the spacing unit of the well. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 	
              E.

            	
              EXERCISE
                BY COBRA OF RIGHT TO ACQUIRE A 50%

              INTEREST
                IN THE
                LEASES

            

    

     

    In
      order
      for Cobra to complete the acquisition of the 50% interest Coastal is offering,
      Cobra and Coastal agree that:

    

    
      	 	
              1.

            	
              At
                the time of Cobra’s intent to exercise the right to acquire the 50%
                interest in the Leases, but no later than May 22, 2010, Cobra shall
                send
                Coastal a letter exercising the right to acquire and agreeing to
                pay to
                Coastal or for Coastal’s benefit, the sum of $1,000,000 toward the cost of
                drilling wells on the Leases.

            

    

    
      	 	
              2.

            	
              When
                a well is proposed in which Cobra participates, Cobra will pay both
                its
                share and Coastal’s share of the cost of such well, until such time as it
                has paid the $1,000,000 toward Coastal’s share of costs.
                

            

    

    
      	 	
              3.

            	
              When
                a well is proposed in which Cobra does not participate, Cobra will
                pay the
                full cost of such well up to the $1,000,000, or whatever portion
                of the
                $1,000,000 remains to be paid by Cobra at that
                time.

            

    

    
      	 	
              4.

            	
              At
                the time of full payment, Coastal shall assign the 50% undivided
                working
                interest in the Leases to Cobra.

            

    

    

    
      	 	
              F.

            	
              RENTALS:

            

    

    

    Once
      Cobra is assigned its 50% interest under the leases, Coastal and Cobra shall
      each pay their proportionate share of the delay or other rentals on the Leases.
      Coastal shall be the party which actually submits the rentals to the lessors.
      Coastal shall give sixty days notice to Cobra of the date when rentals are
      due
      and Cobra shall pay its share, whatever that may be at the time, within fifteen
      days of the date of the notice to Coastal. Coastal shall pay the rentals
      advanced. In the event that either party elects not to pay its portion of the
      rentals to any part of the Lease it shall give the other party at least sixty
      days notice of its intention not to pay rentals and the other party may do
      so
      and retain that portion of the Lease as its sole property, less and excluding
      any producing units where the party’s rights continue and no rentals were due.

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	 	
              G.

            	
              FAILURE
                TO FULFILL REQUIREMENTS:

            

    

    

    In
      the
      event that Cobra completes the requirements of Paragraph E above, Cobra shall
      have earned a 50% undivided working interest in the Leases. In the event that
      Cobra fails to timely meet any of the requirements of Paragraph E. then Cobra
      shall earn no interest at all in the Leases.

    

    
      	 	
              H.

            	
              SUBSEQUENT
                EXPLORATION OF THE LEASES:

            

    

    

    After
      Cobra earns its 50% undivided interest in the Leases, either party may propose
      a
      well within the Leases or additional acreage acquired within the area of mutual
      interest. The other party may opt-in or opt-out of the proposed well, on a
      well
      by well basis. If the other party opts-in, the drilling shall proceed with
      both
      Parties paying their share of the costs. If the other party opts-out of the
      proposed well the party opting out shall have no interest in the spacing unit
      of
      that well, but the party opting out shall retain its right to participate in
      any
      other well drilled as a development well or exploratory well following the
      well
      the party has opted out of.

    

    
      	 	
              I.

            	
              WELL
                INFORMATION:

            

    

    

    Each
      party shall furnish the other party with daily drilling reports, logs, DST
      results, results of other tests performed, and production reports on any well
      it
      drills under this Agreement.

     

    
      	 	
              J.

            	
              OPERATING
                AGREEMENT:

            

    

    

    All
      operations for the joint account of Coastal and Cobra on the Leases shall be
      in
      accordance with the terms and provisions of the model Joint Operating Agreement
      attached hereto and made a part of this Agreement as Exhibit “B”. Coastal shall
      be designated Operator except where it declines to participate in the drilling
      of a well or wells by Cobra, in which case, Cobra may elect to act as operator
      and owner of such well or wells, so long as it meets the following
      qualifications: Cobra shall be registered to do business in Montana; shall
      be
      bonded and provide proof of insurance to Coastal; and shall not commence
      operations until a notice of change of operator has been filed and accepted
      by
      the proper authorities, or in the alternative, a permit has been granted in
      Cobra’s name 

    

    
      	 	
              K.

            	
              TIME
                OF THE ESSENCE:

            

    

    

    It
      is
      understood that time is of the essence of this Agreement, and no provision
      hereof shall be modified nor waived except in writing.

    

    
      	 	
              L.

            	
              AREA
                OF MUTUAL INTEREST
                ACQUISITIONS:

            

    

    

    The
      Area
      of Mutual Interest exists within four miles of the boundaries of the Leases.
      Each party shall offer to the other party the right to participate for its
      then
      current share of the interest in the Leases in the acquisition of any lease
      or
      other interest that party may have the option to acquire, at the same percentage
      of the cost of acquisition. In the event that the other party declines to
      participate, then that lease or other interest shall become outside this AMI
      and
      the other party shall have no interest under the AMI rights as to that lease
      or
      interest acquired. Areas and AMIs established by or included in Coastal’s
      existing third party agreements are excluded from this AMI. A party may propose
      geological investigations of whatever character within the AMI, and that party
      shall offer to the other party the right to participate in the costs and results
      of the proposed geological investigation. In the event that the other party
      declines to participate, then that party shall have no right to the information
      and data from the geological investigation. However, declining to participate
      in
      the geological investigation shall not affect that party’s right to participate
      in any well proposed by the party.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	 	
              M.

            	
              FORCE
                MAJEURE:

            

    

    

    In
      the
      event any party hereof is prevented from complying with any of the obligations
      imposed upon it hereunder, or from exercising any of the rights granted to
      it
      hereunder, as a result of an act of God, or any other cause, whether similar
      or
      dissimilar, reasonably proved beyond the control of such party, the time within
      which said party may perform such obligations or exercise such rights shall
      be
      extended for a period equal to the time during which said party was prevented
      from the performance of such obligations, or the exercise of such rights. The
      party having the difficulty shall take all reasonable steps to remedy such
      condition as rapidly as possible.

     

    
      	 	
              N.

            	
              NOTICES:

            

    

    

    All
      notices and other communications given or made pursuant to this Agreement shall
      be in writing and shall be deemed effectively given: (a) upon personal delivery
      to the party to be notified, (b) when sent by confirmed electronic mail or
      facsimile if sent during normal business hours of the recipient, and if not
      so
      confirmed, then on the next business day, (c) five (5) days after having been
      sent by registered or certified mail, return receipt requested, postage prepaid,
      or (d) one (1) day after deposit with a nationally recognized overnight courier,
      specifying next day delivery, with written verification of receipt. All
      communications shall be sent to the respective Parties at their address as
      set
      forth below or to such e-mail address, facsimile number or address as
      subsequently modified by written notice given in accordance with this Section.
      

    

    
      	
              Coastal
                Petroleum Company

              Post
                Office Box 609

              Apalachicola,
                Florida 32329

               

              Telephone
                Number: 850-653-2732

              Fax
                Number: 850-653-2732

            	
              Cobra
                Oil & Gas Company

              Uptown
                Center

              2100
                West Loop South, Suite 900

              Houston,
                Texas 77027

               

              Telephone
                Number:

              Fax
                Number:

            

    

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
      	 	
              O.

            	
              LEGAL
                ACTIONS: 

            

    

    

    If
      any
      action at law or in equity (including arbitration) is necessary to enforce
      or
      interpret the terms of any of this Agreement, the prevailing party shall be
      entitled to reasonable attorney’s fees, costs and necessary disbursements in
      addition to any other relief to which such party may be entitled.

     

    
      	 	
              P.

            	
              AMENDMENTS:

            

    

     

    Any
      term
      of this Agreement may be amended, terminated or waived only with the written
      consent of each of the Parties hereto.

     

    	 	
            Q.
              

          	
            SEVERABILITY:

          

     

    The
      invalidity or unenforceability of any provision hereof shall in no way affect
      the validity or enforceability of any other provision.

     

    	 	
            R.

          	
            DELAY
              NO WAIVER OF REMEDIES:

          

    

    No
      delay
      or omission to exercise any right, power or remedy accruing to any party under
      this Agreement, upon any breach or default of any other party under this
      Agreement, shall impair any such right, power or remedy of such non-breaching
      or
      non-defaulting party nor shall it be construed to be a waiver of any such breach
      or default, or an acquiescence therein, or of or in any similar breach or
      default thereafter occurring; nor shall any waiver of any single breach or
      default be deemed a waiver of any other breach or default theretofore or
      thereafter occurring. Any waiver, permit, consent or approval of any kind or
      character on the part of any party of any breach or default under this
      Agreement, or any waiver on the part of any party of any provisions or
      conditions of this Agreement, must be in writing and shall be effective only
      to
      the extent specifically set forth in such writing. All remedies, either under
      this Agreement or by law or otherwise afforded to any party, shall be cumulative
      and not alternative.

     

    
      	 	
              S.
                

            	
              ENTIRE
                AGREEMENT:

            

    

     

    This
      Agreement (including the Exhibits hereto), constitute the full and entire
      understanding and agreement between the Parties with respect to the subject
      matter hereof, and any other written or oral agreement relating to the subject
      matter hereof existing between the Parties are expressly canceled.

     

    
      	 	
              T.

            	
              ARBITRATION:

            

    

     

    The
      Parties agree that any unresolved controversy or claim arising out of or
      relating to this Agreement, except as: (i) otherwise provided in this
      Agreement, or (ii) any such controversies or claims arising out of either
      party’s intellectual property rights for which a provisional remedy or equitable
      relief is sought, shall be submitted to arbitration by one arbitrator mutually
      agreed upon by the Parties, and if no agreement can be reached within thirty
      (30) days after names of potential arbitrators have been proposed by the
      American Arbitration Association (the “AAA”),
      then
      by one arbitrator having reasonable experience in oil and gas transactions
      of
      the type provided for in this Agreement and who is chosen by the AAA. The
      arbitration shall take place in Tallahassee, Florida, in accordance with the
      AAA
      rules then in effect, and judgment upon any award rendered in such arbitration
      will be binding and may be entered in any court having jurisdiction thereof.
      There shall be limited discovery prior to the arbitration hearing as follows:
      (a) exchange of witness lists and copies of documentary evidence and documents
      relating to or arising out of the issues to be arbitrated; (b) depositions
      of all party witnesses; and (c) such other depositions as may be allowed by
      the
      arbitrators upon a showing of good cause. Depositions shall be conducted in
      accordance with the Florida Code of Civil Procedure, the arbitrator shall be
      required to provide in writing to the Parties the basis for the award or order
      of such arbitrator, and a court reporter shall record all hearings, with such
      record constituting the official transcript of such proceedings. The prevailing
      party shall be entitled to reasonable attorney’s fees, costs, and necessary
      disbursements in addition to any other relief to which such party may be
      entitled. Each of the Parties to this Agreement consents to personal
      jurisdiction for any equitable action sought in the U.S. District Court for
      the
      Northern District of Florida or any court of the State of Florida having subject
      matter jurisdiction.

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

       

      
        	 	
                U.
                  

              	
                DATE:

              

    

    

    The
      date
      of this Agreement is June 10, 2008.

     

    
      	Coastal Petroleum
              Company	 	Cobra Oil & Gas
              Company
	 	 	 	 	 
	By:	/s/ Phillip
              W. Ware	 	By:	/s/ Max
              Pozzoni
	 	
              

              Phillip
                W. Ware, President

            	 	 	
              

              Max
                Pozzoni, President

            

    

     

    
      
         

      

      
        6

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