Document:

exv10w1

 

Exhibit 10.1

PURCHASE AND SALE AGREEMENT

WEST GREYBULL PROJECT

BIG HORN COUNTY, WYOMING

This Purchase and Sale Agreement (“Agreement”), dated effective April 25, 2007, is between
Mélange International, LLC (“Mélange”), 475 Seventeenth Street, Suite 540, Denver, Colorado 80202,
Mike A. Tinker, individually and Desert Moon Gas Company, a Colorado corporation (“Tinker”), P.O.
Box 440733 Aurora, CO, 80044, Hannon & Associates, Inc. 820 16th St, Suite 630 Denver,
CO 80202. (“Hannon”), and Teton Energy Corporation (“TETON”), 410 17th St, Suite 1850 Denver, CO 80202. Mélange, Tinker and
Hannon are collectively referred to herein as “The Assignors”. Mélange, Tinker, Hannon and TETON
are collectively referred to herein as the “Parties.”

RECITALS

WHEREAS, The Assignors own record title and/or beneficial interests in and to the leasehold
estates created by the oil and gas leases (the “Current Leasehold”) described in Exhibit 1,
attached hereto; and

WHEREAS, The Assignors will assign to TETON 100% of their right, title and interest in the Current
Leasehold, subject to overriding royalty interests herein reserved;

NOW, THEREFORE, in consideration of Four Hundred Eighty Eight Thousand Three Hundred Twenty Five
Dollars ($488,325.00), the mutual promises and covenants contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties
hereby agree as follows:

Article 1.

DEFINITIONS

Whenever used in this Agreement, the following terms will have the below defined meaning:

	 	1.1	 	Affiliate An affiliate of, or person affiliated with, a specified person, is a
person that directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
	 
	 	1.2	 	Agreement means this Agreement, inclusive of all exhibits and attachments, as
the same may be modified or amended from time to time. The Agreement shall replace and
supersede all previous agreements and representations in their entirety.
	 
	 	1.3	 	Current Leasehold means the oil and gas leases and other rights relating to
exploration for and production of oil and gas that are owned by the Assignors within
the West Greybull Project, which leases are more fully described in Exhibit 1
attached hereto.
	 
	 	1.4	 	Additional Leasehold means the oil and gas leases and rights acquired by the
Parties in the specific AMI pursuant to AMI provisions herein.
	 
	 	1.5	 	Leasehold means the Current Leasehold and the Additional Leasehold.
	 
	 	1.6	 	Effective Date means April 25, 2007.
	 
	 	1.7	 	Existing Burdens means all landowner royalties, overriding royalties and other
burdens existing of record on the effective date hereof and burdening the Current
Leasehold, or existing prior to, or

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created as a condition to the Parties’ acquisition of Additional
Leasehold. Existing Burdens also include existing overrides of the Assignors on the
Current Leasehold whether of record or not of record.

	 	1.8	 	Kirkwood Leasehold means that leasehold described on Exhibit 4
acquired through a separate agreement by TETON from Kirkwood Oil & Gas LLC located
within the West Greybull Project.
	 
	 	1.9	 	Operator means TETON.
	 
	 	1.10	 	West Greybull Project means those lands lying within the area outlined in red
on the Map attached hereto as Exhibit 2.

Article 2.

ORGANIZATION

	 	2.1	 	Business Purpose. The purpose for which the Parties enter into this Agreement
is to acquire, hold, maintain, explore, develop, operate, produce, enjoy the benefits
of, sell, or otherwise dispose of any Leasehold and to market or otherwise deal with
the production therefrom. Leasehold may include fee, federal, state and tribal
acreage or acreage held by any other entity.
	 
	 	2.2	 	Term. This Agreement will commence on the Effective Date, and will continue
until this Agreement is terminated in accordance with its provisions.

Article 3.

WEST GREYBULL PROJECT

	 	3.1	 	Current Leasehold. The Assignors represent that they own oil and gas
leases totaling approximately 6,511 net acres that comprise the West Greybull Project.
A complete schedule of the oil and gas leases involved is included as Exhibit
1 attached hereto.
	 
	 	3.2	 	Title Examination. Within five (5) days following the execution of this
Agreement, the Assignors will make available to TETON, at TETON’s office, all title
information pertaining to the Current Leasehold. However, the Assignors acknowledges
that all lease bonuses, rentals, royalties, including minimum advance royalties,
shut-in payments, and any other payments which are required to perpetuate the Current
Leasehold have been paid, or satisfied to date, and all oil and gas leases covering the
Current Leasehold are in full force and effect. TETON shall have then have twenty one
(21) days from receipt of such title information to notify the Assignors of any
material title defects, which TETON may have identified as pertaining to the Current
Leasehold. TETON’s written notice shall identify any such defective Leases, the nature
of the defect and the number of net acres affected thereby. Any of the Current
Leasehold not identified in said written notice by TETON within said thirty (30) days
shall be deemed as acceptable title by Teton and paid for by Teton at closing. A
material title defect shall include, but not be limited to any lease with a
proportionate net revenue interest less than 81% (after creation of the Assignors
overriding royalty provided for in Section 3.3), except in the case of Wyoming State
Lease No. 06-00492, in which case a material title defect exists if the proportionate
net revenue interest of the Assignors in that lease is less than 80.5% (after creation
of the Assignors overriding royalty provided for in Section 3.3). If an existing
environmental hazard is present that affects more than 50% of the surface overlying the
existing leasehold, Teton may elect to terminate this Agreement with no further
obligation to the Assignors. TETON shall have the right, but not the obligation, to
request that any of the Current Leasehold that it deems subject to a title defect be
omitted from this Agreement, and the assignment to TETON by the Assignors will not
include said leases. In

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addition, in the event that more than 20% of Current Leasehold (measured by net
acres) suffers from a material title defect, TETON may elect to terminate this Agreement
with no further obligation to the Assignors. In the event any leases are omitted from this
Agreement the consideration provided for in Article 6.1 shall be reduced by an amount equal
to $75 per net acre multiplied by the number of net acres affected by such title defects.
If the Assignors cure title defects to TETON’s satisfaction at any time within sixty (60)
days after the date of closing then title to the omitted leases will be deemed to be
acceptable and the Assignors will assign said leasehold to TETON pursuant to all terms and
conditions of this Agreement and TETON shall remit to the Assignors payment at the rate
stated herein.

	 	3.3	 	Net Revenue Interest. All Current Leasehold shall be subject to the retention of
overriding royalty interests by the Assignors or their designees. Said overriding royalty
interests shall equal the difference between the existing burdens (whether or not of record as
of the effective date hereof) and nineteen percent (19%) with the exception of State of
Wyoming Lease No.06-00492 recited on Exhibit 1, which said overriding royalty
interests shall equal the difference between the existing burdens and nineteen and one-half
percent (19.5%).
	 
	 	3.4	 	Data. Teton shall furnish to the Assignors, to the extent allowed by law or license and
availability, within ten (10) business days which such data becomes available to Teton, all
data specified in the attached Geological Requirements Exhibit 5 on all wells drilled
drilled within the AMI. The Assignors will keep all such data and information strictly
confidential, and such data shall not be disclosed to any third party until made public by
TETON or appropriate state or federal regulatory agencies. Also to the extent allowed by law
or license, the Assignor agrees to provide TETON, within five days following execution of this
Agreement, copies of all geological and geophysical data in their possession related to the
Current Leasehold and West Greybull Project including, without limitation, the
Petra/Geographix data set or other electronic data set.
	 
	 	3.5	 	Commitment Test Well. Prior to April 25, 2010, TETON commits to commence or cause to be
commenced the drilling of a well within the West Greybull Project to a depth sufficient to
adequately test the Greybull Sandstone found at an approximate depth of 12,380’ in the Gulf
Otto Fed Well located in the SE1/4 of Sec. 26, T.52N.,R95W, Big Horn County,
Wyoming, (the “Commitment Test Well”). TETON shall cause the Commitment Test Well to be
drilled on a drilling/spacing unit comprising at least fifty percent (50%) Current Leasehold
or, Additional Leasehold. If no drilling/spacing unit has been established by the Wyoming
Oil and Gas Conservation Commission prior to the spud date of the Commitment
Test Well, the drilling/spacing unit for such well for purposes of this section shall be
the 160 acre quarter section on which the well is to be drilled. If the drilling/spacing unit
for TETON’s desired location for the Commitment Test Well includes at least 50% Current
Leasehold or Additional Leasehold but access to such Current Leasehold or Additional Leasehold
cannot be obtained due to lease stipulations, unavailable access or other reason beyond
TETON’s reasonable control, then TETON shall be permitted to locate the Commitment Test Well
at an accessible location, which may be on a drilling/spacing unit not including at least 50%
Current Leasehold or Additional Leasehold, but in that event the Assignors Overriding Royalty
shall be not less than two-percent (2.0%) of 8/8ths. If TETON fails to commence drilling the
Commitment Test Well on or before April 25, 2010 as provided for under this Article 3.5, for
any reason other than those covered by Article 9.5 herein, TETON shall immediately reassign to
the Assignors an undivided 100% of its interests acquired hereunder free and clear of any
liens, judgments or burdens other than the overriding royalty interests provided for herein.
	 
	 	3.6	 	West Greybull Project Wells — General. All operations by TETON with respect to West Greybull
Project Wells will be conducted in a good and workmanlike manner in accordance with good oil
field practice. TETON agrees to indemnify and hold the Assignors harmless against all claims
and causes of action associated with TETON’s activities and operations conducted in
association with this Agreement but TETON shall have no liability to the Assignors except in
the case of gross negligence or willful misconduct by either Party.

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Article 4.

LEASE MANAGEMENT

	 	4.1	 	Rentals, Minimum Royalties and Production Accounting. Rental payments and
minimum royalty payments required under the terms of any of the Current Leashold, which
are due after the closing date, will be paid on behalf of the Parties by TETON, except
for any Current Leasehold which may be excluded pursuant to the terms of Section 3.2.
Rental payments and minimum royalty payments required under Additional Leasehold within
the West Greybull Project AMI shall be paid by the party owning such leasehold.
Should any lease be lost as a result of the inadvertent failure to make proper payment
of any rental, option, shut-in well payment or minimum royalty, such loss will be borne
by the Parties jointly and there will be no recourse against or liability on the part
of the Party who failed to make such payment. Any failure to pay delay rentals after
the closing date on any federal lease that is a part of the Current Leasehold (unless
excluded pursuant to Section 3.2) or Additional Leasehold that results in a
reinstatement of said lease with a higher royalty burden shall not serve to reduce the
overriding royalties granted to the Assignors as set forth in Paragraphs 3.3 and 5.1
herein.
	 
	 	4.2	 	Lease Records. On behalf of the Parties, TETON, as Operator, will maintain
appropriate land and lease records relating to the West Greybull Project.
	 
	 	4.3	 	Joint Loss. Except as otherwise expressly provided in this Article 4, any loss
or liability incurred by the Parties from any error or omission by a Party in
performance of its obligations under this Article 4 will be borne by the Parties
jointly.

Article 5.

AREA OF MUTUAL INTEREST

	 	5.1	 	AMI. In consideration that is derived through the mutual benefit of the
parties, the Parties agree that all lands set forth below will constitute an Area of
Mutual Interest (“AMI”) between the Parties:

Township 52 North, Range 95West 6th P.M.

Sections 1 thru 36 (entire Township)
 

Township 51 North, Range 95 West 6th P.M.

Sections 1 thru 36 (entire Township)
 

Big Horn County, Wyoming

Township 52 North Range 94 West

Sections 5, 6, 7, 8, 17, 18, 19, 20, 29, 30, 31 and 32
 

Township 51 North Range 94 West

Sections 5, 6 and 7

And being the same lands located within the West Greybull Project Area as defined herein.
 

The AMI between the Parties will continue in effect for the term commencing with the
Effective Date hereof and ending April 25, 2010 unless sooner terminated by the express
written consent of both Parties. In the event that any Party acquires any oil and gas
leasehold, oil and gas leases, mineral rights, royalty interests or other rights of
entitlement to oil and gas interests covering any lands within the AMI during the term
of the AMI, then such acquiring Party shall provide written notice thereof to each
other Party within thirty (30) days of such acquisition, advising of the costs and
terms of the acquisition. If the Assignors or any one of them are the acquiring party,
TETON shall have thirty (30) days from its receipt of such notice to furnish the
acquiring Party with reimbursement for the acquisition costs of such lease(s) and the
acquiring Party shall promptly thereafter assign to TETON all right, title and interest
in such lease(s), reserving to itself an overriding royalty interest of two and 

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one-half percent ( 2.5%) in the proportions Mélange l/3rd, Tinker
l/3rd and
Hannon l/3rd . If TETON is the acquiring party, then it
shall assign to the Assignors, or to its designees, an overriding royalty interest in
such lease(s) in an amount equal to two and one-half percent (2.5%) to the Assignorsl in
the same proportions as stated above. In the event the acquired leasehold existing
burdens excluding the the Assignors two and one half percent (2.5%) overriding royalty
interest totals nineteen percent (19%), then the the Assignors two and one half percent
(2.5%) overriding royalty interest shall be reduced to an amount, so that the net
revenue interest in the lease(s) is eighty one percent (81%). In any event however, the
the Assignors overriding royalty amount shall not be less than one-percent (1%). If the
interests being acquired are other than oil and gas leasehold or rights to earn oil and
gas leasehold, and are non-cost bearing interests, the Parties’ interests shall be in
the proportions fifty percent (50%) to TETON, and fifty percent (50%) to the Assignors.

Article 6.

ASSIGNMENTS AND CONSIDERATION

	 	6.1	 	Assignments and Consideration. Closing shall occur on May 18th,
2007. At closing, TETON shall remit to the Assignors cash consideration equal to the
number of net acres of leasehold assigned multiplied by $75.00 for a total
consideration of $488,325.00, subject to adjustment for title defects as provided in
Section 3.2. The Assignors shall advise TETON in writing prior to the date of closing
the proportionate amount of such payment payable to Mélange, Tinker, and Hannon,
respectively.
	 
	 	 	 	The Assignors shall assign to TETON one hundred percent (100%) of the Assignors’
interest, as to all depths, subject to the retained/reserved overriding royalty
interests provided for herein, in the Current Leasehold. All assignments from the
Assignors to TETON shall be on a form of assignment attached hereto
as Exhibit
3. In addition, the Assignors shall deliver assignments of federal and state
leases on the required forms. Once all assignments have been fully executed by the
Parties, TETON shall be responsible for submitting all assignments to the proper
agency for approval or to the proper county for recording. All reservations of
overriding royalty, as stated above in Article 3.3, shall be expressly stated.
	 
	 	6.2	 	Reassignment Obligation. If TETON receives an assignment under this Agreement
or acquires a lease subject to this Agreement and thereafter elects to surrender, let
expire, abandon or release said lease, TETON will notify the remaining Parties not less
than sixty (60) days in advance of such surrender, expiration, abandonment or release.
At the request of some or all of the remaining Parties, which request must be made
within thirty (30) days of receipt of such notice, TETON will then immediately assign
those rights to the requesting Parties and, upon receipt of that assignment, the
requesting Parties will pay (if applicable) TETON the reasonable salvage value of any
material or equipment received, less the estimated costs of reclamation and surface
restoration. Any wells affected by such assignment and not taken over by some or all of
the remaining Parties will be plugged and abandoned, according to state and federal
regulations, at the owning Parties’ sole cost, risk and expense.
	 
	 	6.3	 	Special Warranty. The Assignors agree to warrant the title to the Current
Leasehold as to claims made by through or under the Assignors, but not otherwise.

Article 7.

 TERMINATION

	 	7.1	 	Termination. This Agreement will terminate upon the occurrence of any of
the following:

	 	 	 	7.1.a. the expiration of the term provided for in Article 2.2.

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	 	 	 	7.1.b. the mutual written agreement of all Parties to
this Agreement.
	 
	 	 	 	7.1.c. In the event closing does not occur as
provided in Article 6. herein.

Article 8.

MISCELLANEOUS

	 	8.1	 	Amendments. This Agreement may be amended only by written instrument executed
by all Parties.
	 
	 	8.2	 	Overriding Royalty Interests. The overriding royalty interests provided for
herein shall be treated as a lease burden existing on the effective date of this
Agreement and not as a subsequently created interest. Said overriding royalties shall
not merge with any working interest assigned or retained herein.
	 
	 	 	 	The overriding royalties provided for hereunder shall apply to any extension or
renewal of the Leasehold, insofar as such extension and renewal leases include
lands covered by the Leasehold. For the purposes of this provision a renewal of an
oil and gas lease is the taking by any party to this Agreement of any oil and/or
gas lease within one year of the expiration, termination, or release of the
preceding lease and a top lease. A renewal of a federal or state oil and gas lease
is the taking by any party to this Agreement of any oil and gas lease offered at
the next federal or state lease sale at which all or a part of the acreage covered
by the preceding federal or state lease subject to this Agreement is offered for
lease, as long as any party hereto has made a request to the BLM or State, within
six (6) months from the expiration or termination of the preceding federal or state
lease, to post such acreage for lease. The overriding royalties assigned hereunder
shall apply to any extension or renewal of the Leasehold and such assignments of
overriding royalties on renewals and extensions are to be provided in recordable
form to the Assignors, or to its designees, within 30 days of the acquiring party’s
acquisition of the lease(s).
	 
	 	 	 	Further, any overriding royalty reserved by or assigned to the Assignors pursuant to
this Agreement shall (i) be reduced proportionately to the leasehold working
interests and the mineral estates leased thereby, which are burdened by said
overriding royalty; (ii) be free of all drilling, development, production, operating
and overhead costs and expenses; (iii) bear and pay its proportionate share of
gross production taxes, pipeline taxes, ad valorem taxes and other taxes assessed
against the gross production attributable to said overriding royalty interests; (iv)
shall be computed upon the same basis as royalties payable to the United States on
production from the West Greybull Project are calculated, in accordance with CFR
code Chapter II, 206.150 thru 206.160 inclusive and payable to the Minerals
Management Service.
	 
	 	8.3	 	Applicable Law. This Agreement shall be interpreted under the laws of the
State of Colorado without giving effect to any choice of law or conflict of laws
provision or ruole that would constitute application of the laws of any jurisdiction
other than the State of Colorado. With respect to any claims asserted or court
proceedings initiated relating in whole or in part to this Agreement, the Parties
consent to venue and jurisdiction in the Colorado District Court for the City and
County of Denver (Second Judicial District) and in the Federal District Court for the
District of Colorado.
	 
	 	8.4	 	Counterpart. This Agreement may be executed in counterpart and will be
binding upon the Parties and their heirs, successors, assigns, and legal
representatives.
	 
	 	8.5	 	Force Majeure. If any Party is rendered unable, wholly or in part, by force
majeure to carry out its obligations under this Agreement, other than the obligation to
indemnify or make money payments or furnish security, that Party shall give to all
other Parties prompt written notice of the force majeure with reasonably full
particulars concerning it; thereupon, the obligations of the Party giving the notice,
so far as they are affected by the force majeure, will be suspended during, but no
longer than, the continuance of the force majeure. The term “force majeure,” as here
employed,

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means an act of God, strike, lockout, or other industrial disturbance, act
of the public enemy, war, blockade, public riot, lightning, fire, storm, flood, or other
act of Nature, explosion, governmental action, governmental delay, litigation, restraint,
injunction, unavailability of equipment, drilling permits, and any other cause, whether of
the kind specifically enumerated above or otherwise, which is not reasonably within the
control of the Party claiming suspension.

8.5a The affected Party must use all reasonable diligence to remove the force majeure
situation as quickly as practicable. The requirement that any force majeure must be
remedied with all reasonable dispatch does not require the settlement of litigation or the
settlement of strikes, lockouts, or other labor difficulty by the Party involved, contrary
to its wishes; how all such difficulties are handled will be entirely within the
discretion of the Party concerned.

	 	8.6	 	Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit
of the Parties and their respective legal representatives, successors, and assigns. No
assignment by a Party shall in any way diminish or otherwise adversely affect the rights,
interest, or obligations of any other Party. If any Party to this Agreement assigns or conveys
all or a portion of its interest in this Agreement, said assignment or conveyance shall be
specifically made subject to all of the terms and provisions of this Agreement. The Party
assigning or conveying an interest shall notify all other Parties in writing of the conveyance
and provide all other Parties with appropriate documents and information concerning the
successor in interest.
	 
	 	8.7	 	Event of Conflict. In the event of any conflict or inconsistency between the provisions
of this Agreement and those of the Exhibits, the provisions of this Agreement shall prevail.
If any term or condition of this Agreement conflicts with a term or condition of the Current
or Additional Leasehold, then such term or condition of the Current or Additional Leaseholds
shall prevail and this Agreement will be deemed to be amended accordingly.
	 
	 	8.8	 	Representations and Warranties.
	 
	 	 	 	8.8a. TETON Representation - TETON represents, warrants, and agrees to and with the
Assignors hereto that TETON has all requisite power and authority to enter into and to
perform its obligations under this Agreement subject to TETON’s receipt of approval of
this Agreement from its Board of Directors on or before May 4, 2007, which approval shall
be an absolute condition. TETON represents that any prior agreements which it has entered
into with a third party covering the West Greybull Project Area, will not prevent the full
performance of this Agreement by TETON. TETON shall furnish to the Assignors prior to the
execution of this Agreement evidence that it has obtained a release or amendment of its
prior agreement with Patriot Exploration Co., Inc. which might prevent performance of this
Agreement by TETON.
	 
	 	 	 	8.8b. The Assignors Representation - Each Assignor represents, warrants, and agrees that
it has all requisite power and authority to enter into and to perform its obligations
under this Agreement and that there are no conflicts or impediments to any undertakings
herein.
	 
	 	8.9	 	Severability. If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
	 
	 	8.10	 	Assignment. The parties shall have the right, at any time, to assign all or a portion of its
rights or any interest in the Leasehold to a third party; it being understood that said third
party shall be bound by the terms and conditions set forth herein.
	 
	 	8.11	 	Kirkwood Contingency. TETON’s obligation to close the transaction contemplated by this
Agreement is contingent upon the execution of a purchase and sale agreement with Kirkwood Oil
& Gas, LLC covering the Kirkwood Leasehold on substantially similar terms as contained in this
Agreement, excluding the AMI, AMI ORRI and data requirements.

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	 	8.12	 	Disclosure of Agreement. The Assignors, shall advise anyone inquiring
about the Current Leasehold that such leasehold is under contract and not available for sale
or discussion. The Assignors shall not, however, identify TETON as the buyer or disclose
any other information concerning the purchase and sale until TETON has publicly disclosed such
information or it becomes generally known to the public through no actions undertaken by the
Assignor in contravention of the confidentiality provisions herein. Copies of all public
disclosures made by TETON prior to closing will promptly be furnished to Mike Tinker by
electronic mail. The Assignors acknowledge that TETON is subject to reporting requirements
of the Securities Exchange Act of 1934, that TETON’s common stock is traded publicly, and
that federal and state securities laws impose significant restrictions concerning the use or
disclosure of non-public information in general and in buying or selling, or discussing with
others the possibility of buying or selling, TETON securities by person who have access to
information concerning TETON that is not generally available to members of the public.
	 
	 	8.13	 	Entire Agreement. This Agreement embodies the entire agreement between the Parties with
respect to the subject matter of this Agreement, superseding all prior oral or written
agreements, understandings, solicitations of interest or offers related to the subject matter
of this Agreement, and may be amended, supplemented, or altered only by a written instrument
signed by all the Parties.
	 
	 	8.14	 	Transaction Costs. Each Party will be solely responsible for all costs incurred by it in
connection with this Agreement and the transaction contemplated hereby, with no right to
recovery or contribution from any other Party. Neither the Assignors nor TETON shall have any
liability to any third party for commissions or broker’s fees for which the other Party may be
liable.
	 
	 	8.15	 	Counterpart. This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party; provided that a
facsimile signature shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not a facsimile
signature.
	 
	 	8.16	 	Notices. Any notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to have been
delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated
and kept on file by the sending party); (iii) one day after electronically mailed either in
the text of an email message or attached in a commonly readable electronic format, and the
sender has received no generated notice that the client email message has not been
successfully delivered; or (iv) one (1) Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the party to receive
the same. The addresses, facsimile numbers, and email addresses for such communications shall
be:

Attn: Mike A. Tinker

Desert Moon Gas Company

P.O. Box 440733

Aurora, CO 80044

PH 303-752-1084

FAX: 303-752-1084

Email: tinkjl@msn.com

Attn: Gary Stewart

Mélange International, LLC

475 17th St, Suite 540

Denver, Co 80202

PH 303-298-9415

FAX 303-298-0729

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Email: gary@eMelange.net

Hannon & Associates, Inc.

820 16th St, Suite 630

Denver, CO 80202

Email: hannon@qwest.net

Teton Energy Corporation

410 17th Street, Suite 1850

Denver, CO 80202

PH 303 565-4604

FAX 303 565-4606

Email: rbosher@teton-energy.com

IN WITNESS WHEREOF, this Agreement is executed as of April 25, 2007.

	 	 	 	 	 	 	 	 	 
	MÉLANGE INTERNATIONAL, LLC	 	HANNON & ASSOCIATES, INC.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Gary C. Stewart	 	 	 	By:
	 	/s/ Ted Hannon
	 

	 	 
	 	 	 	 	 	 
	 

	 	Gary C. Stewart, Manager
	 	 	 	 	 	Ted Hannon President
	 
	 	 	 	 	 	 	 	 
	 

	 	/s/ Mike A. Tinker	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Mike A. Tinker, individually	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	DESERT MOON GAS COMPANY	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Mike A. Tinker	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Mike A. Tinker

President	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	TETON ENERGY CORPORATION	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Dominic Bazile	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Dominic Bazile, COO and EVP	 	 	 	 

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EXHIBIT “1”
 

To Purchase and Sale Agreement dated effective April 25, 2007, Melange International, LLC et al and Teton Energy Corporation

WEST GREYBULL PROSPECT 
 BIG
HORN COUNTY, WYOMING

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	GROSS	 	 	Melange, etal,	 
	SERIAL NO.	 	EFFECTIVE DATE	 	 	EXPIRATION DATE	 	 	LEGAL DESCRIPTION	 	ACRES	 	 	Net Acres	 
	WYW-158652
	 	 	10/1/2003	 	 	 	9/30/2013	 	 	T52N,R95W.	 	 	347.38	 	 	 	347.38	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 25: L 1-3.NE/4, E/2NW/4	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	WYW-158653
	 	 	10/1/2003	 	 	 	9/30/2013	 	 	T52N,R95W.	 	 	640.00	 	 	 	640.00	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 29: All	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	WYW-160121
	 	 	4/1/2004	 	 	 	3/31/2014	 	 	T52N,R95W.	 	 	960.00	 	 	 	960.00	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 26: N/2,	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 27: All	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	WYW-160123
	 	 	4/1/2004	 	 	 	3/31/2014	 	 	T52N,R95W.	 	 	634.00	 	 	 	634.00	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 35: N/2,N/2SE/4, SE/4SE/4,	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	SW/4, SE/4SE/4, Excl 6.0	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	ac. in RSVR ROW	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	St WY 06-00492
	 	 	6/2/2006	 	 	 	6/2/2011	 	 	T52N,R95W	 	 	592.38	 	 	 	592.38	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 36: Tr 62 (ALL)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	D. Mayland
	 	 	11/7/2006	 	 	 	11/7/2011	 	 	T52N,R95W	 	 	166.37	 	 	 	83.18	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 33: L 10,11 ,7, of Rsvy Tr 123	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	51N,95W	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 4 L12,10,8, of Rsvy Tr 122	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	L. 9, 11,12 of Rsvy Tr 123	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	D. Mayland
	 	 	11/30/2006	 	 	 	11/30/2011	 	 	T52N,R95W	 	 	160.00	 	 	 	80.00	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 11:SW/4 a/d/a L k,l,m,n of Tr 53	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Martin Mayland & Diana
Mayland Trustees
	 	 	11/7/2006	 	 	 	11/7/2011	 	 	T52N,R95W	 	 	544.12	 	 	 	352.06	 

  1 of 3

 

EXHIBIT “1”
 

To Purchase and Sale Agreement dated effective April 25, 2007, Melange International, LLC et al and Teton Energy Corporation

WEST GREYBULL PROSPECT 
 BIG HORN COUNTY, WYOMING

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
		 		 	 	EXPIRATION	 	 		 		 	 	Melange, etal,	 
	SERIAL NO.	 	EFFECTIVE DATE	 	 	DATE	 	 	LEGAL DESCRIPTION	 	GROSS ACRES	 	 	Net Acres	 
	 
	 	 	 	 	 	 	 	 	 	Rsvy Tr 117,	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 34: SE/4SW/4,SW/4SE/4,	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 15: SW/4	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	51N,95W	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Rsvy Tr 117 in sec. 6,	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 3: L.7,8,11,14,15,SE/4SW/4	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Donald Dalley Winters, et al
	 	 	11/7/2006	 	 	 	11/7/2011	 	 	T51N,R95W Rsvy Tr 107 in Sec. 2 &	 	 	649.46	 	 	 	575.09	 
	 
	 	 	 	 	 	 	 	 	 	11, Rsvy Tr 105 in
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec 2,11, & 12,
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	W/2 of Rsvy Tr 106
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 1: SW/4SW/4,	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 2: L9,15,16,19,SW/4NW/4	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 3: L17, SE/4NE/4	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 11: L 1,16,17	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 12: L 1,4,6,7,17NE/4NW/4	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	John J. Bullinger & Sons, LLC
	 	 	11/30/2006	 	 	 	11/30/2011	 	 	T51N, R95 W,6th P.M. Resurvey Tr75 (Original Survey was SE1/4 NE 1/4 of Sec
23 and N 1/2 NW 1/4 and SW 1/4NW 1/4 of Sec 24)
(157.87 ac.)	 	 	1,041.68	 	 	 	970.74	 
	 
	 	 	 	 	 	 	 	 	 	Part of Rsvy Tract 76 (Original Survey was NE 1/4 NE 1/4 of Section 23, exc a 30.36 ac tract	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Rsvy Tract 79 (Original Survey was SE 1/4
NW
1/4
, SW 1/4 NE
1/4, NW
1/4 SE
1/4
and NE 1/4 SW
1/4
of Section 13) (150.61 ac.)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Ptn of Rsvy Tr 80 (Original Survey
was SE 1/4 SW 1/4 and S1/2 SE
1/4 of Section 1 I,SW1/4 SW1/4 of Sec 12, W
1/2 W
1/2 of Sec 13, and E1/2 E 1/2 of Sec 14, except a strip of land 340 feet wide along the East line of Tract 81 (490.69 ac.)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	T51N . R95W,6th P.M.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Rsvy TR 67 in Sec’s 6,7 (201.88 ac)	 	 	 	 	 	 	 	 
	 
	WYW-173874
	 	 	2/1/2007	 	 	 	1/31/2017	 	 	T52N,R95W 6th P. M..	 	 	160.00	 	 	 	160.00 	 

 2 of 3

 

EXHIBIT
“1”

To Purchase and Sale Agreement dated effective April 25, 2007, Melange International, LLC et al and Teton Energy Corporation

WEST GREYBULL PROSPECT  
BIG HORN COUNTY, WYOMING

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Melange, etal,	 
	SERIAL NO.	 	EFFECTIVE DATE	 	 	EXPIRATION DATE	 	 	LEGAL DESCRIPTION	 	GROSS ACRES	 	 	Net Acres	 
	WYW-174082
	 	 	4/1/2007	 	 	 	3/31/2017	 	 	T52N,R95W
6th P. M..	 	 	920.00	 	 	 	920.00	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 23: N/2NE/4, NE/4NW/4,	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	S/2N/2, S/2	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 24: W/2NW/4,SW/4, E/2SE/4	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Richard D. Hammond
	 	 	1/5/2007	 	 	 	1/512	 	 	T51N , R 95 W,6th P.M.	 	 	476.57	 	 	 	178.71	 
	 
	 	 	 	 	 	 	 	 	 	Ptns of Rsvy TR 80 in Sec 14 (12.47 ac)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Ptns of Rsvy TR 81 in Sec 14 (9.54 ac)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Ptns of Rsvy Tr 82 in Sec. 14 & 15 (454.56 ac.)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Carol Wade House
	 	 	1/25/07	 	 	 	1/25/12	 	 	T51N, R 95 W,6th P.M.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Section 1: NW/4SE/4, and a ptn of the SW/4SE/4	 	 	48.00	 	 	 	18.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Totals	 	 	7,339.96	 	 	 	6,511.54	 

 3 of 3

 

EXHIBIT “2”

to Purchase and Sale Agreement Melange International, LLC, et al and Teton Energy Corporation

WEST GREYBULL PROJECT AREA 

BIG HORN COUNTY, WYOMING

 

 

EXHIBIT 3

To
Purchase and Sale Agreement dated effective April 25, 2007,
between Mélange
International, LLC, et al, and Teton Energy Corporation.

ASSIGNMENT OF OIL AND GAS LEASE(S)

KNOW ALL MEN BY THESE PRESENTS:

     THIS
ASSIGNMENT is made and entered into
this
           day
of                      , 2007, by and
between Mélange International, LLC (“Mélange”), 475 Seventeenth Street, Suite 540, Denver, Colorado
80202, Desert Moon Gas Company and Mike A. Tinker (“Tinker”), P.O. Box-440733, Aurora, CO, 80044,
and Hannon & Associates, Inc. 820 16th St, Suite 630 Denver, CO 80202. hereinafter
collectively referred to as “Assignor,” and Teton Energy Corporation (“TETON”), 410 17th
St, Suite 1850, Denver, CO 80202, hereinafter referred to as “Assignee”.

W I T N E S S E T H :

     THAT, Assignor is the owner of certain leasehold interests in the oil and gas lease(s)
described on Exhibit “A” attached hereto and made a part hereof covering the lands described in
Exhibit “A” attached hereto and made a part hereof.

     THAT, for and in consideration of Ten Dollars ($10.00+) and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to
Assignor’s reservation herein of the overriding royalty interest set forth below, Assignor does
hereby grant, assign, transfer, set over, and convey unto Assignee, its successors and assigns, all
of Assignor’s right, title, interest, in and to the oil and gas
lease(s), covering the lands described on Exhibit “A” attached hereto.

     Assignor does hereby EXCEPT AND RESERVE unto itself, its successors and assigns, an overriding
royalty interest equal to the difference between lease burdens existing of record as of the date
hereof and nineteen percent (19%), thus delivering to Assignee an eighty one percent (81%) net
revenue interest, of all of the oil, gas and other hydrocarbons produced, saved and sold from the
oil and gas lease(s), covering the lands as described on Exhibit
“A” with the exception of the State of Wyoming Lease
No. 06      
      00497,
 in which Assignor does except and reserve an royalty interest equal to the difference between
lease burdens existing of record as of the date hereof and nineteen and one-half percent (19.5%),
thus delivering to Assignee an eighty and one half percent (80.5%) net revenue interest in such
lease. The overriding royalty interest herein reserved shall apply to extensions or renewals of
the lease(s) described on Exhibit “A” and is subject to all the terms and conditions of the
Purchase and Sale Agreement dated effective April 25, 2007, between Assignor and Assignee.

     If any of the oil and gas leases assigned covers less than the entire and undivided mineral
estate or if Assignor’s interest in any of the leases is less than the full and undivided
leasehold estate in and to the lands described on Exhibit “A”, the overriding royalty interest
herein reserved and excepted shall be proportionately reduced to correspond with the leasehold
interest assigned hereby.

     This Assignment of Oil and Gas Lease is executed simultaneously with that certain Federal
Form of Assignment of Record Title Interest dated the
                     day of                      2007, covering the Federal leases
and State Form Assignment dated the
                     day of,                      2007, covering the State Lease(s)
described on Exhibit “A”. The interest conveyed by such Assignments are parallel, and not in
addition, to the interest herein conveyed. In the event further Assignments or documents are
required after the date hereof by any governmental authority Assignor
will upon Assignee’s
request, execute, acknowledge and deliver or cause to be executed and delivered, all such
documents or instruments necessary to effectuate this Assignment.

     The interests assigned herein are subject to 1) all terms and conditions of the oil and gas
leases; 2) all instruments existing of record in Assignor’s chain of title; and 3) that certain
Purchase and Sale Agreement dated effective April 25th, 2007 between Teton Energy
Corporation and Mélange International, LLC, et al,. In the event there is a conflict between the
terms of this Assignment and the terms of said Purchase and Sale Agreement, the Purchase and Sale
Agreement shall prevail.

 

 

     This Assignment is given without representation or warranty of title, either express or
implied, except all parties claiming by through or
under Assignor, but not otherwise.

     This Assignment shall be binding upon and will inure to the benefit of Assignor and Assignee,
their successors and assigns.

SIGNED
EXECUTED AND DELIVERED this
                     day of                                          2007.

	 	 	 	 	 	 	 	 	 
	MÉLANGE INTERNATIONAL, LLC	 	 	 	HANNON & ASSOCIATES, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 

        Gary C. Stewart, Manager
	 	 	 	 

        Ted Hannon, President
	 	 
	 
	 	 	 	 	 	 	 	 
	Desert Moon Gas Company	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	BY:
	 	 	 	 	 	 	 	 
	 

	 	 

Mike A. Tinker
	 	 	 	 

Mike A. Tinker
	 	 
	 

	 	President	 	 	 	 	 	 

ACKNOWLEDGMENT

COUNTY OF                                         )

                                                                )

STATE OF COLORADO )

     The
foregoing instrument was acknowledged before me this                      day of                     , 2007
by Mike A. Tinker,

     WITNESS my hand and official seal.

     Notary Public in and for the State of Colorado

My Commission Expires:                                        

 

 

CORPORATE ACKNOWLEDGMENT

COUNTY OF                                          )

                                                                  )

STATE OF COLORADO                      )

     The foregoing instrument was acknowledged before me this                      day of           
          ,
2007 by Mike A. Tinker, as President of Desert Moon Gas Company,

     WITNESS my hand and official seal.

     Notary Public in and for the State of Colorado

My Commission Expires:                                        

CORPORATE
ACKNOWLEDGMENT

COUNTY OF                                          )

                                                                  )

STATE OF COLORADO                    )

     The
foregoing instrument was acknowledged before me
this           day of 
                    , 2007
by Gary Stewart, as Manager of Mélange International. LLC,

     
WITNESS my hand and official seal.

      Notary Public in and for the State of Colorado                    

My Commission Expires:

COUNTY OF                                         )

                                                                  )

STATE OF COLORADO                    )

     The
foregoing instrument was acknowledged before me this
       
              day of                              
        
   , 2007
by Ted Hannon, as President of Hannon & Associates, Inc.,

     WITNESS my hand and official seal.

     Notary Public in and for the State of Colorado

My Commission Expires:                                         

 

 

EXHIBIT “4”

     To Purchase and Sale Agreement dated effective April 25, 2007, Melange International, LLC,
et al, and Teton Energy Corporation

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	EFFECTIVE	 	 	EXPIRATION	 	 	 	 	%INTEREST	 	 	GROSS	 	 	NET	 
	SERIAL NO.	 	DATE	 	 	DATE	 	 	LEGAL DESCRIPTION	 	OWNED	 	 	ACRES	 	 	ACRES	 
	WYW-160120
	 	 	4/1/2004	 	 	 	3/31/2014	 	 	T52N.R95W.	 	 	100.00	%	 	 	933.53	 	 	 	933.53	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 15: TR 41A, 60B,60C,60D	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 16: Tr 41A	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 21: Tr 41 A	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 22: SW/4NW/4, S/2, L 5,8,9,	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	              Tr 41A, 60B,60C,60D	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 24: NE/4, E/2NW/4, W/2SE/4	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	WYW-160122
	 	 	4/1/2004	 	 	 	3/31/2014	 	 	T52N.R95W.	 	 	100.00	%	 	 	678.00	 	 	 	678.00	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 33: NE/4	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 34: N/2, N/2SW/4, NW/4SE/4,	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	E/2SE/4 excl 2.0 ac in Resvr ROW	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	WYW-163270
	 	 	6/1/2005	 	 	 	5/31/2015	 	 	T52N.R95W.	 	 	100.00	%	 	 	1,560.24	 	 	 	1,560.24	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 16: SW/4SW/4,L 17,20,21,25	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	              Tr 41B,41C46I,46P	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 17: S/2SE/4,L13.15,16,	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	              19-21, 24Tr 46I,	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	              46j,46K,46L,46M,46N,	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	              46O,46P,47I	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 18: SW/4NE/4, SE/4, L13,15,	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	              TR 47I	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 20: ALL	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	WYW-163272
	 	 	6/1/2005	 	 	 	5/31/2015	 	 	T52N.R95W.	 	 	100.00	%	 	 	640.00	 	 	 	640.00	 
	 
	 	 	 	 	 	 	 	 	 	Sec. 28: ALL	 	 	 	 	 	 	 	 	 	 	3811.77	 

 1 of 1

 

EXHIBIT “5”

To Purchase and Sale Agreement dated effective April 25, 2007, between Melange

International, LLC, et al and Teton Energy Corporation

GEOLOGIC REQUIREMENTS

The contact information is as follows:

	 	 	 	 	 
	 
	 	 	 	 
	Melange International, LLC

	 	Desert Moon Gas Company
	 	Hannon & Associates, Inc
	475 17th Street, Suite 540

	 	P.O. Box 440733
	 	820 16th St, Suite 630
	Denver, CO 80202

	 	Aurora, CO 80044
	 	Denver, CO 80202
	Telephone: 303-298-9415

	 	Telephone: 303-752-1084	 	 
	Facsimile: 303-298-0729

	 	Fax: 303-752-1084	 	 
	Attn: Gary C. Stewart

	 	Attn: Mike A. Tinker
	 	Attn: Ted Harnnon
	e-mail: gary@emelange.net

	 	e-mail: tinkj1@msn.com
	 	Email: hannon@qwest.net

     Melange International, LLC, will keep all information strictly confidential until made
public by Teton or a federal or state regulatory agency, other than to Tinker and Hannon

1. PROGRESS REPORTS: Teton agrees to e-mail to Melange International, LLC daily written
operations reports within ten (10) business days from receipt by Teton of activity, including
without limitation the current mud log, if available. The first such report is to include the
well name, location (legal description), proposed total depth, deepest objective formation and spud
date.

2. WELL LOGS AND SURVEYS: When well has been drilled to contract depth, Teton shall cause
to be made the well formation logs and surveys set forth below and shall furnish, within ten (10)
business days from receipt by Teton to Melange International, LLC, with one (1) final print of
these surveys plus any additional logs or surveys run during the drilling of the well, and LAS
formatted data of all such logs and information.

3. REPORTS, LOGS, CHARTS: In addition to reports, logs, and charts required elsewhere in
this agreement, Teton agrees to furnish Melange International, LLC, within ten (10) business days
from receipt by Teton with the following (if acquired):

	 	A.	 	One copy of all core analysis, gas analysis and water analysis.
	 
	 	B.	 	One copy of all drill stem test reports.
	 
	 	C.	 	One copy of the mud log e-mailed daily.
	 
	 	D.	 	One copy of final mud log.
	 
	 	E.	 	One copy of the completion report, initial potential test(s).
	 
	 	F.	 	One copy of reports and charts of all bottom hole pressure surveys.
	 
	 	G.	 	One copy of all logging suites, including cased hole logs, provided in
both paper and digital LAS format.
	 
	 	H.	 	One copy of dipmeter and/or velocity survey if run.
	 
	 	I.	 	One copy of any directional surveys.

	 
	 	J.	 	One copy of any and all stimulation and completion data and reports, including without
limitation, detailed frac reports, acidizations, flowback reports, pressure
buildups and analysis, frac fluid types, cement jobs, casing programs etc.
	 
	 	K.	 	Digital Copies of the above data in original digital format including but not limited
to LAS files for all well logs and mud logs, if available.exv10w2

 

Exhibit 10.2

PURCHASE AND SALE AGREEMENT

OIL AND GAS LEASEHOLD PURCHASE

BIG HORN COUNTY, WYOMING

This Purchase and Sale Agreement (“Agreement”), dated effective April 25, 2007, is between
Kirkwood Oil & Gas LLC (“Kirkwood”) P.O. Box 3439 Casper, WY 82602, and Teton Energy Corporation
(“TETON”), 410 17th St, Suite 1850 Denver, CO 80202. Kirkwood is referred to herein as
“The Assignor”. Kirkwood and TETON are collectively referred to herein as the “Parties.”

RECITALS

WHEREAS, The Assignor owns record title and/or beneficial interests in and to the leasehold
estates created by the oil and gas leases (the “Kirkwood Leasehold”) described in Exhibit 1,
attached hereto; and

WHEREAS, The Assignor will assign to TETON 100% of its right, title and interest in the Kirkwood
Leasehold, subject to overriding royalty interests herein reserved;

NOW, THEREFORE, in consideration of Four Hundred Thirty One Thousand Four Hundred Seventy Two
Dollars and Seventy Five Cents ($431,472.75), the mutual promises and covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:

Article 1.

DEFINITIONS

Whenever used in this Agreement, the following terms will have the below defined meaning:

	 	1.1	 	Affiliate An affiliate of, or
person affiliated with, a specified person, is
a person that directly or indirectly, through one or more intermediaries, controls or
is controlled by, or is under common control with, the person specified.
	 
	 	1.2	 	Agreement means this Agreement, inclusive of all exhibits and attachments,
as the same may be modified or amended from time to time. The Agreement shall replace
and supersede all previous agreements and representations in their entirety.
	 
	 	1.3	 	Kirkwood Leasehold means the oil and gas leases and other rights relating
to exploration for and production of oil and gas that are owned by the Assignor
within the West Greybull Project, which leases are more fully described in
Exhibit 1 attached hereto.
	 
	 	1.4	 	Effective Date means April 25, 2007.
	 
	 	1.5	 	Existing Burdens means all landowner royalties, overriding royalties and
other burdens existing of record on the effective date hereof and burdening the
Kirkwood Leasehold. Existing Burdens also include existing overrides of the Assignor on
the Kirkwood Leasehold whether of record or not of record.
	 
	 	1.6	 	Operator means TETON.

	 	 	 	West Greybull Project means those lands lying within the area described in 7.0.

1

 

Article 2.

ORGANIZATION

	 	2.1	 	Term. This Agreement will commence on the Effective Date, and will continue until this
Agreement is terminated in accordance with its provisions.

Article 3.

KIRKWOOD LEASEHOLD

	 	3.1	 	Leasehold. The Assignor represents that it owns oil and gas leases totaling approximately 5,752.97 net acres that comprise the Kirkwood Leasehold. A complete schedule of the
oil and gas leases involved is included as Exhibit 1 attached hereto.
	 
	 	3.2	 	Title Examination. Within five (5) days following the execution of this
Agreement, the Assignor will make available to TETON, all title information pertaining
to the Kirkwood Leasehold. However, the Assignor acknowledges that all lease bonuses,
rentals, royalties, including minimum advance royalties, shut-in payments, and any
other payments which are required to perpetuate the Kirkwood Leasehold have been paid,
or satisfied to date, and all oil and gas leases covering the Kirkwood Leasehold are in
full force and effect. TETON shall have then have fifteen (15) days from receipt of
such title information to notify the Assignor of any material title defects, which
TETON may have identified as pertaining to the Kirkwood Leasehold. TETON’s written
notice shall identify any such defective Leases, the nature of the defect and the
number of net acres affected thereby. Any of the Kirkwood Leasehold not identified in
said written notice by TETON within said thirty (30) days shall be deemed as acceptable
title by Teton and paid for by Teton at closing. A material title defect shall include,
but not be limited to any lease with a proportionate net revenue interest less than
81% (after creation of the Assignor overriding royalty provided for in Section 3.3).
If an existing environmental hazard is present that affects more than 50% of the
surface overlying the existing leasehold, Teton may elect to terminate this Agreement
with no further obligation to the Assignor. TETON shall have the right, but not the
obligation, to request that any of the Kirkwood Leasehold that it deems subject to a
title defect be omitted from this Agreement, and the assignment to TETON by the
Assignor will not include said leases. In addition, in the event that more than 20% of
Kirkwood Leasehold (measured by net acres) suffers from a material title defect, TETON
may elect to terminate this Agreement with no further obligation to the Assignor. In
the event any leases are omitted from this Agreement the consideration provided for in
Article 5.1 shall be reduced by an amount equal to $75 per net acre multiplied by the
number of net acres affected by such title defects. If the Assignor cures title defects
to TETON’s satisfaction at any time within sixty (60) days after the date of closing
then title to the omitted leases will be deemed to be acceptable and the Assignor will
assign said leasehold to TETON pursuant to all terms and conditions of this Agreement
and TETON shall remit to the Assignor payment at the rate stated herein.
	 
	 	3.3	 	Net Revenue Interest. All Kirkwood Leasehold shall be subject to the retention
of an overriding royalty interest by the Assignor or its designee. Said overriding
royalty interest shall equal the difference between the existing burdens (whether or
not of record as of the effective date hereof) and nineteen percent (19%).
	 
	 	3.4	 	Commitment Test Well. Prior to April 25, 2010, TETON commits to commence or
cause to be commenced the drilling of a well within the West Greybull Project, on
either Kirkwood or Melange acreage, to a depth sufficient to adequately test the
Greybull Sandstone found at an approximate depth of 12,380' in the Gulf Otto Fed Well
located in the SE1/4 of Sec. 26,

2

 

	 	 	 	“Commitment Test Well”. If TETON fails to commence drilling the Commitment Test
Well on or before April 25, 2010 as provided for under this Article 3.4, TETON
shall immediately reassign to Kirkwood an undivided 100% of its interests acquired
hereunder free and clear of any liens, judgments or burdens other than the
overriding royalty interests provided for herein.

Article 4.

LEASE MANAGEMENT

	 	4.1	 	Rentals, Minimum Royalties and Production Accounting. Rental payments and
minimum royalty payments required under the terms of any of the Kirkwood Leasehold,
which are due after the closing date, will be paid on behalf of the Parties by TETON,
except for any Kirkwood Leasehold which may be excluded pursuant to the terms of
Section 3.2. Should any lease be lost as a result of the inadvertent failure to make
proper payment of any rental, option, shut-in well payment or minimum royalty, such
loss will be borne by the Parties jointly and there will be no recourse against or
liability on the part of the Party who failed to make such payment. Any failure to pay
delay rentals after the closing date on any federal lease that is a part of the
Kirkwood Leasehold (unless excluded pursuant to Section 3.2) that results in a
reinstatement of said lease with a higher royalty burden shall not serve to reduce the
overriding royalty granted to the Assignor as set forth in Paragraphs 3.3 and 5.1
herein.
	 
	 	4.2	 	Lease Records. 
On behalf of the Parties, TETON, as Operator, will
maintain appropriate land and lease records relating to the Kirkwood Leasehold.
	 
	 	4.3	 	Joint Loss. Except as otherwise expressly provided in this Article 4, any loss
or liability incurred by the Parties from any error or omission by a Party in
performance of its obligations under this Article 4 will be borne by the Parties
jointly.

Article 5.

ASSIGNMENTS AND CONSIDERATION

	 	5.1	 	Assignments and Consideration. Closing shall occur on June 6th, 2007. At closing, TETON shall remit to the Assignor cash consideration equal to the number of net acres of
leasehold assigned
multiplied by $75.00 for a total consideration of $431,472.75 subject to adjustment
for title defects as provided in Section 3.2.
	 
	 	 	 	The Assignor shall assign to TETON one hundred percent (100%) of the Assignor’s
interest, as to all depths, subject to the retained/reserved overriding royalty
interest provided for herein, in the Kirkwood Leasehold. All assignments from the
Assignor to TETON shall be on a form of assignment attached hereto as
Exhibit 2. In addition, the Assignor shall deliver assignments of federal and state
leases on the required forms. Once all assignments have been fully executed by the
Parties, TETON shall be responsible for submitting all assignments to the proper
agency for approval or to the proper county for recording. All reservations of
overriding royalty, as stated above in Article 3.3, shall be expressly stated.
	 
	 	5.2	 	Reassignment Obligation. If TETON receives an assignment under this Agreement
and thereafter
elects to surrender, let expire, abandon or release said lease, TETON will notify
Kirkwood not less
than sixty (60) days in advance of such surrender, expiration, abandonment or
release. At the
request of Kirkwood, which request must be made within thirty (30) days of receipt
of such notice,
TETON will then immediately assign those rights to Kirkwood and, upon receipt of
that
assignment, Kirkwood will pay (if applicable) TETON the reasonable salvage value of
any
material or equipment received, less the estimated costs of reclamation and surface
restoration.

3

 

	 	 	 	Any wells not taken over by Kirkwood will be plugged and abandoned, according to
state and federal regulations, at the owning Parties’ sole cost, risk and expense.
	 
	 	5.3	 	Special Warranty. The Assignor agrees to warrant the title to the
Kirkwood Leasehold as to claims made by, through or under the Assignor, but not
otherwise.

Article 6.

TERMINATION

	 	6.1	 	Termination. This Agreement will terminate upon the occurrence of any of the following:
	 
	 	 	 	6.1.a. the expiration of the term provided for in Article 2.2.

	 
	 	 	 	6.l.b. the mutual written agreement of all Parties to this Agreement.
	 
	 	 	 	6.1.c. In the event closing does not occur as provided in Article 5 herein.

	 	7.0	 	Data. Teton shall furnish to Kirkwood, to the extent allowed by law or
license and availability, within ten (10) business days from the date on which such
data becomes available to Teton, all data specified in the attached Geological
Requirements (Exhibit 3) on all wells drilled within the area described below.
Kirkwood will keep all such data and information strictly confidential, and such data
shall not be disclosed to any third party until made public by TETON or appropriate
state or federal regulatory agencies. In the event that Kirkwood acquires any oil and
gas lease, mineral interest, or similar interest covering any lands within the area
described below during the period commencing on the Effective Date and expiring three
(3) years thereafter, Kirkwood shall promptly advise Teton and Teton shall have the
option to acquire 100% of Kirkwood’s right, title and interest in such lease or
similar interest by reimbursing Kirkwood for 100% of its actual out of pocket costs
for such acquisition:

Township 52 North, Range 95 West 6th P.M. 

Sections 1 thru 36 (entire Township)
 

Township 51 North, Range 95 West 6th P.M.

Sections 1 thru 18

Article 7.

MISCELLANEOUS

	 	7.1	 	Amendments. This Agreement may be amended only by written instrument executed
by all Parties.
	 
	 	7.2	 	Overriding Royalty Interests. The overriding royalty interests provided for
herein shall be treated as a lease burden existing on the effective date of this
Agreement and not as a subsequently created interest. Said overriding royalties shall
not merge with any working interest assigned or retained herein.
	 
	 	 	 	The overriding royalties provided for hereunder shall apply to any extension or
renewal of the Leasehold, insofar as such extension and renewal leases include
lands covered by the Kirkwood Leasehold. For the purposes of this provision a
renewal of an oil and gas lease is the taking by any party to this Agreement of any
oil and/or gas lease within one year of the expiration, termination, or release of
the preceding lease, and a top lease. A renewal of a federal or state oil and gas
lease is the taking by any party to this Agreement of any oil and gas lease offered
at the next federal or state lease sale at which all or a part of the acreage
covered by the preceding

4

 

	 	 	 	federal or state lease subject to this Agreement is offered for lease, as long as any
party hereto has made a request to the BLM or State, within six (6) months from the
expiration or termination of the preceding federal or state lease, to past such acreage
for lease. The overriding royalties assigned hereunder shall apply to any extension or
renewal of the Kirkwood Leasehold and such assignments of overriding royalties on renewals
and extensions are to be provided in recordable form to-the Assignor, or to its designee,
within 30 days of the acquiring party’s acquisition of the lease(s).
	 
	 	 	 	Further, any overriding royalty reserved by or assigned to the Assignor pursuant to this
Agreement shall (i) be reduced proportionately to the leasehold working interests and the
mineral estates leased thereby, which are burdened by said overriding royalty; (ii) be
free of all drilling, development, production, operating and overhead costs and expenses;
(iii) bear and pay its proportionate share of gross production taxes, pipeline taxes, ad
valorem taxes and other taxes assessed against the gross production attributable to said
overriding royalty interests; (iv) shall be computed upon the same basis as royalties
payable to the United States on production from the Kirkwood Leasehold are calculated, in
accordance with 30 CFR. Sections 206.150 thru 206.160 inclusive, (2006), or as in effect at
the time of production.
	 
	 	7.3	 	Applicable Law. This Agreement shall be interpreted under the laws of the State of Colorado
without giving effect to any choice of law or conflict of laws provision or rule that would
constitute application of the laws of any jurisdiction other than the State of Colorado With
respect to any claims asserted or court proceedings initiated relating in whole or in part to
this Agreement, the Parties consent to venue and jurisdiction in the Colorado District Court
for the City and County of Denver (Second Judicial District) and in the Federal District
Court for the District of Colorado.
	 
	 	7.4	 	Counterpart. This Agreement may be executed in counterpart and will be binding upon the
Parties and their heirs, successors, assigns, and legal representatives.
	 
	 	7.5	 	Force Majeure. If any Party is rendered unable, wholly or in part, by force majeure to carry
out its obligations under this Agreement, other than the obligation to indemnify or make money
payments or furnish security, that Party shall give to all other Parties prompt written
notice of the Force majeure with reasonably full particulars concerning it; thereupon, the
obligations of the Party giving the notice, so far as they are affected by the force
majeure, will be suspended during, but no longer than, the continuance of the force
majeure The term “force majeure,” as here employed, means an act of God, strike, lockout,
or other industrial disturbance, act of the public enemy, war, blockade, public riot,
lightning, fire, storm, flood, or other act of Nature, explosion, governmental action,
governmental delay, litigation, restraint, injunction, unavailability of equipment,
drilling permits, and any other cause, whether of the kind specifically enumerated above
or otherwise, which is not reasonably within the control of the Party claiming suspension.
	 
	 	 	 	7.5a. The affected Party must use all reasonable diligence to remove the force majeure
situation as quickly as practicable. The requirement that any force majeure must be
remedied with all reasonable dispatch does not require the settlement of litigation or the
settlement of strikes, lockouts, or other tabor difficulty by the Party involved, contrary
to its wishes; how all such difficulties are handled will be entirely within the
discretion of the Party concerned.

	 	7.6	 	Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit
of the Parties and their respective legal representatives, successors, and assigns. No
assignment by a Party shall in any way diminish or otherwise adversely affect the rights,
interest, or obligations of any other Party. If any Party to this Agreement assigns or conveys
all or a portion of its interest in this Agreement, said assignment or conveyance shall be
specifically made subject to all of the terms and provisions of this Agreement. The Party
assigning or conveying an interest shall notify all other Parties in writing of the conveyance
and provide all other Parties with appropriate documents and information concerning the
successor in interest.
	 
	 	7.7	 	Event of Conflict. In the event of any conflict or inconsistency between the
provisions of this Agreement and those of the Exhibits, the provisions of this Agreement
shall prevail. If any term

5

 

	 	 	 	or condition of this Agreement conflicts with a term or condition of the Kirkwood
Leasehold, then such term or condition of the Kirkwood or Leaseholds shall prevail and
this Agreement will be deemed to be amended accordingly.
	 
	 	7.8	 	Representations and Warranties.
	 
	 	 	 	7.8a. TETON Representation — TETON represents, warrants, and agrees to and with the
Assignor hereto that TETON has all requisite power and authority to enter into and to
perform its obligations under this Agreement; subject to TETON’s receipt of approval of
this Agreement from its Board of Directors which approval shall be an absolute condition.
	 
	 	 	 	7.8b. The Assignor Representation — Assignor represents, warrants, and agrees that it has
all requisite power and authority to enter into and to perform its obligations under this
Agreement and that there are no conflicts or impediments to any undertakings herein.

	 	7.9	 	Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
	 
	 	7.10	 	Assignment. The parties shall have the right, at any time, to assign all or a portion of
its rights or any interest in the Kirkwood Leasehold to a third party; it being understood
that said third party shall be bound by the terms and conditions set forth herein.
	 
	 	7.11	 	Disclosure of Agreement. The Assignor, shall advise anyone inquiring about the Kirkwood
Leasehold that such leasehold is under contract and not available for sale or discussion. The
Assignor shall not, however, identify TETON as the buyer or disclose any other information
concerning the purchase and sale until TETON has publicly disclosed such information or it
becomes generally known to the public through no actions undertaken by the Assignor in
contravention of the confidentiality provisions herein. Copies of all public disclosures made
by TETON prior to closing will promptly be furnished to Kirkwood by electronic mail. The
Assignor acknowledge that TETON is subject to reporting requirements of the Securities
Exchange Act of 1934, that TETON’s common stock is traded publicly, and that federal and state
securities laws impose significant restrictions concerning the use or disclosure of non-public
information in general and in buying or selling, or discussing with others the possibility of
buying or selling, TETON securities by person who have access to information concerning TETON
that is not generally available to members of the public.
	 
	 	7.12	 	Entire Agreement. This Agreement embodies the entire agreement between the Parties with
respect to the subject matter of this Agreement, superseding all prior oral or written
agreements, understandings, solicitations of interest or offers related to the subject matter
of this Agreement, and may be amended, supplemented, or altered only by a written instrument
signed by all the Parties.
	 
	 	7.13	 	Transaction Costs. Each Party will be solely responsible for all costs incurred by it in
connection with this Agreement and the transaction contemplated hereby, with no right to
recovery or contribution from any other Party. Neither the Assignor nor TETON shall have any
liability to any third party for commissions or broker’s fees for which the other Party may be
liable.
	 
	 	7.14	 	Counterpart. This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party; provided that a
facsimile signature shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not a facsimile
signature.

6

 

	 	7.15	 	Notices. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
(iii) one day after electronically mailed either in the text of an email message or
attached in a commonly readable electronic format, and the sender has received no
generated notice that the client email message has not been successfully delivered;
or (iv) one (1) Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the same.
The addresses, facsimile numbers, and email addresses for such communications shall
be:

Attn: Steve Kirkwood

Kirkwood Oil & Gas

P.O. Box 3439

Casper, WY 82602

PH (307) 265-5178

FAX: 307 265-1791

Email: stevek@tribcsp.com

Teton Energy Corporation

410 17th Street, Suite 1850

Denver, CO 80202

PH 303 565-4604

FAX 303 565-4606

Email: rbosher@teton-energy.com

IN WITNESS WHEREOF, this Agreement is executed as of April 25, 2007.

	 	 	 	 	 
	KIRKWOOD OIL AND GAS LLC	 	 
	 
	 	 	 	 
	By:

	 	/s/ William C. Kirkwood	 	 
	 

	 	 

          William C. Kirkwood
	 	 
	 
	 	 	 	 
	TETON ENERGY CORPORATION	 	 
	 
	 	 	 	 
	By:

	 	/s/ Dominic Bazile	 	 
	 

	 	 

	 	 
	       Dominic Bazile, COO and EVP	 	 

7

 

KIRKWOOD OIL & GAS LLC

	 	 	 	 	 
	     DATE: 05/16/07

	 	Exhibit ‘1’ - Lease Schedule
	 	PAGE 1

COUNTY: BIG HORN, WY

STATE: WY

	 	 	 	 	 	 	 	 	 
	LEASE NO	 	LESSOR	 	LESSEE/LEGAL DESCRIPTION	 	LEASE DT     GR-ACRES BOOK PAGE
	01037100	 	W-153609	 	WILLIAM C. KIRKWOOD	 	09/01/01 1941.200 
	 	 	 	 	T52N R94W Sec.	 	17 W/2	 	 
	 

	 	 	 	 	 	18 LOTS 1-4, E/2NE, SENW, E/2SW, SE	 	 
	 

	 	 	 	 	 	20 N/2, SE	 	 
	 

	 	 	 	 	 	21 ALL	 	 
	 
	 	 	 	 	 	 	 	 
	01070000	 	W-160120	 	KIRKWOOD OIL & GAS LLC	 	  04/04/04 933.530 
	 	 	 	 	T52N R95W Sec. 	 	15 TR 41A, 60B, 60C, 60D	 	 
	 

	 	 	 	 	 	16 TR 41A	 	 
	 

	 	 	 	 	 	21 TR 41A	 	 
	 

	 	 	 	 	 	22 LOTS 5,8,9, SWNW, S/2	 	 
	 

	 	 	 	 	 	     TR 41A, 60B, 60C, 60D	 	 
	 

	 	 	 	 	 	24 NE, E/2NW, W/2SE	 	 
	 
	 	 	 	 	 	 	 	 
	01070100	 	W-160122	 	KIRKWOOD OIL & GAS LLC	 	  04/01/04 678.000 
	 	 	 	 	T52N R95W Sec.	 	33 NE	 	 
	 

	 	 	 	 	 	34 N/2, N/2SW, NWSE, SESE	 	 
	 

	 	 	 	 	 	NESE (EXCL 2.00 ACRES IN RSVR ROW	 	 
	 

	 	 	 	 	 	     WY8035508)	 	 
	 
	 	 	 	 	 	 	 	 
	01092100	 	W-163272	 	KIRKWOOD OIL & GAS LLC	 	  06/01/05 640.000 
	 	 	 	 	T52N R95W	 	Sec. 28 ALL	 	 
	 
	 	 	 	 	 	 	 	 
	01092200	 	W-163270	 	KIRKWOOD OIL & GAS LLC	 	06/01/05 1560.240 
	 	 	 	 	T52N R95W Sec.16 LOTS 17, 20, 21, 24, 25, SWSW,	 	 
	 

	 	 	 	 	 	     TR 41B, 41C, 46I, 46P	 	 
	 

	 	 	 	 	 	17 LOTS 13, 15, 16, 19-21, 24, S/2SE	 	 
	 

	 	 	 	 	 	     TR 46I, 46J, 46K, 46L, 46M, 46N, 46O,	 	 
	 

	 	 	 	 	 	     46P, 47I,	 	 
	 

	 	 	 	 	 	18 LOTS 13, 15, SWNE, SE, TR 471	 	 
	 

	 	 	 	 	 	20 ALL	 	 
	 

	 	EXHIBIT TOTALS:
	 	 	 	 	 	5752.970 

 

 

EXHIBIT 2

To Purchase and Sale Agreement dated effective April 17, 2007, Kirkwood Oil & Gas LLC, et al, and
Teton Energy Corporation.

     ASSIGNMENT OF OIL AND GAS LEASE(S)

KNOW ALL MEN BY THESE PRESENTS:

     THIS
ASSIGNMENT, is made and entered into this
                    
day of
                    ,
2007, by and between Kirkwood Oil &
Gas LLC, PO Box 3439, Casper, Wyoming 82602 hereinafter referred
to as “Assignor,” and
Teton Energy Corporation (“TETON”), 410 17th St, Suite 1850, Denver, CO 80202,
hereinafter referred to as “Assignee”.

W I T N E S S E T H :

     THAT, Assignor is the owner of certain leasehold interests in the oil and gas lease(s)
described on Exhibit “A” attached hereto and made a part hereof covering the lands described in
Exhibit “A” attached hereto and made a part hereof.

     THAT, for and in consideration of Ten Dollars ($10.00) and other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, and subject to
Assignor’s reservation herein of the overriding royalty interest set forth below, Assignor does
hereby, grant, assign, transfer, set over, and convey unto Assignee, it successors and assigns, all
of Assignor’s right, title, interest, in and to the oil and gas lease(s), covering the lands
described on Exhibit “A” attached hereto.

     Assignor does hereby EXCEPT AND RESERVE unto itself, its successors and assigns an
overriding royalty interest equal to the difference between lease burdens existing of record as
of the date hereof and nineteen percent (19%), thus delivering to Assignee an eighty one percent
(81%) net revenue interest of all of the oil, gas and other hydrocarbons produced, saved and sold
from the oil and gas lease(s), covering the lands as described on Exhibit “A”. The overriding
royalty interest herein reserved shall apply to extensions or renewals of the lease(s) described
on Exhibit “A” and is subject to all the terms and conditions of the Purchase and Sale Agreement
dated effective April 25, 2007, between Assignor and Assignee.

     If any of the oil and gas leases assigned covers less than the entire and undivided mineral
estate or if Assignor’s interest in any of the leases is less than the full and undivided
leasehold estate in and to the lands described on Exhibit “A”, the overriding royalty interest
herein reserved and excepted shall be proportionately reduced to correspond with the leasehold
interest assigned hereby.

     In the event further Assignments or documents are required after the date hereof by any
governmental authority Assignor will upon Assignee’s request, execute, acknowledge and deliver or
cause to be executed and delivered, all such documents or instruments necessary to effectuate this
Assignment.

     The interests assigned herein are subject to 1) all terms and conditions of the oil and gas
leases; 2) all instruments existing of record in Assignor’s chain of title; and 3) that certain
Purchase and Sale Agreement, dated effective April 25, 2007 between Teton Energy Corporation and
Kirkwood Oil & Gas, LLC. In the event there is a conflict between the terms of this Assignment and
the terms of said Purchase and Sale Agreement, the Purchase and Sale Agreement shall prevail.

     This Assignment is given without representation or warranty of title, either express or
implied, except that Assignor warrants title as against all parties claiming by through or under
Assignor, but not otherwise.

     This Assignment shall be binding upon and will inure to the benefit of Assignor and Assignee,
their successors and assigns.

SIGNED EXECUTED AND DELIVERED this                      day of May, 2007.

	 	 	 	 	 
	Kirkwood Oil & Gas, LLC	 	 
	 
	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	 

	 	William C. Kirkwood	 	 

CORPORATE ACKNOWLEDGMENT

STATE OF WYOMING

 

 

EXHIBIT “3”

GEOLOGIC REQUIREMENTS

The contact information is as follows:

Attn: Steve Kirkwood 
Kirkwood
Oil & Gas 
P.O. Box 3439 
Casper, WY 82602 
PH (307) 265-5178 
FAX: 307 265-1791 
Email: stevek@tribcsp.com

     Kirkwood Oil & Gas will keep all information strictly confidential until made public by Teton
or a federal or state regulatory agency. Kirkwood Oil & Gas will not own a license to any data,
that Teton has licensed from a third (3rd) party.

The following reports, logs, data and information will be confined to the area:

 

  Township 52 North, Range 95West 6th P.M.

  Sections 1 thru 36 (entire Township)

 

  Township
51 North, Range 95 West 6th P.M.

  Sections 1 thru 18

1. PROGRESS REPORTS: Teton agrees to e-mail to Kirkwood Oil & Gas daily written
operations reports within ten (10) business days from receipt by Teton of activity, including
without limitation the current mud log, if available. The first such report is to include the well
name, location (legal description), proposed total depth, deepest objective formation and spud
date.

2. WELL LOGS AND SURVEYS: When well has been drilled to contract depth, Teton shall
cause to be made the well formation logs and surveys set forth below and shall furnish, within ten
(10)
business days from receipt by Teton to Kirkwood Oil & Gas with one (1) final print of these
surveys
plus any additional logs or surveys run during the drilling of the well, and LAS formatted data of
all
such logs and information .

3.
REPORTS, LOGS, CHARTS: In addition to reports, logs, and charts required elsewhere in
this
agreement, Teton agrees to furnish Kirkwood Oil & Gas within ten (10) business days from receipt by
Teton with the following (if acquired):

	 	A.	 	One copy of all core analysis, gas analysis and water analysis.
	 
	 	B.	 	One copy of all drill stem test reports.
	 
	 	C.	 	One copy of the mud log e-mailed daily.
	 
	 	D.	 	One copy of final mud log.

 

 

	 	E.	 	One copy of the completion report, initial potential test(s).
	 
	 	F.	 	One copy of reports and charts of all bottom hole pressure surveys.
	 
	 	G.	 	One copy of all logging suites, including cased hole logs, provided in
both paper and digital LAS format.
	 
	 	H.	 	One copy of dipmeter and/or velocity survey if run.
	 
	 	I.	 	One copy of any directional surveys.
	 
	 	J.	 	One copy of any and all stimulation and completion data and reports,
including without limitation, detailed frac reports, acidizations,
flowback reports, pressure buildups and analysis, frac fluid types,
cement jobs, casing programs etc.
	 
	 	K.	 	Digital Copies of the above data in original digital format including
but not limited to LAS files for all well logs and mud logs, if
available.

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