Document:

exv10w8

 

Exhibit 10.8

Advanced Drilling Services, LLC

10600 N De Anza Blvd Suite 250

Cupertino, Ca 95014

Mr. Alan David Goddard

SIERRA EQUITY GROUP, INC

7700 Congress Avenue Suite 3207

Boca Raton, FL 33487

     Re: Selling Agreement (the “Agreement”)

Dear Mr. Goddard:

     Advanced Drilling Services, LLC., a Delaware limited liability company (the “Seller”
or the “Company”), proposes to offer and sell (the “Offering”),(i) a minimum of
6,400,000 Class B Membership Units ( the “Units” or “Offered Securities”) and (ii)
a maximum of 11,200,000 Units to selected investors, upon the terms set forth in the Subscription
Agreement and the Confidential Private Placement Memorandum (which collectively, together with the
attachments and exhibits thereto, is referred to as the “Offering Document”), a copy of
which has been delivered to you. The minimum investment per subscriber is 40,000 Units ($50,000.00)
unless waived by the Company. All of the Units offered hereby are being sold by the Company in an
offering with a price of $1.25 per Unit.

     Sierra Equity Group, Inc. (the “Selling Agent”) agrees to offer and sell, on a non
exclusive “best efforts” basis, the Offered Securities during the offering period described in the
Offering Document (the “Offering Period”). Capitalized terms used and not otherwise defined
herein shall have the respective meanings set forth in the Offering Document. In connection with
all offers and sales of the Units in the Offering: It is understood that the offer and sale of the
securities in the Offering will be exempt from the registration requirements of the Securities Act
of 1933, as amended (the “Securities Act”), pursuant to Section 506 of Regulation D
thereof. Selling Agent will not directly or indirectly, make any offer or effect any sale of the
Shares or of securities of the same or a similar class as the securities in the Offering if as a
result the offer and sale of the securities in the Offering contemplated hereby would fail to be
entitled to the exemption from the registration requirements of the Securities Act provided for in
Section 506 of Regulation D of the Securities Act. As used herein, the terms “offer” and “sale”
have the meanings specified in section 2(3) of the Securities Act.

     The Seller hereby confirms its agreement with Selling Agent as follows:

     1. Offer and Sale of Offered Securities by Selling Agent; Compensation; Closing.

          1.1 On the basis of Selling Agent’s representations, covenants and warranties, the Seller
appoints Selling Agent as a non-exclusive co-placement agent of the Seller as of February 26, 2007
and ending on May 26, 2007, unless extended by the Seller for a period not to exceed an additional
ninety (90) days (“Offering Termination Date”), to use Selling Agent’s best efforts to
offer and sell, on the terms and conditions set forth in this

 

 

Agreement and in the Offering Document, subject to Selling Agent’s right to engage and supervise
participating broker-dealers pursuant to Section 2 hereof. The Selling Agent hereby accepts such
appointment and agrees pursuant to the terms and conditions set forth herein and in the Offering
Document to use its best efforts to offer and sell the Offered Securities as agent for the Seller
during the period specified above, and to attempt to find suitable accredited purchasers for the
Offered Securities acceptable to the Seller.

          1.2 The Company reserves the right, in its sole discretion to reject any subscription by any
investor and to hold multiple closings (each, a “Closing”). At each Closing, the Company
will cause to be issued to each investor whose Subscription Agreement, funds and other required
deliverables as described in the Offering Document have been accepted by the Company, the number of
Units purchased by the investor.

          1.3 As compensation for the Selling Agent’s services hereunder, the Seller shall pay to
Selling Agent selling commissions (“Commission”), from the Offered Securities sold by the
Selling Agent, consisting of a cash payment equal to 8% of aggregate gross proceeds from said
Offered Securities sold directly by the Selling Agent and received by the Company, and the issuance
of warrants (“Warrants”) to Selling Agent for the purchase of up to 10% of the total number
of Units issued to investors that are sold directly by Selling Agent in the Offering or its
authorized Participating Broker-Dealer approved by Seller. Such Warrants shall have an exercise
price equal to $1.25, a cashless exercise provision and a five year term, and the Warrants shall
otherwise be in the same form and shall contain the same provisions set forth in Offering Document
including the same registration rights as Investors. Said Commission and Warrants shall be paid at
each Closing.

          1.4 In addition, the Selling Agent will perform financial advisory services to the Seller with
respect to matters, including but not limited to, a potential merger transaction. The Selling Agent
shall receive the following compensation with respect to its financial advisory services: At the
Closing of the Offering where the Company closes on Offering proceeds which, collectively with all
prior Closing, equal an aggregate of at $3,000,000 sold by the Selling Agent, Selling Agent shall
receive a total of 500,000 warrants exercisable for Units with a three year term (the “Advisory
Warrants”), issued as follows: 100,000 warrants at $1.25 per Unit, 200,000 warrants at $1,375
per Unit, and 200,000 warrants at $1,50 per Unit, and the Advisory Warrants shall have a cashless
exercise provision, a five year term, and shall otherwise be in the same form and shall contain the
same provisions set forth in Offering Document including the same registration rights as Investors.

          1.5 At each Closing of the Offering, the Seller shall pay the Selling Agent its Commission
relating to the sale of the Offered Securities that are subject of the Closing provided that the
Seller or counsel for the Seller has received all funds and documents, including but not limited
to, an executed Subscription Agreement for each investor and other required deliverables as
described in the Offering Document (the “Subscription Documents”) previously furnished to
Selling Agent which the Selling Agent is required to deliver to the Seller or counsel for the
Seller prior to Closing. All or any portion of such Commission may be re-allowed to Participating
Broker-Dealers (as hereinafter defined), subject to applicable securities laws. No Offered
Securities shall be considered to have been sold by Selling Agent or any Participating
Broker-Dealer selected by Selling Agent unless the purchaser is acceptable to the Seller, and no
compensation will be payable with respect to any agreement for the

 

 

purchase of Offered Securities if the Subscription Documents therefore are not actually accepted by
the Seller. Anything in this Agreement to the contrary notwithstanding, the Seller shall not be
required to pay a Commission to Selling Agent and Selling Agent shall not be entitled to a
Commission or additional Warrants, pursuant to this Section 1.5 or any other provision, if to do so
would cause the Seller to violate federal or state securities laws, regulations or rules or any
other law applicable to the Offering. For purposes of clarity, the Selling Agent shall not be
entitled to any Commission (or Warrants) upon the future exercise of the Warrants or Advisory
Warrants to the Selling Agent or any selling agent, or warrants, if any, sold as part of the Units
or in the Offering.

          1.6 The Seller will pay all of its costs relating to the Offering contemplated hereby,
including, without limitation, audit expenses, issuance costs and taxes, counsel fees for the
preparation of the Offering Documents, filing fees and disbursements of counsel relating to the
qualification of the Offered Securities under federal securities laws, and legal fees and expenses
of counsel in connection with qualifying the Offered Securities under the state blue sky laws. To
the extent required by law, the Seller shall qualify the Offered Securities for offer and sale in
those jurisdictions designated by the Selling Agent and reasonably acceptable to the Seller. The
Seller’s counsel shall be responsible for state blue sky securities laws compliance by the Seller.

          1.7 Once the Offered Securities are sold, or the Offering Period terminates, the agency
between the Seller and the Selling Agent shall terminate. The Selling Agent, on the basis of the
representations and warranties herein contained, but subject to the terms and conditions herein set
forth, accepts such appointment as the limited agent of the Seller and agrees to use its best
efforts to find purchasers for the Offered Securities.

          1.8 Each Closing shall be held at the place of the Seller’s choice in such time and date as
Seller deems appropriate.

          1.9 Each investor shall receive registration rights as set forth in the Registration Rights
Agreement attached as Exhibit C to the Offering.

     2. Participating Broker-Dealers. Subject in each case to the Company’s prior written
approval, which shall not be unreasonably withheld, the Seller hereby authorizes Selling Agent to
engage and supervise other qualified broker-dealers (the “Participating Broker-Dealers”) to
assist the Selling Agent in the placement of the Offered Securities; provided that (i) during all
times that each such Participating Broker-Dealer shall offer and sell the Offered Securities, and
(ii) each such Participating Broker-Dealer shall be registered as a broker-dealer under the
Securities Exchange Act of 1934 (the “1934 Act”), shall be a member in good standing of the
National Association of Securities Dealers, Inc. (“NASD”), and shall be authorized to offer and
sell the Offered Securities under the laws of the jurisdictions in which the Offered Securities
will be offered and sold by such Participating Broker-Dealer. Any commissions, fees, or expenses
payable to such Participating Broker-Dealers will be paid by the Selling Agent and not by the
Seller.

     3. Representations, Warranties and Covenants.

 

 

          3.1 The Seller represents, warrants and covenants to Selling Agent that, except as set forth
in the Offering Document:

               (a) The Seller and each subsidiary is a limited liability company duly formed and validly
existing and in good standing under the laws of the jurisdiction of its formation as in effect on
the date of this Agreement, with adequate power and authority to enter into and perform this
Agreement and to own its property and to conduct its business as described in the Offering
Document; and the Seller and each subsidiary is duly qualified as a foreign entity to transact
business and is in good standing in each jurisdiction in which it owns or leases substantial
properties or in which the conduct of its business requires such qualification except for such
jurisdictions in which the failure to qualify in the aggregate would not have material and adverse
effect on the assets, liabilities, earnings, affairs, business or prospects of the Seller or any
such subsidiary (a “Material Adverse Effect”) and in which jurisdictions such failure may
be cured without such Material Adverse Effects; the execution and delivery of this Agreement,
Warrant, Registration Rights, Subscription Agreement and other transaction documents (collectively
the “Transaction Documents”) by the Seller has been duly and validly authorized and will
not result in a breach of its Certificate of Formation or Operating Agreement, as amended; and when
executed and delivered by both parties hereto, this Agreement will be a valid and binding
obligation of the Seller, assuming the due execution by the Selling Agent, enforceable in
accordance with its terms (except to the extent that enforceability of the indemnification
provisions may be limited under applicable securities laws and except as enforcement may be limited
by bankruptcy, moratorium or other laws affecting creditors’ rights or general principles of
equity); and the execution and delivery of this Agreement, the consummation of the transactions
herein contemplated and compliance with the terms of this Agreement by the Seller do not and will
not conflict with or result in a breach of any of the terms or provisions of, or constitute a
default under, any agreement or any applicable law, rule, regulation, judgment, order or decree of
any government, government instrumentality or court, domestic or foreign, having jurisdiction over
the Seller, to which the Seller is a party or by which it is bound; and does not otherwise conflict
with any permit, license, authorization, franchise, commitment or with any agreement, loan, note
indenture, mortgage, license, lease or other agreement;

               (b) The Offering Document does not contain and will not contain, at any time between the date
hereof and to and including the date of each Closing, any untrue statement of a material fact and
does not omit nor during such period will omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under which they
were made, not misleading;

               (c) Except as is otherwise disclosed, there is no litigation or governmental proceeding
pending or, to the best of its knowledge, threatened against or involving the property or business
of the Seller or any subsidiary of the Seller that would result in a Material Adverse Effect or
would otherwise adversely affects the validity or enforceability of this Agreement or Transaction
Documents or Company’s ability to consummate the Offering;

               (d) Except as is otherwise disclosed, the Company is not in violation of any permit, the
Certificate of Formation or Operating Agreement, as amended, no material defaults exist in the due
performance and observance of any material obligation, term,

 

 

covenant or condition of any agreement or instrument, license, note, indenture, loan agreement,
mortgage, or other agreement to which the Seller or any subsidiary is a party or by which they are
bound that would result in a Material Adverse Effect;

               (e) The offer, offer for sale, and sale of the Offered Securities are not registered with the
Securities and Exchange Commission (the “SEC”) except as contemplated in the Offering
Document. The Company’s actions with respect to the offer, offer for sale and sale of the Offered
Securities will be pursuant to the exemptions from the registration requirements of Section 5 of
the 1933 Act provided by Section 506 of Regulation D thereunder;

               (f) To the best of its knowledge and belief, assuming the offer, offer for sale and sale of
the Offered Securities is made in compliance with the terms of the Offering Document, the
applicable filings with the SEC and any applicable Blue Sky laws, and subject to the performance of
the Selling Agent’s obligations hereunder, the Seller will have complied in all material respects
with the Securities Act and with all state securities laws and regulations applicable to it in
connection with the offer, offer for sale, and sale of the Offered Securities. The Seller has not
taken and will not take any action in conflict with the Securities Act or applicable state or
foreign securities or blue sky laws, or which would make the exemption, qualification or
registration pursuant to applicable federal or state securities or blue sky laws unavailable with
respect to the offer, offer for sale and sale of the Offered Securities. The Seller and its
officers and directors are not subject to any disqualification, including but not limited to any
judgment, decree, order or decision issued by the SEC, any state or foreign securities regulatory
authority, any court of competent jurisdiction or the United States Postal Service. In offering the
Offered Securities, the Seller will comply with all applicable federal, state or foreign securities
laws, including the rules covering exemptions from registration;

               (g) Subject to the performance of the Selling Agent’s obligations hereunder, the Offered
Securities, upon the payment therefor and issuance thereof, will conform to all statements and
descriptions in relation thereto contained in the Offering Document and will have the rights set
forth in the Seller’s Operating Agreement, as amended;

               (h) To the best of the Seller’s knowledge, the Seller has neither been engaged in, nor been
the subject of, any of the actions or proceedings specified in subsection (a) of Rule 262
promulgated under Section 3(b) of the Securities Act, or any substantially similar provisions under
the securities laws of any state in which the Offered Securities are to be sold, such that no
exemption from registration would be available for the offering of the Offered Securities by the
Seller under applicable federal or state securities laws;

               (i) The Seller will notify the Selling Agent immediately and confirm the notice in writing (i)
of the issuance by the SEC or by any state attorney general or securities administrator of any
order enjoining the sale of the Offered Securities or suspending the effectiveness of any
qualification of the Offered Securities for sale or (ii) of the initiation of any proceedings for
that purpose.

               (j) The audited and unaudited financial statements of the Seller (including the related notes)
present fairly the financial position of the Seller and its subsidiaries at the dates indicated;
said financial statements have been prepared in conformity

 

 

with United States generally accepted accounting principles applied on a consistent basis, except
as expressly qualified therein, and the audited financials are in conformity with Regulation S-X
promulgated under the Act. The Seller has engaged independent auditors to audit the financial
statements of Seller and the auditors are a registered public accounting firm;

               (k) Except as set forth in the Offering Documents, the Seller does not have any subsidiaries
and does not own any interest in any other corporation, partnership, joint venture or other entity;

               (l) The Seller and its subsidiaries have not, directly or indirectly, at any time during their
existence (i) made any unlawful contribution to any candidate for political office, or failed to
disclose fully any contribution in violation of law, or (ii) made any payment to any federal, state
or foreign governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of the United States or
any jurisdiction thereof;

               (m) To the best of Seller’s knowledge, the Seller and its subsidiaries have filed all
necessary federal, state, local, foreign and other tax returns required to be filed by them and
have paid all taxes shown as due thereon; the Seller and its subsidiaries have not been notified,
either orally or in writing, that any state, local, federal or foreign taxing authority is
conducting or intends to conduct an audit of any tax return or report filed by the Seller and its
subsidiaries or concerning their business or properties; and the Seller has no knowledge of any tax
deficiency which has been asserted or threatened against the Seller and any subsidiary which would
materially and adversely affect the business, properties, financial condition, results of
operations, liabilities or working capital of the Seller;

               (n) There are no pre-emptive rights applicable to any of the Seller’s outstanding securities,
or granted by the Seller to any person or party;

               (o) The capitalization of the Seller is as described in the Offering Documents, and all
presently outstanding shares of the Seller’s Class A Membership Units are duly and validly
authorized and issued, fully paid and non-assessable.

               (p) The Seller agrees that, for a period of twenty four months (24) months from the date
hereof, it shall not solicit any offer to buy from or offer to sell to any person introduced to the
Seller by the Selling Agent in connection with the Offering (the “Selling Agent
Investors”), without compliance with this Section, any securities of the Seller or provide the
name of any such person to any other securities broker or dealer or selling agent. For purposes of
this subsection, a person shall be considered to have been “introduced to the Seller” by the
Selling Agent only so long as Seller delivers an investment presentation to such person as part of
the “road show” for the Offering as arranged by the Selling Agent, each of whose name(s) shall be
thereafter listed and set forth on a schedule to this Agreement, which shall be updated from time
to time. In the event that the Seller or any of its affiliates, directly or indirectly, solicits,
offers to buy from or offers to sell to any such person any such Company securities, and such
person purchases such Company securities, the Seller shall pay to the Selling Agent an amount equal
to eight percent (8.0%) of the aggregate purchase price of the Company securities so purchased by
such person and provide Selling Agent with Warrants as set forth in this Agreement.

 

 

               (q) All securities to be issued in the Offering, including but not limited to the Units
and the Warrants and the Advisory Warrants, and any other securities to be delivered pursuant to
the Offering, shall be validly issued, fully paid, and non-assessable upon issuance and shall not
trigger any pre-emptive rights, participation rights or other rights to receive additional
securities, except as described herein.

          3.2 The Selling Agent represents and warrants and covenants to the Seller as follows:

               (a) The Selling Agent is, has been and will be at all times during the Offering Period, a
Delaware corporation duly organized and validly existing under the laws of the state of its
incorporation, with all requisite power and authority to enter into and perform this Agreement; the
execution and delivery of this Agreement by the Selling Agent has been duly and validly authorized;
and when executed and delivered by the Seller, this Agreement will be a valid and binding
obligation of the Selling Agent enforceable in accordance with its terms subject to: (i) due
authorization, execution and delivery hereof by the Seller; (ii) the enforcement of remedies under
applicable bankruptcy, insolvency and other laws affecting creditors’ rights generally and
moratorium laws from time to time in effect; (iii) general equitable principles which may limit the
right to obtain the remedy of specific performance; and (iv) the public policy limitation on
indemnification under the federal securities laws;

               (b) The Selling Agent shall not offer or sell the Offered Securities in any state or states
without the approval of the Seller and completion by the Seller of all, or any, blue sky filings
for such states and shall not offer or sell the Offered Securities in any state or states in which
it is not qualified or registered as a broker-dealer or authorized to engage in the brokerage
business;

               (c) The Selling Agent (and Participating Broker-Dealers) is (i) a broker-dealer registered
with the SEC pursuant to the 1934 Act, and no proceeding has been initiated to revoke such
registration; (ii) a member in good standing of the NASD; and (iii) a broker-dealer registered with
the securities authorities of each jurisdiction in which it is required to be registered in
connection with the offers or sales of the Offered Securities, and all such offers or sales will be
made only by individuals licensed as required by all applicable federal and state securities laws.
The Selling Agent agrees to maintain each of the foregoing memberships and registrations in good
standing throughout the Offering Period and agrees to comply with all applicable laws and
regulations of federal and state governmental and regulatory agencies (both foreign and domestic),
including, but not limited to, the Rules of Fair Practices of the NASD.

               (d) Selling Agent has all rights, powers, authorities and licenses in order to enter into this
agreement and doing so shall in no manner violate any law or the rights of third parties.

               (e) Selling Agent will not offer or affect the sale of the securities in the Offering by means
of any form of general solicitation or general advertising. Selling Agent will not at any time
during the term of this Agreement, or for a period of six months following the Offering Termination
Date contemplated hereby, make any reference publicly to the transactions contemplated hereby, by
way of the issuance of a press release, the placement of

 

 

an advertisement or otherwise, without the prior consent of the Company, which consent will not be
unreasonably withheld. Selling Agent will require each person to or with whom it may offer or
effect the sale of the securities in the Offering to represent that such person is an “accredited
investor” under the Securities Act. Selling Agent will not furnish to any potential investor in the
Offering any information other than the Offering Documents, which have been approved by the Company
and a letter of transmittal approved by the Company which discloses to each investor the commission
to be paid to Selling Agent. Selling Agent will require each investor to execute and deliver the
Company’s subscription documents in order to ensure that the purchasers of the securities in the
Offering are not underwriters within the meaning of section 2(11) of the Securities Act and,
without limiting the foregoing, that such purchases will comply with Rule 502(d) under the
Securities Act.

               (f) Selling Agent further acknowledges that by the very nature of its relationship with the
Company it may, from time to time, have knowledge of or access to material non-public information
(as such term is defined by the Securities Exchange Act of 1934, as amended). Selling Agent hereby
agrees and covenants that: 1) Selling Agent will not make any purchases or sales in the stock of
the Company’s public merger target, Pacific East Advisors, Inc (currently trading under “BSBI.PK”).
based on such information; 2) Selling Agent will utilize its commercially reasonable efforts to
safeguard and prevent the dissemination of such information to third parties unless authorized in
writing by the Company to do so as may be necessary in the performance of its services under this
Agreement; and 3) Selling Agent will not, in any way, utilize or otherwise include such
information, in actual form or in substantive content, in its analysis for, preparation of or
release of any Selling Agent literature or other communication(s) relating to the Company,
including, but not limited to: Research Reports, Press Releases, Publications on Selling Agent’s
website, letters to investors and telephone or other personal communication(s) with potential or
current investors, including Selling Agent Investors.

               (g) Selling Agent is financially able to bear the economic risk of an investment in the
Warrants and Advisory Warrants, including the total loss thereof.

               (h) Selling Agent acknowledges that the Warrants and Advisory Warrants and securities issuable
thereunder have not been registered under the Securities Act, or qualified under the California
Corporate Securities Law of 1968, as amended, or any other applicable state securities laws in
reliance, in part, on his or her representations, warranties, and agreements herein. Selling Agent
understands that the Warrants and Advisory Warrants and securities issuable thereunder are “
restricted securities” under the Securities Act in that the Warrants and Advisory Warrants and
securities issuable thereunder will be acquired from the Company in a transaction not involving a
public offering, and that the Warrants and Advisory Warrants and securities issuable thereunder may
not be resold without registration under the Securities Act except in certain limited circumstances
and that otherwise the Warrants and Advisory Warrants and securities issuable thereunder must be
held indefinitely.

               (i) Without limiting the representations set forth above, Selling Agent will not make any
disposition of all or any part of the Warrants and Advisory Warrants and securities issuable
thereunder which will result in the violation by the Selling Agent or by the Company of the
Securities Act, the California Corporate Securities Law of 1968, or any other applicable securities
laws. Without limiting the foregoing, Selling Agent agrees not to

 

 

make any disposition of all or any part of the Warrants and Advisory Warrants and securities
issuable thereunder unless and until: (1) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is made in accordance
with such registration statement and any applicable requirements of state securities laws; or
Selling Agent has notified the Company of the proposed disposition and has furnished the Company
with a detailed statement of the circumstances surrounding the proposed disposition; and (2) if
reasonably requested by the Company, Selling Agent has furnished the Company with a written opinion
of counsel, reasonably satisfactory to the Company, that such disposition will not require
registration of any securities under the Securities Act or the consent of or a permit from
appropriate authorities under any applicable state securities law.

               (j) Selling Agent understands that the certificates (if any) evidencing the Warrants and
Advisory Warrants and securities issuable thereunder shall bear restrictive legends. Selling Agent
acknowledges that the investment in the Warrants and Advisory Warrants and securities issuable
thereunder is a speculative investment which involves a substantial degree of risk of loss by
Selling Agent of his or her entire investment in the Company, that Selling Agent understands and
takes full cognizance of the risk factors related to the purchase of the Warrants and Advisory, and
that the Company is newly organized and has no financial or operating history. Selling Agent is an
“accredited investor” under the Regulation D of the Securities Act. Selling Agent has received and
reviewed all information Selling Agent considers necessary or appropriate for deciding whether to
purchase the Warrants and Advisory Warrants. Selling Agent has had an opportunity to ask questions
and receive answers from the Company and its officers, managers and employees regarding the terms
and conditions of purchase of the Warrants and Advisory Warrants and regarding the business,
financial affairs, and other aspects of the Company and has further had the opportunity to obtain
all information (to the extent the Company possesses or can acquire such information without
unreasonable effort or expense) which Selling Agent deems necessary to evaluate the investment and
to verify the accuracy of information otherwise provided to it. Neither any manager, any agent or
employee of the Company or of any manager, or any other Person has at any time expressly or
implicitly represented, guaranteed, or warranted to him or her that Selling Agent may freely
transfer the Warrants and Advisory Warrants and securities issuable thereunder, that a percentage
of profit and/or amount or type of consideration will be realized as a result of an investment in
the Warrants and Advisory Warrants and securities issuable thereunder, that past performance or
experience on the part of the managers or their affiliates or any other person in any way indicates
the predictable results of the ownership of the Warrants and Advisory Warrants and securities
issuable thereunder or of the overall Company business, that any cash distributions from Company
operations or otherwise will be made to the members by any specific date or will be made at all, or
that any specific tax benefits will accrue as a result of an investment in the Company. Selling
Agent acknowledges that the tax consequences to his or her of investing in the Company will depend
on his or her particular circumstances, and neither the Company, the managers, the other members,
nor the partners, shareholders, managers, agents, officers, directors, employees, affiliates, or
consultants of any of them will be responsible or liable for the tax consequences to him or her of
an investment in the Company. Selling Agent will look solely to, and rely upon, his or her own
advisers with respect to the tax consequences of this investment.

     4. Sale and Delivery of Offered Securities.

 

 

          4.1 No sale of Offered Securities shall take place or be regarded as effective unless and
until accepted by the Seller, such acceptance to occur at Closing, and the Seller reserves the
right in its sole and absolute discretion to refuse to sell Offered Securities to any or all
persons at any time. Selling Agent shall send to the Seller, with copies to counsel for the Seller,
all acceptable executed Subscription Documents, promptly upon receipt of the same, subject to any
reasonable delay occasioned by further inquiry as to a prospective purchaser’s qualification or
requests by the Seller or Selling Agent for further information from a prospective purchaser. The
Seller shall notify Selling Agent as to whom to send the originals of such executed Subscription
Documents and to whom to send copies. Selling Agent shall promptly send each such prospective
purchaser’s payment for his Offered Securities to the Seller. For every prospective purchaser of
Offered Securities whose subscription is rejected, the Seller will promptly return all of such
prospective purchaser’s executed Subscription Documents to Selling Agent for return to the
prospective purchaser, and will return the funds received to such prospective purchaser without
interest and without deduction.

     5. Conditions of the Obligations of the Selling Agent.

          The obligations of the Selling Agent to act as agent hereunder, to find purchasers for the
Offered Securities, and to attend and to deliver documents at Closing shall be subject to the
following conditions:

          (a) Between the date hereof and Closing, the Seller and its subsidiaries shall not have
sustained any loss on account of fire, explosion, flood, accident, calamity or other cause, of such
character as results in a Material Adverse Effect, whether or not such loss is covered by
insurance.

          (b) Between the date hereof and Closing, there shall be no material litigation instituted or
threatened against the Seller or any subsidiary (other than as set forth in the Offering Document)
and there shall be no material proceeding instituted or threatened before or by any federal or
state commission, regulatory body or administrative agency or other governmental body, domestic or
foreign, wherein an unfavorable ruling, decision or finding would materially adversely affect the
business, franchises, licenses, permits, operations or financial condition or income of the Seller.

          (c) Except as contemplated herein or as set forth in the Offering Document, during the period
subsequent to the date hereof, and prior to Closing, the Seller and each subsidiary: (i) shall have
conducted its business in the usual and ordinary manner as the same was being conducted on the date
hereof, and (ii) except in the ordinary course of its business or transactions contemplated or
disclosed to Selling Agent (e.g., entering into agreements for follow-on financing, which may
include debt, security and a change in capital structure, the Seller and each subsidiary shall not
have incurred any liabilities or obligations (direct or contingent), or disposed of any assets, or
entered into any material transaction or suffered or experienced any substantially adverse change
in its condition, financial or otherwise, or in its working capital position. At Closing, the
capitalization of the Seller shall be substantially the same as set forth in the Offering Document.

 

 

          (d) The authorization for the issuance and delivery of the Offered Securities and the Offering
Document and related materials, and for the execution and delivery of this Agreement, and all other
legal matters incident thereto, shall be reasonably satisfactory in all respects to counsel for
Selling Agent.

          (e) The representations and warranties of the Seller made in this Agreement or in any document
or certificate delivered to the Selling Agent pursuant hereto shall be true and correct on and as
of the Closing with the same force and effect as though such representations and warranties have
been made on and as of the Closing, and the Selling Agent shall have received a certificate, dated
the Closing Date, to such effect executed by the Chairman of the Board or President of the Seller.
This certificate shall be deemed reasonably acceptable if it is in substantially similar form to
the document attached hereto as Exhibit B.

          (f) The Seller shall have performed and complied in all material respects with all covenants,
terms and agreements to be performed and complied with by the Seller on or before the Closing.

          (g) The Seller shall have provided Certificates as the Selling Agent shall reasonably request.

          (h) The Seller and its President shall provide certificates to the Selling Agent certifying
that the proceeds of the Offering will be used in accordance with the uses designated in “Use of
Proceeds” in the Offering Document.

     6. Indemnification.

          6.1 The Seller agrees to indemnify and hold harmless Selling Agent and each person, if any,
who controls Selling Agent within the meaning of the 1933 Act or the 1934 Act (together, the
“Acts”), the Selling Agent’s affiliated entities, partners, employees, legal counsel and
agents (the “SA Indemnified Parties”) against any losses, claims, damages, obligations,
penalties, judgments, awards, liabilities, costs, expenses and disbursements (and any and all
actions, suits, proceedings and investigations in respect thereof and any and all legal and other
costs, expenses and disbursements in giving testimony or furnishing documents in response to a
subpoena or otherwise), joint or several, to which Selling Agent or such person may be subject,
under the Acts or otherwise, including, without limitation, the costs, expenses and disbursements,
as and when incurred, of investigating, preparing or defending any such action, suit, proceeding or
investigation (whether or not in connection with litigation in which the Selling Agent is a party),
directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with
(i) the violation or breach of any representation, warranty or covenant or agreement of the Seller
set forth in this Agreement or in any instrument, document, agreement or certificate delivered by
the Seller in connection herewith; (ii) any material untrue statement or omission in the Offering
Document or selling material, excluding any statement or omission relating to information contained
in or omitted from the Offering Document or selling material in reliance upon, and in conformity
with, information furnished to the Seller by Selling Agent or any Participating Broker-Dealer
specifically for use in preparation of the Offering Document or selling material, as the case may
be; (iii) any material statement or omission relating to information provided by or on behalf of
Seller in order to qualify or exempt the Offered Securities for sale in any jurisdiction; or (iv)
the failure

 

 

of the Seller to comply with the provisions of the Acts and the regulations thereunder, including
Regulation D; and will reimburse the SA Indemnified Parties for any legal or other expenses
reasonably incurred by the SA Indemnified Parties in connection with investigation of or defending
against any such loss, claim, expense, damage, liability, (or actions in respect thereof);
provided, however, that the Seller shall not be required to indemnify the SA Indemnified Parties
for any payment made to any claimant in settlement of any suit or claim unless such payment is
agreed to by the Seller (which agreement shall not be unreasonably withheld) or by a court having
jurisdiction of the controversy. This indemnity agreement shall remain in full force and effect and
shall survive consummation of the sale of the Offered Securities hereunder and shall be in addition
to any liability which the Seller may otherwise have. Notwithstanding the foregoing, in no event
shall the amount that the Seller is required to indemnify the Selling Agent’s Indemnified Parties,
exceed in the aggregate the monies received by the Selling Agent hereunder, except in the case of
fraud on the part of the Seller.

          6.2 Selling Agent agrees to indemnify and hold harmless the Seller and each person, if any,
who controls the Seller within the meaning of the Acts, Seller’s affiliated entities, partners,
employees, legal counsel and agents (the “Seller Indemnified Parties”) against any losses, claims,
damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements
(and any and all actions, suits, proceedings and investigations in respect thereof and any and all
legal and other costs, expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), joint or several (including, without limitation, the costs,
expenses and disbursements, as and when incurred, of investigating, preparing or defending any such
action, suit, proceeding or investigation (whether or not in connection with litigation in which
the Seller is a party)), to which the Seller or any such person may be subject, under the Acts or
otherwise, insofar as such losses, claims, expenses, damages or liabilities (or actions in respect
thereof) which (i) arise out of or are based upon any material untrue statement or omission
contained in the Offering Document in reliance upon, and in conformity with, information furnished
to the Seller by Selling Agent or any Participating Broker-Dealer or either of them specifically
for use in preparation of the Offering Document or selling material, as the case may be or (ii) are
directly, caused by, relating to, based upon, arising out of, or in connection with the violation
or breach of any representation, warranty or covenant or agreement of the Selling Agent set forth
in this Agreement or in any instrument, document, agreement or certificate delivered by the Selling
Agent in connection herewith); and will reimburse the Seller Indemnified Parties for any legal or
other expenses reasonably incurred by them in connection with investigating or defending against
any such loss, claim, expense, damage, liability, (or actions in respect thereof); provided,
however, that Selling Agent shall not be required to indemnify the Seller Indemnified Parties for
any payment made to any claimant in settlement of any suit or claim unless such payment is approved
by a court having jurisdiction over the controversy or Selling Agent agrees to such settlement
(which agreement shall not be unreasonably withheld); and provided further that Selling Agent shall
not be liable under this Section 6.2 for any losses, claims, expenses, damages or liabilities
arising out of any act or failure to act on the part of any other person except Selling Agent, its
partners, employees and agents (including registered representatives) or any Participating
Broker-Dealer. This indemnity agreement shall remain in full force and effect notwithstanding any
investigation made by or on behalf of the Seller and shall survive consummation of the sale of the
Offered Securities hereunder and the termination of this Agreement, and shall be in addition to any

 

 

liability which Selling Agent may otherwise have. Notwithstanding the foregoing, in no event
shall the amount that the Selling Agent is required to indemnify the Seller Indemnified Parties,
exceed in the aggregate the compensation received by the Selling Agent hereunder, except in the
case of fraud on the part of the Selling Agent.

          6.3 The indemnified party shall notify the indemnifying party in writing promptly after the
summons or other first legal process giving information of the nature of any and all claims which
have been served upon the indemnified party. In case any action is brought against any indemnified
party upon any such claim, the indemnifying party shall be entitled to participate at its own
expense in the defense, or if it so elects, in accordance with arrangements satisfactory to any
other indemnifying party or parties similarly notified, to assume the defense thereof, with counsel
who shall be satisfactory to such indemnified party and other indemnified parties who are
defendants in such action; and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof and the retaining of such counsel by the
indemnifying party, the indemnifying party shall not be liable to such indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than the reasonable costs of investigation, unless the
indemnified party shall have reasonably concluded that there are or may be defenses available to it
which are different from or in addition to those available to the indemnifying party (in which case
the indemnifying party shall not have the right to direct the defense of such action on behalf of
the indemnified party), in any of which circumstances such expenses shall be borne by the
indemnifying party. Notwithstanding anything to the contrary herein, the indemnified party shall
not enter into any settlement unless the indemnifying party is provided with a full release,
reasonably satisfactory to the indemnifying party, and the indemnifying party is not required to
make any admission of wrongdoing.

     7. Termination of Agreement.

          7.1 This Agreement shall terminate (i) If at any time after commencement of the Offering, any
material condition of Seller’s obligations hereunder shall not have been met or shall cease to be
met and Selling Agent shall have given to the Seller notice of Selling Agent’s desire to terminate
this Agreement on account of the nonfulfillment of such condition (at which point Selling Agent
shall have no further liability or obligation to Seller); or (ii) at such time as all of the
Offered Securities shall have been sold and the subscriptions therefor have been accepted or the
Offering Termination Date has been reached, whichever shall first occur.

          Notwithstanding the termination of this Agreement in accordance with the foregoing provisions
of this Section 7, the respective indemnities, covenants, agreements, representations, warranties
and other statements of the Seller and Selling Agent set forth in or made pursuant to this
Agreement will remain operative and in full force and effect.

     8. Miscellaneous.

          8.1 The Selling Agent, on the one hand, and the Seller, on the other, shall each pay their
respective expenses incident to this Agreement and the transactions

 

 

contemplated hereby (including, without limitation, the fees and disbursements of their respective
counsel), and no party to the Agreement shall have any liability for such expenses incurred by any
other party.

          8.2 It is understood and agreed that Selling Agent’s relationship to the Seller is that of an
independent contractor and that nothing herein shall be construed to create a relationship of
partners, affiliates, joint venturers or employer and employee between Selling Agent or either of
them and the Seller.

          8.3 No rights or interests arising hereunder may be assigned except with the prior written
consent of both the Seller and the Selling Agent. Subject to this limitation, this Agreement shall
inure to the benefit and be binding upon Selling Agent and the Seller and their respective
successors and assigns. This Agreement is intended to be and is for the sole and exclusive benefit
of the parties hereto, and their respective successors and assigns and for the benefit of no other
person. Except as provided in this Agreement, nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, other than the parties to it and their
respective successors and assigns, any legal or equitable right, remedy or claim under or with
respect to this Agreement or any of its provisions. No purchaser of Offered Securities shall be
construed as a successor or assign merely by reason of such purchase.

          8.4 If any portion of this Agreement shall be held invalid or inoperative, then so far as is
reasonable and possible:

               (a) the remainder of this Agreement shall be considered valid and operative; and

               (b) to the extent possible under applicable law, effect shall be given to the intent manifest
by the portion held invalid or inoperative.

          8.5 This Agreement may be executed in a number of identical counterparts and by facsimile,
each of which shall be deemed to be an original, but all of which constitute, collectively, one and
the same Agreement; but, in making proof of this Agreement, it shall not be necessary to produce or
account for more than one counterpart.

          8.6 This Agreement may not be modified or amended except by written agreement executed by each
of the parties to this Agreement.

          8.7 Whenever the context so requires, the masculine shall include the feminine and neuter, and
the singular shall include the plural, and conversely. The words “shall” and “will” and “agrees”
are mandatory, “may” is permissive.

          8.8 The parties to this Agreement covenant and agree that they will execute any other and
further instruments and documents which reasonably are or may become necessary or convenient to
effectuate and carry out this Agreement.

          8.9 This Agreement (and the other documents and agreements referenced herein) contains the
entire understanding between the parties and supersedes prior

 

 

understandings or written or oral agreements between the parties with respect to the subject matter
of this Agreement.

          8.10 This Agreement shall be construed and governed by the laws of the State of California.
Any dispute or controversy arising out of or relating to any interpretation, construction,
performance or breach of this Agreement shall be settled by arbitration to be held in Santa Clara
County, California, in accordance with the rules then in effect of the American Arbitration
Association. The arbitrator may grant injunctions or other equitable relief in such dispute or
controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties
to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having
jurisdiction; provided, however, that the arbitrator shall not have the power to alter or amend
this Agreement.

          8.11 All notices or communications, except as otherwise specifically provided, shall be in
writing, and, if sent to any party, shall be mailed, delivered or telegraphed and confirmed to that
party at the address set forth below:

	 	 	 
	If to the Seller:

	 	Advanced Drilling Services, LLC
	 

	 	10600 N De Anza Blvd Suite 250
	 

	 	Cupertino, Ca 95014
	 
	 	 
	 

	 	Attention: General Counsel
	 
	 	 
	If to Selling Agent, to:

	 	Sierra Equity Group, Inc.
	 

	 	7700 Congress Avenue
	 

	 	Suite 3207
	 

	 	Boca Raton, FL 33487
	 

	 	Attention: Alan Goddard
	 
	 	 
	With a copy contemporaneously

	 	 
	 

	 	by like means:
	 

	 	Blank Rome LLP
	 

	 	1200 North Federal Highway, Suite 417
	 

	 	Boca Raton, FL 33432
	 

	 	Attention: Bruce C. Rosetto, Esq.

          8.12 Section titles or captions contained in this Agreement are inserted only as a matter of
convenience and for reference. Those titles in no way define, limit, extend or describe the scope
of this Agreement, or the intent of any provision of this Agreement.

 

 

     If the foregoing correctly sets forth the understanding between us, please indicate acceptance
by signing in the space provided below for that purpose and return to us a counterpart hereof so
signed, whereupon this letter and Selling Agent’s acceptance shall constitute a binding agreement
between us.

	 	 	 	 	 
	 	Very truly yours,

ADVANCED DRILLING SERVICES, LLC

 	 
	 	By:  	/s/ Michael McTeigue
 	 
	 	 	Michael McTeigue, CFO 	 
	 	 	 	 
	 

     The foregoing Selling Agreement for Seller is hereby accepted and agreed to as of the date
first above written.

	 	 	 	 	 
	 	Sierra Equity Group, Inc.

As Selling Agent

 	 
	 	By:  	/s/ Alan David Goddard
 	   2/26/07
	 	 	Alan David Goddard
CEOexv10w9

 

Exhibit 10.9

CONSULTING AGREEMENT 

     THIS
CONSULTING AGREEMENT is made and effective as of
February 28, 2007, by and between Inner
Mongolia Production Company, LLC, a New York limited liability company (the “Company”), and
Christopher B. Sherwood (“Consultant”).

RECITALS

	 	A.	 	The Company is a development stage company engaged in developing new energy
ventures in the Far East (including East Asia, South Asia, Southeast Asia and Russia).
	 
	 	B.	 	The Company has a need for general business consulting services, including
consulting services in the areas of, without limitation, (i) sourcing and developing
energy ventures, (ii) conducting energy business operations in the Far East, including
energy ventures and (iii) public company business operations in the United States
(collectively and individually, the “Specialty Areas”).
	 
	 	C.	 	Consultant has expertise and knowledge in one or more of the Specialty Areas and
provides consulting in one or more of the Specialty Areas.
	 
	 	D.	 	Consultant desires to provide consulting services to the Company in one or more of
the Specialty Areas on the terms and conditions contained herein.

     NOW, THEREFORE, in consideration of the foregoing and the terms and conditions hereinafter set
forth, the parties mutually agree as follows.

     1. Engagement as Consultant; Services.

          1.1 The Company agrees to engage Consultant to provide, and Consultant agrees to provide,
consulting services in one or more of the Specialty Areas (the “Services”) on the terms and
conditions set forth herein. Consultant’s primary contact at the Company will be Frank Ingriselli,
or such other person the Manager of the Company may designate in writing.

          1.2 In agreeing to perform work hereunder, Consultant represents, warrants and covenants that
(a) Consultant has the capability, experience, and means necessary to perform the Services; (b)
Consultant will perform the Services at such times and in accordance with the priorities and
instructions mutually agreed by the Company and Consultant; (c) Consultant will perform the
Services in a workmanlike manner with reasonable skill and care ordinarily exercised by members of
the profession practicing under similar conditions and in accordance with accepted industry
practices and professional guidelines; (d) Consultant will perform the Services in accordance with
all applicable U.S. federal, state and local laws, rules, regulations, code, ordinances, and orders
and all relevant and applicable foreign legislation (including but not limited to directives,
statutes, laws, regulations and codes of practice); (e) Consultant will not, in performing the
Services, disclose, violate, infringe or misappropriate any trade secrets, proprietary information,
trademark, copyright, or patent rights of third-parties; (f) while on the Company’s premises,
Consultant will abide by all safety and other instructions generally

1

 

applicable to the Company employees and representatives; and (g) neither this Agreement nor
Consultant’s Services hereunder will violate any policy, rule or regulation of, or any written
agreement, Consultant or any employee of Consultant has with any other employer, former employer or
any other third party.

          1.3 Consultant recognizes that the Company may utilize the consulting services of third
parties. Nothing contained in this Agreement requires the Company to solely utilize Consultant to
provide consulting services in any of the Specialty Areas.

          1.4 Neither Consultant, nor any of its directors, managers, officers, agents or employees, or
any Affiliate of any of the foregoing, has or will during the course of or in connection with the
provision of Services to the Company under this Agreement: (a) made any unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity for or on behalf of
the Company; (b) made any payment in violation of applicable Law to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns or violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, for or on behalf of the
Company; or (c) made any other payment in violation of applicable law for or on behalf of the
Company.

     2. Term; Termination

          2.1 The term of this Agreement will commence as of the date set forth on page 1 and terminate,
subject to earlier termination in accordance with this Agreement, on the first anniversary of the
date hereof (the “Initial Term”). This Agreement will automatically renew after the Initial Term
for consecutive twelve (12) month periods (the “Renewal Period”) unless terminated in writing by
either party within 60 days of expiration of either the Initial Term or any Renewal Period.

          2.2 This Agreement is subject to the following rights of early termination:

               a. Either party may immediately terminate this Agreement by giving written notice to the other
party, in the event of (i) the other party’s bankruptcy, insolvency, or the filing of a petition
therefore or (ii) the other party materially defaults in the performance of its obligations
hereunder.

               b. Either party may terminate this Agreement by giving the other party thirty (30) days prior
written notice of its intent to terminate this Agreement, except that each party will be obligated
to perform its outstanding obligations hereunder.

     3. Compensation

          3.1 In consideration for the Services, the Company agrees to compensate Consultant at the rate
of $1,200 a day for work done on behalf of and as requested by the Company. All international
airline travel shall be in business class.

          3.2 In addition to the foregoing, the Company agrees to reimburse Consultant for reasonable
travel expenses incurred at the Company’s request in connection with the Services and in accordance
with the Company’s travel and reimbursement policy.

2

 

          3.3 Consultant will submit to the Company an invoice for reimbursable expenses owed by the
Company, accompanied by original receipts supporting the request for reimbursement. The Company
will pay Consultant’s reimbursable expenses within thirty (30) days of receipt of invoice and
supporting documentation.

          3.4 It is understood and agreed that Consultant (and Consultant’s employees) will not be
eligible for, and will not receive, on account of this Agreement, any employee benefits or special
compensation under any plans promulgated by the Company.

          3.5 In consideration for the Services, the Company agrees to issue to Consultant Eight Hundred
Eighty Three (883) of the Company’s Class A Membership Interests (as such term is defined in the
Company’s Amended and Restated Operating Agreement (the “Operating Agreement”)) (the “Interests”).
Such interests shall be fully vested as of the date hereof. In consideration of the Company’s
issuance of the Interests hereby, Consultant makes the following representations and warranties to
the Company and to its principals, jointly and severally:

          a. Consultant has received a copy of the Operating Agreement. Consultant has reviewed the
Operating Agreement. Consultant agrees to the terms and conditions of the Operating Agreement to
the same extent as though it were a signatory thereof. If requested by the Manager, Consultant will
promptly execute and deliver a copy of the Operating Agreement.

          b. Consultant acknowledges that Consultant has not seen, received, been presented with, or
been solicited by any leaflet, public promotional meeting, newspaper or magazine article or
advertisement, radio or television advertisement, or any other form of advertising or general
solicitation with respect to the Interests.

          c. The Interests are being purchased for Consultant’s own account for long-term investment and
not with a view to immediately re-sell the Interests. No other person or entity will have any
direct or indirect beneficial interest in, or right to, the Interests.

          d. Consultant acknowledges that the Interests have not been registered under the Securities
Act of 1933, as amended (the “Securities Act”), or qualified under the California Securities Law,
or any other applicable blue sky laws, in reliance, in part, on Consultant’s representations,
warranties and agreements made herein.

          e. No person has made to Consultant any written or oral representations:

               (i) that any person will resell or repurchase any of the Interests;

               (ii) that any person will refund the purchase price of any of the Interests;

               (iii) as to the future price or value of any of the Interests; or

               (iv) that any of the Interests will be listed and posted for trading on any stock exchange or
automated dealer quotation system or that application has been made to list

3

 

and post any of the Interests of the Company on any stock exchange or automated dealer
quotation system.

          f. Other than the rights specifically set forth in the Amended Operating Agreement, Consultant
represents, warrants and agrees that the Company and the officers of the Company (the “Company’s
Officers”) are under no obligation to register or qualify the Interests under the Securities Act or
under any state securities law, or to assist the undersigned in complying with any exemption from
registration and qualification.

          g. Consultant represents that Consultant meets the criteria for participation because: (i)
Consultant has a preexisting personal or business relationship with the Company or one or more of
its partners, officers, managers or controlling persons; or (ii) by reason of Consultant’s business
or financial experience, or by reason of the business or financial experience of its financial
advisors who are unaffiliated with, and are not compensated, directly or indirectly, by the Company
or any affiliate or selling agent of the Company, Consultant is capable of evaluating the risk and
merits of an investment in the Interests and of protecting its own interests.

          h. Consultant represents that Consultant is an “accredited investor” within the meaning of
Rule 501 of Regulation D under the Securities Act and Consultant has executed the Certificate of
Accredited Investor Status, attached hereto as Annex A.

          i. Consultant understands that the Interests are illiquid, and until registered with the
Securities Exchange Commission, or an exemption from registration becomes available, cannot be
readily sold as there will not be a public market for them, and that Consultant may not be able to
sell or dispose of the Interests, or to utilize the Interests as collateral for a loan. Consultant
must not purchase the Interests unless Consultant has liquid assets sufficient to assure Consultant
that such purchase will cause it no undue financial difficulties, and that Consultant can still
provide for current and possible personal contingencies, and that the commitment herein for the
Interests, combined with other investments of Consultant, is reasonable in relation to its net
worth.

          j. Consultant understands that the right to transfer the Interests will be restricted unless
the transfer is not in violation of the Securities Act, the California Securities Law, and any
other applicable state securities laws (including investment suitability standards), that the
Company will not consent to a transfer of the Interests unless the transferee represents that such
transferee meets the financial suitability standards required of an initial participant, and that
the Company has the right, in its absolute discretion, to refuse to consent to such transfer.

          k. Consultant has been advised to consult Consultant’s own legal, tax and other advisors with
respect to the merits and risks of an investment in the Interests and with respect to applicable
resale restrictions, and it is solely responsible (and the Company is not in any way responsible)
for compliance with:

               (i) any applicable laws of the jurisdiction in which Consultant is resident in connection with
the distribution of the Interests hereunder, and

               (ii) applicable resale restrictions; and

4

 

               (iii) this Agreement is not enforceable by Consultant unless it has been accepted by the
Company, and Consultant acknowledges and agrees that the Company reserves the right to reject any
subscription for any reason.

          1. Consultant acknowledges that the tax consequences of investing in the Company will depend
on particular circumstances, and neither the Company, the Company’s officers, any other investors,
nor the partners, members, managers, agents, officers, managers, employees, affiliates or
consultants of any of them, will be responsible or liable for the tax consequences to Consultant of
an investment in the Company. Consultant will look solely to and rely upon its own advisers with
respect to the tax consequences of this investment.

          m. All information which Consultant has provided to the Company concerning Consultant, its
financial position and its knowledge of financial and business matters, and any information found
in the Certificate of Accredited Investor Status, is truthful, accurate, correct, and complete as
of the date set forth herein.

          n. Each certificate or instrument representing securities issuable pursuant to this Agreement
will be endorsed with the following legend:

     “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE
IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES WHICH IS REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

     THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS
AND CONDITIONS OF THE COMPANY’S AMENDED AND RESTATED OPERATING AGREEMENT. COPIES OF SUCH AGREEMENT
MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.”

     4. Confidentiality

          4.1 Consultant understands and agrees that in the course of providing the Services hereunder,
Consultant may receive or otherwise learn certain items of business, technical, financial or other
information owned by or otherwise in the possession of the Company (“Confidential Information”).
Confidential Information may include, by way of example but without limitation, products,
specifications, formulae, equipment, business strategies, customer lists, know-how, drawings,
pricing information, inventions, ideas, and their potential uses. Consultant agrees to take and
maintain proper and appropriate steps to protect Confidential Information. Consultant agrees to
disclose the Confidential Information only to employees or agents of Consultant who are directly
involved with the Services contemplated by

5

 

this Agreement, and even then only to such extent as is reasonably necessary to perform the
Services. Consultant agrees to inform such employees and agents of the confidential nature of the
information disclosed hereunder and to cause all such employees and agents to abide by the terms of
this Agreement. Consultant agrees not to disclose Confidential Information to any unauthorized
party without prior express written consent of the Company or unless required by law or court
order. If Consultant is required by law or court order to disclose Confidential Information, to the
extent permitted by law, Consultant agrees to provide the Company prompt written notice of such
requirement so that an appropriate protective order or other relief may be sought.

          4.2 Consultant agrees to use Confidential Information only in connection with the Services
contemplated by this Agreement. Consultant agrees to make no other use of Confidential Information,
it being recognized that the Company has reserved all rights to Confidential Information not
expressly granted herein. All documents containing Confidential Information shall remain the
property of the Company. Upon the request of the Company, Consultant agrees to destroy any
documents prepared by Consultant using Confidential Information or derived therefrom and Consultant
agrees to provide confirmation of such destruction in writing. Consultant may, however, keep one
archival copy of any such document in its files for record purposes only.

          4.3 The obligations of confidentiality and non-use set forth in this section will not apply to
any information which:

          a. is in the public domain prior to disclosure by the Company to Consultant;

          b. becomes part of the public domain, by publication or otherwise, through no unauthorized act
or omission on the part of Consultant; or

          c. is lawfully in Consultant’s possession prior to disclosure by the Company.

          4.4 The obligations imposed by this section, including but not limited to nondisclosure and
non-use, however, shall endure so long as the Confidential Information does not become part of the
public domain.

     5. Independent Contractor

          Nothing in this Agreement is to be construed to deem the relationship between the parties to
be one of master/servant, principal/agent, or employer/employee. To the contrary, the relationship
of Consultant to the Company is that of independent contractor, and Consultant will have no
authority to (i) make any binding decision for, or on behalf of, the Company or (ii) commit the
Company to any contract, obligation, debt, or other liability. None of Consultant’s employees will
be deemed to be employees of the Company.

     6. Indemnification; Remedies

          6.1 The Company agrees to indemnify and hold harmless Consultant, its directors, officers,
employees, agents and representatives from and against any and all claims, damages, liabilities,
fines, penalties, costs and expenses (including reasonable attorneys’ fees) to

6

 

which Consultant may be subjected to the extent caused by the Company’s, its employee’s or agent’s
(i) business operations, including, without limitation, the Company employee claims, (ii)
performance hereunder in a manner that is negligent, grossly negligent, reckless, or willfully
improper or (iii) breach of this Agreement.

          6.2 Not withstanding anything herein to the contrary, UNDER NO CIRCUMSTANCES SHALL EITHER
PARTY BE ENTITLED TO INCIDENTAL, INDIRECT, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES ARISING IN
CONNECTION WITH THE DEFAULT OR BREACH OF ANY OBLIGATION OF THE OTHER PARTY UNDER THIS AGREEMENT,
ANY ORDER OR ANY DOCUMENTS OR APPENDICES RELATED THERETO.

          6.3 Consultant recognizes that the Company will be irreparably harmed by a violation of
Consultant’s confidentiality, non-use or other obligations hereunder. Therefore, in addition to any
other available remedies, the Company is entitled to an injunction or other decree of specific
performance with respect to any violation thereof by Consultant.

     7. Assignment

          This Agreement may not be assigned by either party without the express written consent of the
other party.

     8. Non-Transferability

          Consultant will not have any right to anticipate, encumber, or dispose of any payment or other
rights hereunder, which payments and rights are non-assignable and non-transferable.

     9. Governing Law and Language and Jurisdiction

          9.1 This Agreement is to be construed, performed, and enforced in accordance with the laws of
the State of New York, United States of America, disregarding its conflicts of law rules.

          9.2 With respect to any claim, suit, action, or proceeding with respect to which the Company
is entitled to access the courts, Consultant expressly agrees and irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts of New York over any such claim, suit,
action, or proceeding.

     10. Notice

          All notices to be provided hereunder must be in writing and delivered by courier, overnight
deliver, confirmed facsimile or mailed by registered or certified mail, return-receipt requested,
to the parties at the following addresses:

          If to the Company:

7

 

               Inner Mongolia Production Company, LLC

               250 East Hartsdale Ave

               Suite: 47

               Hartsdale, New York 10530

               Facsimile: 914-574-8283

          If to Consultant, to the address set forth on the signature page hereof.

or such other address as either party may hereafter designate in writing by notice to the other
party. Notice served by mail will be deemed received three (3) days after the date in which notice
is deposited in the United States and/or Canadian mail.

     11. Severability

          All provisions contained herein are severable, and in the event any of them is held to be
invalid by any competent court or arbitrator, this Agreement is to be interpreted as if such
invalid provision were not contained herein.

     12. Waiver

          The failure of either party to insist in anyone or more instances upon performance of any
terms or conditions of this Agreement, is not to be construed as a waiver of future performance of
any such term, covenant, or condition, but the obligations of either party with respect thereto
will continue in full force and effect. No waiver will be effective unless in writing and signed by
the waiving party.

     13. Survivability

          The covenants and promises herein contained in Sections 4, 6, 7, 10, and 14 will survive the
expiration or earlier termination of this Agreement.

     14. Entire Agreement

          This Agreement and Exhibit(s) supersede all previous understandings between Consultant and the
Company, and contain the entire agreement between the parties with respect to the subject matter
hereof, and may not be amended, modified, or supplemented except in writing signed by both parties,
which specifically refers to this Agreement.

[Remainder of Page Intentionally Blank]

8

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.

CONSULTANT:

	 	 	 	 	 
	/s/ Christopher B. Sherwood
	 	 	 	 
	 
	 	 	 
	Christopher B. Sherwood
	 	 	 	 

	 	 	 
	Address:
	 	13706 MARINE DRIVE
	 
	 	WHITE ROCK
	 
	 	BRITISH COLUMBIA, CANADA V4B 1A4
	 
	 	 
	Phone:
	 	604 531 4930
	 
	 	 
	E.mail:
	 	cbsherw@hotmail.com

THE COMPANY:

INNER MONGOLIA PRODUCTION COMPANY, LLC

	 	 	 	 	 	 
	 	 	 
	By:  	/s/ Frank C. Ingriselli
 	 	 
	 	Name:  	Frank C. Ingriselli 	 	 
	 	Title:  	Manager 	 	 
	 

 

 

Annex A

CERTIFICATE OF ACCREDITED INVESTOR STATUS

     Except as may be indicated by the undersigned below, the undersigned is an “accredited
investor,” as that term is defined in Regulation D under the Securities Act of 1933, as amended
(the “Securities Act”). The undersigned has initialed the space below indicating the basis on which
he is representing his status as an “accredited investor”:

	 	 	 
	       

	 	a bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its
individual or fiduciary capacity; a broker or dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934, as
amended (the “Securities Exchange Act”); an insurance company as
defined in Section 2(13) of the Securities Act; an investment
company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of
that Act; a small business investment company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its political subdivisions, for
the benefit of its employees, and such plan has total assets in
excess of $5,000,000; an employee benefit plan within the meaning
of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are “accredited investors”;
	 
	 	 
	       

	 	a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
	 
	 	 
	       

	 	an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of
$5,000,000;
	 
	 	 
	CBS

	 	a natural person whose individual net worth, or joint net worth
with the undersigned’s spouse, at the time of this purchase
exceeds $1,000,000;
	 
	 	 
	       

	 	a natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with
the undersigned’s spouse in excess of $300,000 in each, of those
years and has a reasonable expectation of reaching the same income
level in the current year;
	 
	 	 
	       

	 	a trust with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered, whose
purchase is directed by a person who has such knowledge and
experience in financial and business matters that he is capable of

 

 

	 	 	 
	 

	 	evaluating the merits and risks of the prospective investment;
	 
	 	 
	       

	 	an entity in which all of the equity holders are “accredited investors” by virtue of their meeting one or more of the
above standards; or
	 
	 	 
	       

	 	an individual who is a director or executive officer of Inner Mongolia Production Company, LLC.

         IN WITNESS WHEREOF, the undersigned has executed this Certificate of Accredited Consultant
Status effective as of February___, 2007.

	 	 	 
	CONSULTANT:
	 	 
	 
	 	 
	/s/ Christopher B. Sherwood
 

Christopher B. Sherwood

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