Document:

exhibit10_2.htm

    Exhibit 10.2

    
 

    ASSET
      PURCHASE AND SALE AGREEMENT

    

             This
      Asset Purchase and Sale Agreement (“Agreement”) is entered into this 25th day of
      July, 2007 (“Effective Date”), by and among Jayhawk Energy, Inc., a Colorado
      corporation (“Jayhawk”), and Armstrong Investments Incorporated, an Anguilla
      corporation (“Armstrong”). Jayhawk is referred to herein as “Buyer” and
      Armstrong is referred to herein as “Seller.” Buyer and Seller are called herein
      collectively the “Parties.”

    

    RECITALS

    

    A.              Seller
      is the owner of certain interests in certain oil and gas leases and well bores,
      which are set forth as attached hereto as Exhibits A and A-1.

    

    B.              Seller
      desires to sell and assign its interests in and obligations concerning those
      oil
      and gas leases for the benefit of Buyer, for the consideration and on the terms
      and subject to the conditions specified in this Agreement.

    

    C.              Buyer
      desires to purchase those certain interests in and assume those obligations
      concerning those oil and gas leases, on the terms and subject
      to the conditions specified in this Agreement.

    

    NOW,
      THEREFORE, IN CONSIDERATION OF THE RECITALS SPECIFIED ABOVE THAT SHALL BE DEEMED
      TO BE A SUBSTANTIVE PART OF THIS AGREEMENT, AND THE MUTUAL COVENANTS, PROMISES,
      UNDERTAKINGS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES SPECIFIED IN THIS
      AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY
      OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED LEGALLY AND
      EQUITABLY, THE PARTIES DO HEREBY COVENANT, PROMISE, AGREE, REPRESENT AND WARRANT
      AS FOLLOWS:

    

    ARTICLE
      1

    DEFINITIONS

    

             Capitalized
      terms used in this Agreement have the meanings given such terms in this Article
      1 or elsewhere in this Agreement.

    

             “Affiliate”
      means (i) with respect to the Seller, any corporation, limited liability
      company, association, partnership or person that directly or indirectly, through
      one or more intermediaries, controls, is controlled by, or under common control
      with, the Seller, and (ii) any Seller's officers, directors and
      shareholders.

    

             “Assets”
      has the meaning set forth in Article 2.01 hereof.

    

             “Buyer”
      has the meaning set forth in the preface to this Agreement.

     

    
      
        
        

      

      
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             “Buyer
      Indemnified Party” has the meaning provided in Article 7.03.

    

             “Closing”
      has the meaning set forth in Article 3.02 hereof.

    

             “Closing
      Date” has the meaning set forth in Article 3.02 hereof.

    

             “Code”
      means the Internal Revenue Code of 1986, as amended.

    

             “Commission”
      means the Securities and Exchange Commission (or any successor body
      thereto).

    

             “Conveyance
      Documents” means the Conveyance in the form attached hereto as Exhibit B and
      B-1, together with those other forms of assignments, bills of sale, deeds and
      other instruments the Parties agree are necessary or appropriate to convey
      interest in the Assets or from Seller to Buyer as contemplated by the
      Agreement.

    

             “Environmental
      Audit” means an assessment of Seller’s compliance with Environmental Laws
      relative to the Assets consisting of examination of Seller’s files and public
      documents, interviews of personnel of Seller and of other appropriate persons
      and visual inspection of the Assets.

    

             “Examination
      Period” has the meaning set forth in Article 6.02.

    

             “Governmental
      Approvals” has the meaning set forth in Article 13.

    

             “Hydrocarbons”
      means crude oil, natural gas, casinghead gas, condensate, helium, sulphur,
      S02,
      C02, natural gas liquids and other gaseous and liquid hydrocarbons or any
      combination thereof.

    

             “Indemnifying
      Party” has the meaning set forth in Article 7.04(a) hereof.

    

             “Lands”
      means the lands covered by the Mineral Interests.

    

             “Leases”
      means the oil and gas leases or oil, gas, and mineral leases shown in Exhibit
      A
      hereto or that cover any portion of the area described in such
      Exhibit.

    

             “Loss”
      or “Losses” means all damages, payments, penalties, fines, assessments, costs,
      amounts paid in settlement, obligations, taxes, losses (including reductions
      in
      the value of Assets), liabilities, expenses and fees incurred, including court
      costs and attorneys' fees and expenses and costs of investigating, preparing
      or
      defending any action or proceeding, provided, however, that Buyer shall be
      deemed to have incurred a Loss or Losses only if, and only to the extent that,
      the cumulative aggregate of all such Loss or Losses attributable to or arising
      in connection with the portion of the Assets acquired from Armstrong exceeds
      $50,000 or the cumulative aggregate of all such Loss or Losses attributable
      to
      or arising in connection with the portion of the Assets acquired from Jayhawk
      exceeds $250,000.

     

    
      
        
        

      

      
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             “Mineral
      Interests” means the interests of Seller in the Leases described in Exhibit A
      and any mineral interest owned by Seller in and to the lands described in
      Exhibit A.

    

             “Parties”
      has the meaning set forth in the preface above.

    

             “Permitted
      Encumbrances” means, with respect to the Assets, the following:

    

             (i)      liens
      for taxes not yet due or, if due, being challenged in good faith by appropriate
      proceedings;

    

             (ii)     materialmen's,
      mechanics' and other similar liens or charges arising in the ordinary course
      of
      business for obligations that are not delinquent and that will be paid or
      discharged in the ordinary course of business or, if delinquent, that are being
      contested in good faith in the ordinary course of business;

    

             (iii)    easements,
      rights-of-way, servitudes, permits, surface leases, and other rights granted
      to
      or reserved for third parties in respect of surface operations that do not
      materially interfere with the operation of the portion of the Assets burdened
      thereby;

    

             (iv)     rights
      reserved to or vested in any governmental authority to control or regulate
      any
      of Well Bores or Units and all applicable laws, rules, regulations and orders
      of
      such authorities.

    

             (v)      liens
      arising under operating agreements, unitization and pooling agreements, orders
      and statutes and production sales contracts securing amounts not yet due or,
      if
      due, being contested in good faith in the ordinary course of business as set
      forth in Exhibit A attached hereto and made a part hereof for all
      purposes;

    

             (vi)     the
      terms and conditions of all contracts and agreements relating to the Leases
      including, without limitation, exploration agreements, gas sales contracts,
      processing agreements, farmins, farmouts, operating agreements, and right-of-way
      agreements, to the extent such terms and conditions are normal and customary
      in
      the oil and gas industry in the area in which the affected Assets are
      located;

    

             (vii)    royalties,
      overriding royalties, net profits interests, production payments, reversionary
      interests, and similar interests that do not decrease Seller's interest, except
      as specified in Exhibit A attached hereto;

    

             (viii)   conventional
      rights of reassignment requiring notice to the holders of the rights prior
      to
      surrendering or releasing a leasehold interest; and

    

             (ix)      the
      absence of Governmental Approvals other than Governmental Approvals that were
      applicable to a previous transaction involving the transfer of all or any
      portion of the Assets but were not complied with at the time of the consummation
      of such transaction.

    

             “Purchase
      Price” has the meaning given set forth in Article 3.01.

     

    
      
        
        

      

      
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             “Records”
      means all originals, copies, computer tapes and discs, files, records,
      information or data relating to the Assets in the possession of Seller, or
      in
      the possession of any agent for the Seller, including, without limitation,
      title
      records (including abstracts of title, title opinions, certificates of title
      and
      title curative documents), accounting records and files, contracts,
      correspondence, production records, electric logs, core data, pressure data,
      decline curves, graphical production curves, geologic and geophysical
      information, drilling reports, well completion reports, drill stem test charts
      and reports, engineering reports, regulatory reports, and all related materials,
      insofar as the foregoing items constitute materials that may be lawfully
      conveyed to Buyer (i.e. the materials are not subject to a proprietary agreement
      precluding their transfer to Buyer).

    

             “Seller”
      has the meaning set forth in the preface to this Agreement.

    

             “Seller
      Indemnified Party” has the meaning given to it in Article 7.02.

    

             “Survival
      Period” has the meaning set forth in Article 7.01 hereof.

    

             “Taxes”
      has the meaning set forth in Article 9.

    

             “Third
      Party Claim” has the meaning set forth in Article 7.04(a) hereof.

    

             “Transfer
      Requirements” means all consents, approvals, authorizations or permits of, or
      filings with or notifications to, any third party which must be obtained, made
      or complied with for or in connection with the transactions contemplated by
      this
      Agreement in order (a) for such transactions to be effective, (b) to prevent
      any
      termination, cancellation, default, acceleration or change in terms (or any
      right arising therefrom) under any terms, conditions or provisions of any Asset
      (or of any agreement, instrument or obligation relating to or burdening any
      Asset or any interest therein or portion thereof) as a result of such
      transactions, or (c) to prevent the creation or imposition of any lien, charge,
      penalty, restriction, security interest or encumbrance on or with respect to
      any
      Asset or any interest therein or portion thereof (or any right arising
      therefrom) as a result of such transactions.

    

             “Units”
      means all unitization, communitization, pooling agreements, working interest
      units created by operating agreements, and orders covering the lands subject
      to
      the Leases, or any portion thereof, and the units and pooled or communitized
      areas created thereby.

    

             “Wells”
      means wells for the production of Hydrocarbons.

    

    ARTICLE
      2

    SALE
      AND PURCHASE

    

             2.01
      Assets. Subject to the terms and conditions of this Agreement and in
      consideration of Buyer’s payment to Seller of the Purchase Price as provided in
      this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
      agrees to sell and convey to Buyer, the following Assets:

     

    
      
        
        

      

      
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             (a)      all
      of the oil, gas and mineral interests in the leases described on Exhibit A
      and
      well bores described on Exhibit A-1 as specified in the Conveyance Documents
      in
      Exhibits B and B-1 (the “Leasehold Interests”);

    

             (b)      All
      of Seller’s right, title, and interest in and to all of the immovable, movable
      and mixed property of Seller, or in which Seller owns an interest, that is
      attributable or allocable to the Assets and used or held for use in connection
      with the exploration, development, operation or maintenance of any of the
      Leasehold Interests or the production, treatment, measurement, storage,
      gathering, transportation or marketing of oil, gas or other hydrocarbons
      attributable to the Leasehold Interests (or the interests of others
      therein)

    

             (c)      All
      of Seller’s right, title, and interest in and to all original files, records,
      data, information and documentation of Seller (or if originals are not
      available, copies of such items) pertaining to or evidencing Seller’s use,
      ownership or operation of any of the assets, or the maintenance or operation
      thereof, or to any units in which any of the Leasehold Interests may be included
      or to the producing, treating, measuring, processing, storing, gathering,
      transporting or marketing of oil and gas attributable to the Leasehold Interests
      or such units and water, brine or other minerals and products produced in
      association therewith, including, without limitation, lease files, land files,
      well files, production sales agreement files, division order files, title
      opinions and abstracts, legal records (excluding any records or information
      the
      disclosure of which would result in the waiver of an attorney-client privilege),
      tax records, financial and accounting records, governmental, tribal and
      regulatory filings and permits, environmental records, and, except to the extent
      the transfer thereof may not be made without violating applicable contractual
      restrictions, geological and geophysical data, seismic records, production
      reports, maps, and computer software (collectively, the “Records” );
      and

    

             (d)      All
      rights of Seller in and to those instruments and agreements listed on Exhibits
      A, A-1, B and B-1 hereto, the other instruments and agreements under which
      Seller’s interests in the Leasehold Interests arise, and all other agreements
      and contractual rights, easements, rights-of-way, servitudes, and other rights,
      privileges, and benefits to the extent relating to any asset described in
      clauses (a) through (d) above, including, without limitation, all rights of
      Seller in, to and under or derived from all production sales contracts,
      operating agreements, pooling, unitization or communitization agreements,
      purchase, exchange or processing agreements, production handling agreements,
      surface leases, easements or rights-of-way, farmout or farmin agreements, dry
      hole or bottom hole contribution agreements, seismic agreements, permits,
      licenses, options, orders and all other contracts, agreements and instruments
      relating to the exploration for, or the development, production, storage,
      gathering, treatment, transportation, processing, or sale or disposal of oil,
      gas, other hydrocarbons, other minerals, water, brine or other substances from
      any Leasehold Interest or any units of which they are a part (collectively,
      the
“Rights” )

    

    The
      Leasehold Interests, the Related Property, the Records, and the Rights are
      herein collectively called the “Assets.”

     

    
      
        
        

      

      
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    ARTICLE
      3

    PURCHASE
      PRICE; CLOSING

    

             3.01
      Purchase Price. In consideration for the sale and conveyance to Buyer
      of the Assets, subject to the terms and conditions hereof, the Buyer agrees
      to
      tender and deliver to the Seller in the manner hereinafter provided Two Million
      Two Hundred Thousand ($2,200,000) Dollars as consideration (the “Purchase
      Price”).

    

             3.02
      The Closing. The closing of the transactions contemplated by this
      Agreement (the “Closing”) will take place at the offices of the Buyer located in
      Broomfield, Colorado, simultaneously with the execution of this Agreement on
      the
      Effective Date, or at such other place, date and time as the Buyer and the
      Seller may mutually determine (the “Closing Date”).

    

             3.03
      Closing Obligations.  At the Closing, the following events shall
      occur:

    

             (a)      Seller
      and Buyer shall execute, acknowledge and deliver to each other the Conveyance
      Documents. In the Conveyance Documents, Seller shall bind itself and its
      respective successors and assigns to warrant title to the Assets unto Buyer,
      its
      successors and assigns, against every person whomsoever lawfully claiming or
      to
      claim the same or any part thereof by, through and under Seller, but not
      otherwise, and with full substitution and subrogation of Buyer in and to all
      warranties of title heretofore made by Seller’s predecessors in title in respect
      of the Assets. Further, in the Conveyance Documents, any movable or tangible
      property situated on and comprising a portion of the Assets shall be sold on
      an
“AS IS, WHERE IS” basis without any warranty, either express or
      implied, as to title, value, quality, condition or fitness for any purpose
      and
      with all defects;

    

             (b)      Buyer
      shall make the payment described in Article 3.01;

    

             (c)      Seller
      shall execute such other instruments and take such other action as may be
      necessary to carry out its obligations under this Agreement; and

    

             (d)      Buyer
      shall execute such other instruments and take such other action as may be
      necessary to carry out its obligations under this Agreement.

    

    ARTICLE
      4

    REPRESENTATIONS
      AND WARRANTIES

    

             4.01
      Representations and Warranties of Seller. Seller represents and
      warrants to Buyer that the statements contained in this Article 4.01 are true
      and correct as of the Closing Date:

    

             (a)      Seller
      is a corporation which is duly organized, validly existing and in good standing
      under the laws of Anguilla, and is qualified to do business and in good standing
      under the laws of any jurisdiction where the Seller conducts
      operations.

     

    
      
        
        

      

      
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             (b)      Seller
      has all requisite power and authority to carry on their respective businesses
      as
      presently conducted, to enter into this Agreement, to perform their obligations
      pursuant to this Agreement.

    

             (c)      The
      execution and delivery of this Agreement has been, and the execution and
      delivery of all certificates, documents and instruments required to be executed
      and delivered by the Seller at Closing, and the consummation of the transactions
      contemplated hereby and thereby as of the Closing Date shall have been duly
      authorized by all necessary corporate action on the part of the Seller. No
      further authorization is required by any law, statute, regulation, court order
      or judgment applicable to the Seller. This Agreement constitutes the legal,
      valid and binding obligations the Seller enforceable in accordance with their
      respective terms, subject however, to the effects of bankruptcy, insolvency,
      reorganization, moratorium and similar laws, as well as to principles of equity
      (regardless of whether such enforceability is considered in a proceeding in
      equity or at law). After Closing, the Seller will have the ability to continue
      in its same business without a fundamental change in the nature or scope of
      its
      business.

    

             (d)      The
      execution and delivery of the Agreement and the consummation of the transactions
      contemplated hereby and thereby will not (i) violate, or be in conflict with,
      any provisions of the Seller’s charter documents, (ii) constitute a breach of,
      or any event of default under, any contract or agreement to which the Seller
      is
      a party or by which it or its assets are bound, or constitute the happening
      of
      an event or condition upon which any other party to such a contract or agreement
      may exercise any right or option which will materially adversely affect any
      of
      the Assets, (iii) violate any judgment, decree, order, statute, rule or
      regulation applicable to Seller, or (iv) result in any material liability to
      Buyer under the terms of any contracts or agreements.

    

             (e)      No
      suit, action or other proceeding is pending before any court or any governmental
      agency as of the date of this Agreement to which the Seller is a party or which
      involves the Assets and which might result in a material impairment or loss
      of
      the Seller’s title to the Assets or that might materially hinder or impede the
      operation of the Assets or the ability of the Seller to perform its obligations
      under this Agreement. Seller will promptly give the Buyer notice of any such
      proceeding arising prior to or after the Closing with respect to which it has
      notice. The Seller has received no notice of any pending or threatened action,
      suit, proceeding, inquiry or investigation, at law or in equity, before or
      by
      any court, governmental agency, public board or body against or affecting the
      Seller or the Assets that questions the powers and authority of the Seller
      to
      enter into or perform its obligations under this Agreement or to carry out
      the
      transactions on its part described in this Agreement to own and dispose of
      the
      Assets.

    

             (f)      Prior
      to the Closing Date, all royalties, rentals and other payments due with respect
      to the Mineral Interests have been properly and timely paid as prescribed by
      the
      Leases governing them. All conditions necessary to keep the Leases in force
      have
      been fully performed no notices have been received by Seller of any claim to
      the
      contrary and all of the Leases are in full force and effect.

     

    
      
        
        

      

      
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             (g)      Prior
      to the Closing Date, (i) Seller is not obligated by virtue of any prepayment
      arrangement under any contract for the sale of Hydrocarbons and containing
      a
      "take or pay" or similar provision to deliver Hydrocarbons produced from the
      Assets at some future time without then or thereafter receiving full payment
      therefor, and (ii) Seller is under no obligation to reduce its share of
      production under any balancing agreement or similar contract.

    

             (h)      All
      ad valorem, property, production, severance and similar taxes and assessments
      based on or measured by the ownership of property or the production of
      Hydrocarbons on the Assets have been properly paid and all such taxes and
      assessments which become due and payable prior to the Closing Date shall have
      been properly paid by Seller.

    

             (i)      All
      laws, regulations and orders of all governmental agencies having jurisdiction
      over the Assets or operations conducted thereon have, to Seller's knowledge,
      been and shall continue to be complied with in all material respects until
      the
      Closing Date. Seller has obtained all material necessary permits from
      governmental agencies having jurisdiction in connection with all operations
      currently conducted with respect to the Assets, including, without limitation,
      the injection and disposal of salt water, or operations currently conducted
      thereon and have timely, properly and accurately made and will continue to
      timely, properly and accurately make all filings required by all governmental
      agencies with respect to the Assets or operations currently conducted thereon
      and through the Closing Date.

    

             (j)      Seller
      has not incurred liability, contingent or otherwise, for brokers' or finders'
      fees relating to the transactions contemplated by this Agreement for which
      Buyer
      shall have any responsibility whatsoever.

    

             (k)      With
      respect to the Basic Documents (defined below), in all material respects (i)
      the
      Basic Documents all are in full force and effect and are the valid and legally
      binding obligations of the parties thereto and are enforceable in accordance
      with their respective terms; (ii) Seller is not in breach or default with
      respect to any of its material obligations pursuant to any such Basic Document
      or any regulations incorporated therein or governing same; (iii) all material
      payments (including, without limitation, royalties, delay rentals, shut-in
      royalties, or payments, fees for salt water disposal or injection, and joint
      interest or other billings under unit or operating agreements) due from Seller
      thereunder have been made by Seller; (iv) to Seller's knowledge no other party
      to any Basic Document (or any successor in interest thereto) is in breach or
      default with respect to any of their material obligations thereunder; (v)
      neither the Seller nor, to Seller's knowledge, any other party to any Basic
      Document has given or threatened to give notice of any action to terminate,
      cancel, rescind or procure a judicial determination of any Basic Document or
      any
      provision thereof; and (vi) the execution and delivery of this Agreement and
      the
      consummation of the transactions contemplated hereby and thereby will not result
      in a breach of, constitute a default under, or result in a violation of the
      material provisions of any Basic Document and none of the Basic Documents will
      require, after the Effective Date, that any advance payments be made to any
      party other than those required under operating agreements.  As used
      herein the term "Basic Documents" shall mean the Leases, partnership, joint
      venture, limited partnership, farmout, dry hole, bottom hole, operating
      agreements, acreage contribution, purchase and acquisition agreements, area
      of
      mutual interest agreements and salt water disposal and/or injection agreements,
      servicing contracts, casement and/or right-of-way agreements, surface leases,
      surface use agreements, unitization or pooling agreements and all other material
      executory contracts and agreements relating to the Assets, including, without
      limitation, those contracts and agreements described in Article 4.01(m)
      hereto.

     

    
      
        
        

      

      
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             (l)      Seller
      has good and valid title to the Assets; Exhibits A and A-1 contain a list
      of all Mineral Interests and other mineral estates and interests within the
      interest in the Leases owned by Seller and is true and correct, except as
      otherwise noted therein.

    

             (m)      The
      Mineral Interests entitle Seller to receive not less than the undivided interest
      set forth in Exhibit A and A-1 of all indicated hydrocarbons produced, saved
      and
      marketed from or attributable to the Leases.

    

             (n)      No
      portion of the Mineral Interests (1) has been contributed to and is currently
      held by a tax partnership; (2) is subject to any form of agreement (whether
      formal or informal, written or oral) deemed by any state or federal tax statute,
      rule or regulation to be or have created a tax partnership; or (3) otherwise
      constitutes "partnership property" (as that term is used in Subchapter K of
      Chapter 1 of Subtitle A of the Code) of a tax partnership. For the purpose
      of
      this Article 4.01(n) a "tax partnership" is an entity deemed to be a partnership
      within the meaning of Section 761 of the Internal Revenue Code or any similar
      state or federal statute, rule or regulation, by reason of elections made not
      to
      be excluded from the application of such partnership provisions.

    

             (o)      The
      Seller represents that it has been furnished with such information as Seller
      may
      have requested from the Buyer concerning the Buyer.

    

             (p)      Seller
      has provided Buyer with complete and accurate information relating to the Leases
      and Assets, including without limitation, all applicable agreements relating,
      appertaining or incidental to the Leases, production history and
      characteristics. Seller has also provided Buyer with copies of all land files
      heretofore maintained and belonging to Seller.

    

             (q)      Prior
      to Closing, Seller shall have made available to Buyer for examination all title
      and other information relating to the Assets insofar as the same are in Seller's
      possession and after Closing will cooperate with Buyer in Buyer's efforts to
      obtain such additional information relating to the Assets as Buyer may
      reasonably require, to the extent in each case that Seller may do so without
      violating legal constraints or any obligation of confidence or other contractual
      commitment of Seller to a third party. After Closing, Seller shall cooperate
      with Buyer in Buyer's efforts to obtain, at Buyers' expense, such additional
      title information as Buyer may reasonably deem prudent.

    

             (r)      Seller
      has caused the Assets to be maintained in a good and workmanlike manner
      consistent with good oilfield practices, has maintained insurance now in force
      with respect to the Assets, has paid or caused to be paid all costs and expenses
      in connection therewith, has kept the Leases in full force and effect and has
      performed and, to the best knowledge of Seller, complied with all the covenants
      and conditions contained in the Leases and all agreements relating to the
      Assets.

     

    
      
        
        

      

      
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             (s)      During
      the period between the Effective Date and the Closing, Seller has not entered
      into any agreements or commitments with respect to the Assets, has not modified
      or terminated any of the agreements relating to the Assets, including, without
      limitation, the Basic Documents, has not encumbered, sold or otherwise disposed
      of any of the Assets other than any personal property which may have been
      replaced by equivalent property or consumed in the operation of the Assets,
      and
      has not voluntarily compromised any amounts payable to the Seller due to
      casualty loss or any pending or threatened taking related to the
      Assets.

    

             (t)      Seller
      has exercised reasonable efforts in safeguarding and maintaining all
      engineering, geological and geophysical data, reports and maps, contract rights
      and like information relating to the Assets.

    

             (u)      In
      the event that as of the Closing Date the Assets are subject to outstanding
      Governmental Approvals, Seller agrees to indemnify the Buyer Indemnified Party
      against any Loss or Losses arising by reason of the failure to obtain such
      Governmental Approvals. Seller represents that it will exercise reasonable
      efforts to obtain such Governmental Approvals. The indemnity herein provided
      shall survive the Closing until the required Governmental Approvals have been
      obtained.

    

             (v)      Seller
      has permitted Buyers' authorized representatives to consult with Seller's and/or
      any third-party contract operator's agents and employees during reasonable
      business hours and to conduct on-site inspections, reasonable tests and
      inventories with respect to the Assets and inspect and examine any and all
      production and related data, well logs and geological and geophysical data
      relating to the Assets.

    

             (w)      Prior
      to the Closing Date, Seller has used reasonable efforts to maintain its
      relationships with all suppliers, customers and others having business
      relationships with Seller with respect to the Assets so that such relationships
      will be preserved for Buyer on and after the Closing Date.

    

             (x)     There
      are no underground storage tanks located on any of Lands.

    

             4.02
      Representations and Warranties of Buyer. Jayhawk represents and
      warrants to Seller that the statements contained in this Article 4.02 are true
      and correct as of the Closing Date:

    

             (a)      Jayhawk
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the State of Colorado, and is qualified to do business and in good
      standing under the laws of any jurisdiction where Jayhawk conducts
      operations.

    

             (b)      Buyer
      has all requisite power and authority, corporate and otherwise, to carry on
      its
      business as presently conducted, to enter into this Agreement to which it is
      a
      party, and to perform its obligations under this Agreement.

     

    
      
        
        

      

      
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             (c)      The
      execution and delivery of this Agreement has been, and the execution and
      delivery of all certificates, documents and instruments required to be executed
      and delivered by Buyer at Closing, and the consummation of the transactions
      contemplated hereby as of the Closing Date shall have been duly authorized
      by
      all necessary corporate action on the part of Buyer and no further authorization
      is required by any law, statute, regulation, court order or judgment applicable
      to Buyer. This Agreement constitutes a legal, valid and binding obligation
      of Buyer enforceable in accordance with its terms, subject however, to the
      effects of bankruptcy, insolvency, reorganization, moratorium and similar laws,
      as well as to principles of equity (regardless of whether such enforceability
      is
      considered in a proceeding in equity or at law).

    

             (d)      The
      execution and delivery of the Agreement and the consummation of the transactions
      contemplated hereby will not (i) violate, or be in conflict with any provisions
      of Buyer's certificate of incorporation, bylaws or governing documents, (ii)
      constitute a material breach of, or any event of default under, any contract
      or
      agreement to which Buyer is a party or by which it or its assets are bound,
      or
      constitute the happening of an event or condition upon which any other party
      to
      such a contract or agreement may exercise any right or option which will
      materially adversely affect the ability of Buyer to perform its obligations
      hereunder, or (iii) violate any judgment, decree, order, statute, rule or
      regulation applicable to Buyer.

    

             (e)      No
      suit, action or other proceeding is pending before any court or governmental
      agency as of the date of this Agreement to which Buyer is a party and which
      might materially hinder or impede the ability of Buyer to perform its
      obligations hereunder. Jayhawk shall promptly notify Seller of any such
      proceeding arising prior to the Closing with respect to which it receives actual
      notice.

    

             (f)      Buyer
      has not incurred any liability, contingent or otherwise, for brokers' or
      finders' fees relating to the transactions contemplated by this Agreement for
      which Seller shall have any responsibility whatsoever.

    

    ARTICLE
      5

    ENVIRONMENTAL
      REPRESENTATIONS AND WARRANTIES

    

             5.01
      Definitions. As used in this Article 5.01:

    

             
      (a)      “Contaminated Site List” means any list,
      registry, or other compilation established by any Governmental Entity of sites
      that require or potentially require investigation, removal actions, remedial
      actions, or any other response under any Environmental Laws or treaty covering
      environmental matters, as the result of the Release or threatened Release of
      any
      Hazardous Materials.

     

    
      
        
        

      

      
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      (b)      “Environmental Laws” means all laws,
      rules, regulations, statutes, ordinances or orders of any Governmental Entity
      relating to (A) the control of any potential pollutant or protection of the
      air,
      water or land, (B) solid, gaseous or liquid waste generation, handling,
      treatment, storage, disposal or transportation, and (C) exposure to hazardous,
      toxic or other substances alleged to be harmful, and includes without
      limitation, the terms and conditions of any license, permit, approval, or other
      authorization by any Governmental Entity, and judicial, administrative, or
      other
      regulatory decrees, judgments, and orders of any Governmental Entity. The term
      “Environmental Laws” shall include, but not be limited to, the Clean Air Act, 42
      U.S.C.ss.7401 et seq., the Clean Water Act, 33 U.S.C.ss.1251 et seq., the
      Resource Conservation Recovery Act (“RCRA”), 42 U.S.C.ss.6901 et seq., the
      Superfund Amendments and Reauthorization Act, 42 U.S.C.ss.11011 et seq., the
      Toxic Substances Control Act, 15 U.S.C.ss.2601 et seq., the Water Pollution
      Control Act, 33 U.S.C.ss.1251, et seq., the Safe Drinking Water Act, 42
      U.S.C.ss.300f et seq., the Comprehensive Environment Response, Compensation,
      and
      Liability Act (“CERCLA”), 42 U.S.C.ss.9601 et seq., the Oil Pollution Act of
      1990, 33 U.S.C.A.ss.2701 et seq., and any applicable statutes promulgated by
      the
      State of Utah or any counties, cities, townships or other jurisdictions located
      therein.

    

              (c)      “Environmental
      Liabilities” shall mean any and all liabilities, responsibilities, claims,
      suits, losses, costs (including remediation, removal, response, abatement,
      cleanup, investigative, and/or monitoring costs and any other related costs
      and
      expenses), damages, settlements, expenses, charges, assessments, liens,
      penalties, fines, prejudgment and postjudgment interest, attorney fees and
      other
      legal fees (A) pursuant to any agreement, order, notice, or responsibility,
      (including directives embodied in Environmental Laws), injunction, judgment,
      or
      similar documents (including settlements), or (B) pursuant to any claim by
      a
      Governmental Entity or other person for personal injury, property damage, damage
      to natural resources, remediation, or similar costs or expenses incurred by
      such
      Governmental Entity or person pursuant to common law, statute, rule or
      regulation.

    

             
      (d)      “Environmental Remediation Costs” means
      all costs and expenses of actions or activities to (A) cleanup or remove
      Hazardous Materials from the environment, (B) to prevent or minimize the further
      movement, leaching or migration of Hazardous Materials in the environment,
      (C)
      prevent, minimize or mitigate the Release or threatened Release of Hazardous
      Materials into the environment, or injury or damage from such Release, and
      (D)
      comply with the requirements of any Environmental Laws. Environmental
      Remediation Costs include, without limitation, costs and expenses payable in
      connection with the foregoing for legal, engineering or other consultant
      services, for investigation, testing, sampling, and monitoring, for boring,
      excavation, and construction, for removal, modification or replacement of
      equipment or facilities, for labor and material, and for proper storage,
      treatment, and disposal of Hazardous Materials.

    

             
      (e)      “Governmental Entity” means any court,
      administrative agency or commission or other governmental authority or agency,
      domestic or foreign, including local authorities.

    

             
      (f)      “Hazardous Materials” means any toxic or
      hazardous materials or substances, or solid wastes, including asbestos, buried
      contaminants, chemicals, flammable or explosive materials, radioactive,
      materials, petroleum and petroleum products, and any other chemical, pollutant,
      contaminants substance or waste that is regulated by any Governmental Entity
      under any Environmental Law.

    

             
      (g)      “Material” or “Material Adverse Effect”
for purposes of this Article 5.01 means any matter, response, action,
      remediation, or other item calling for the payment or expenditure by any Seller
      or Buyer after the Closing of funds in excess of $50,000 per occurrence, or
      $250,000 in the aggregate.

    

             
      (h)      “Release” means any spilling, leaking,
      pumping, pouring, emitting, emptying, discharging, injecting, escaping,
      leaching, dumping, or disposing into the environment of any Hazardous
      Materials.

     

    
      
        
        

      

      
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             5.02
      Representations and Warranties. With respect to the Assets, the Seller
      represents and warrants to Buyer that, to the best of its
      knowledge:

    

             (a)      With
      respect to permits and licenses relating to the Assets, (A) all Material
      licenses, permits, consents, or other approvals required under Environmental
      Laws that are necessary to the current operations on the Assets have been
      obtained and are in full force and effect, and Seller is unaware of any basis
      for revocation or suspension of any such licenses, permits, consents or other
      approvals, (B) no declaration, environmental impact statement, or other filing
      or notice to any Governmental Entity is required under Environmental Laws as
      a
      condition or in connection with the transactions contemplated by this Agreement,
      and (C) no Environmental Laws impose any obligation upon any Seller, as a result
      of any transaction contemplated hereby, requiring prior notification to any
      Governmental Entity of the transfer of any permit, license, consent, or other
      Approval which materially is necessary to the operations of the
      Assets.

    

             (b)      No
      Governmental Entity has given notice to the Seller of any claim or investigation
      under or violation of any Environmental Law with respect to the Assets or of
      any
      intent to encumber or place a lien under any Environmental Laws upon the Assets.
      No Material notice or Material restriction has been, or is required to be placed
      in any deed or other public real property record pursuant to any Environmental
      Laws with respect to the Assets.

    

             (c)      Except
      as would not have a Material Adverse Effect and with respect to the Assets
      or
      any of the Lands, (A) no oral or written notification of any Release of any
      Hazardous Materials has been given to any Governmental Entity by or on behalf
      of
      Seller, (B) none of the Assets is on (nor has any Seller received any notice
      from any Governmental Entity that any of the Assets is being considered or
      proposed for listing on) any Contaminated Site List, (C) none of the Assets
      is
      the subject of any judgment, decree or order of any Governmental Entity
      requiring any investigation, removal, remediation or similar action, or other
      response under any Environmental Laws, (D) the Seller has not received any
      notice from any Governmental Entity that it is liable or responsible, or
      potentially liable or responsible, in any material respect for any removal,
      remedial, or other similar type action under any Environmental Laws as the
      result of the Release or threatened Release of Hazardous Materials with respect
      to the Assets and (E) there is no claim, complaint, investigation, litigation,
      or administrative proceeding threatened before any Governmental Entity (and
      to
      the best of its information and belief, Seller knows of no threatened claim,
      complaint, investigation, litigation, or administrative proceeding) in which
      it
      is asserted by any Governmental Entity or any other person that Seller (x)
      has
      violated or is not in compliance with any Environmental Laws with respect to
      the
      Assets, (y) is liable for or should be ordered or compelled to undertake any
      removal, remediation, or other response action as the result  of the
      Release or threatened Release of any Hazardous Materials with respect to the
      Assets or (z) is liable for damages (including without limitation, damages
      to
      natural resources), fines, penalties, or other relief as the result of the
      violation or noncompliance of any Environmental Laws or as the result of the
      Release or threatened Release of any Hazardous Materials with respect to the
      Assets.

    

    
      
        
        

      

      
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             (d)      Except
      where the failure to have such permits and authorizations would not have a
      Material Adverse Effect, all Hazardous Materials, garbage, refuse, and similar
      waste materials with respect to the Assets have been transported by Seller
      only
      to sites which have proper permits or other authorization from Governmental
      Entities for the disposal of such materials. To the best knowledge of Seller,
      no
      such site to which Hazardous Materials, garbage, refuse, or similar waste
      materials have been transported for disposal Seller are on any Contaminated
      Site
      List.

    

             (e)      Except
      as would not have a Material Adverse Effect, all operations of Seller with
      respect to the Assets are in compliance with all Environmental
      Laws.

    

             (f)      Except
      as would not have a Material Adverse Effect, no facts or circumstances exist
      which could reasonably be expected to result in any Environmental Liabilities
      to
      Seller or the Buyer following the Closing with respect to the
      Assets.

    

             (g)      Seller
      does not now own, lease or otherwise operate any disposal sites on the
      Assets.

    

    ARTICLE
      6

    ENVIRONMENTAL
      COVENANT

    

             6.01
      Availability of Data to Buyer; Environmental Audit. Prior to the date
      hereof, Seller has made available to Buyer information which is in the
      possession or control of Seller or to which Seller has access (other than
      publicly available information to which Buyer has equal access) and which
      relates to the environmental condition of the Assets, which information
      includes, without limitation, information regarding crude oil and produced
      water
      that may have been spilled or disposed of on-site and the locations thereof;
      onsite pits and pit closures; on-site burial; land farming; land spreading;
      underground injection; and on-site solid waste disposal sites. Seller has
      further delivered to Buyer true and correct copies of its Environmental Reports.
      No material environmental events have occurred since the dates of these
      reports.

    

             6.02
      Environmental Assessment. Buyer shall have the right to make an
      environmental assessment of the Assets during the period beginning on the date
      of execution of this Agreement and ending ninety (90) days after the Closing
      Date ("Examination Period"). If during the Examination Period, Buyer determines
      that operations of Seller or its affiliates with respect to the Assets are
      not
      in compliance with all Environmental Laws, without regard to whether Seller
      has
      been previously notified of such matter by an applicable authority, then Buyer
      shall give Seller notice thereof together with an explanation of the
      environmental problem. Seller shall have five (5) days following such notice
      to
      notify Buyer whether Seller elects to (x) remediate, dispose of, restore, or
      otherwise resolve such environmental problem or lack of compliance in accordance
      with all applicable laws, rules, and regulations, and to Buyer's reasonable
      satisfaction, or (y) reduce the Purchase Price to be paid under this Agreement
      (b) by $50,000. Buyer and Seller agree to cooperate with each other in
      connection with all activities to be conducted hereunder.

     

    
      
        
        

      

      
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    ARTICLE
      7

    SURVIVAL
      AND INDEMNIFICATION

    

             7.01
      Survival of Representations and Warranties. The representations and
      warranties of (i) the Seller contained in Article 4.01 and Article 5 hereof
      shall survive the Closing for a period of one year from the Closing Date and
      (ii) the representations and warranties of the Buyer contained in Article 4.02
      hereof shall survive the Closing for one year from the Closing Date (the
      "Survival Period").

    

             7.02
      Indemnification Provision for the Benefit of the Seller. In the event
      the Buyer breaches any of its representations and warranties contained in
      Article 4.02 hereof, then the Buyer agrees to indemnify and hold harmless the
      Seller, any current, former, and future director, officer, manager, member,
      partner, shareholder, employee and agent of Seller, and any successor, assign,
      heir, and executor of any of the foregoing (the "Seller Indemnified Party"),
      from and against the entirety of any Losses resulting from or related or
      attributable to the breach which the Seller, or any such Affiliate (or any
      such
      other indemnified person in such person's capacity set forth above) shall
      suffer, provided such claim for indemnification is brought within the Survival
      Period; and further provided that "Losses", as used in this sentence, shall
      not
      include, and Buyer shall not be responsible or liable for, any death, personal
      injury, or consequential damages in respect of such breach. Further, subject
      to
      the limitations of the immediately preceding sentence, the Buyer indemnifies,
      defends and holds the Seller Indemnified Parties harmless from and against
      any
      and all Losses directly or indirectly arising out of or resulting from any
      Hazardous Materials being present or released in, on or around any part of
      the
      surface of the Fee Tract, or in the soil, groundwater or soil vapor on or under
      the surface of the Fee Tract subsequent to the Closing Date that is caused
      by
      the Buyer or its agents and employees.

    

             7.03
      Indemnification Provision for the Benefit of the Buyer. In the event
      the Seller breaches any of its representations and warranties contained in
      Article 4.01 and Article 5 hereof, then the Seller agrees to indemnify and
      hold
      harmless the Buyer, any current, former, and future director, officer, manager,
      member, partner, shareholder, employee and agent of Buyer, and any successor,
      assign, heir, and executor of any of the foregoing (the "Buyer Indemnified
      Party"), from and against the entirety of any Losses resulting from or related
      or attributable to the breach which the Buyer, or any such Affiliate (or any
      such other indemnified person in such person's capacity set forth above) shall
      suffer, provided such claim for indemnification is brought within the Survival
      Period; and further provided that "Losses", as used in this sentence, shall
      not
      include, and Seller shall not be responsible or liable for, any death, personal
      injury, or consequential damages in respect of such breach. Further, subject
      to
      the limitations of the immediately preceding sentence, the Seller indemnifies,
      defends and holds the Buyer Indemnified Parties harmless from and against any
      and all Losses directly or indirectly arising out of or resulting from any
      Hazardous Materials being present or released in, on or around any part of
      the
      surface of the Fee Tract, or in the soil, groundwater or soil vapor on or under
      the surface of the Fee Tract prior to the Closing date and thereafter, except
      for the presence of such Hazardous Materials that is caused by the Buyer or
      its
      agents and employees.

     

    
      
        
        

      

      
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             7.04     Matters
      Involving Third Parties.

    

             (a)      If
      any third party shall notify a Seller Indemnified or Buyer Indemnified Party
      with respect to any matter which may give rise to a claim for indemnification
      against Seller or Buyer, as the case may be (the "Indemnifying Party") under
      this Article 7 or otherwise pursuant to this Agreement, then the Indemnified
      Party shall promptly (and in any event within ten (10) business days after
      receiving service of process in a lawsuit, administrative proceeding or
      arbitration proceeding with respect to the Third Party Claim) notify each
      Indemnifying Party thereof in writing. Each of the matters described in this
      Article 7.04(a) shall be referred to in this Agreement as a "Third Party
      Claim".

    

             (b)      Any
      Indemnifying Party will have the right to assume and thereafter conduct the
      defense of the Third Party Claim with counsel of its choice reasonably
      satisfactory to the Indemnified Party; provided, however, that the Indemnifying
      Party will not consent to the entry of any judgment or enter into any settlement
      with respect to the Third Party Claim without the prior written consent of
      the
      Indemnified Party (not to be withheld unreasonably) unless the judgment or
      proposed settlement involves only the payment of money damages and does not
      impose an injunction or other equitable relief upon (or constitute an admission
      of guilt, liability, fault or responsibility for) the Indemnified Party. The
      Indemnified Party shall have the right to employ separate counsel in any such
      action and to participate in the defense thereof, but the fees and expenses
      of
      such counsel shall be at the expense of the Indemnified Party unless (i) the
      employment thereof has been specifically authorized in writing by the
      Indemnifying Party or (ii) the Indemnifying Party failed to assume the defense
      and employ counsel.

    

             (c)      Unless
      and until an Indemnifying Party assumes the defense of the Third Party Claim
      as
      provided in Article 7.04(b) above, however, the Indemnified Party may defend
      against the Third Party Claim in any manner it reasonably may deem appropriate
      with such reasonable costs and expenses associated therewith to be borne for
      the
      account of the Indemnifying Party.

    

             (d)      In
      no event will the Indemnified Party consent to the entry of any judgment or
      enter into any settlement with respect to the Third Party Claim without the
      prior written consent of the Indemnifying Party (not to be withheld
      unreasonably), unless the Indemnified Party waives indemnification with respect
      to the Third Party Claim so settled and adjudicated.

    

             (e)      The
      indemnification obligations of Seller and Buyer, respectively under this
      Agreement shall include court costs and attorney's fees and expenses and costs
      of investigating, preparing or defending any action or proceeding with respect
      to any Third Party Claim.

    

    ARTICLE
      8

    POST
      CLOSING COVENANTS

    

             8.01
      Certain Obligations of Seller. Seller agrees that, with respect to the
      period following the Closing:

     

    
      
        
        

      

      
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             (a)      Records.
      On or before five (5) business days after Closing, Seller shall, at Seller's
      cost, deliver to Buyer, at Buyer's offices in Broomfield, Colorado, copies
      of
      all Records.

    

             (b)      Retained
      Liabilities. Seller retains and shall remain liable and responsible for, and
      Buyer specifically does not assume, any liabilities and obligations of Seller
      not related to or arising out of the ownership, use, maintenance and operation
      of the Assets, whether known or unknown, accrued or contingent and not otherwise
      specifically set forth in this Agreement.

    

             8.02
      Certain Obligations of Buyer. Buyer agrees that within (30) days
      following Closing, Buyer shall record those Conveyance Documents necessary
      to
      evidence in the public record that Buyer has acquired the Assets and within
      a
      reasonable time thereafter, Buyer shall supply Seller with a true and accurate
      photocopy of the recorded and filed Conveyance Documents. In the event Buyer
      fails to record any such Conveyance Document within such time period, Seller
      may, but shall not be obligated to, record such Conveyance Document on Buyer's
      behalf and at Buyer's cost (for which Buyer will promptly reimburse Seller
      upon
      demand).

    

    ARTICLE
      9

    EFFECT
      OF CLOSING

    

             The
      following terms, provisions and prorations shall be effective at the
      Closing:

    

             (a)      Revenues.
      All proceeds from accounts receivables, notes receivable, income, revenues,
      monies and other items attributable to the Assets with respect to any period
      of
      time prior to the Effective Date shall belong to and be retained by or paid
      over
      to Seller and all necessary reports with respect to such proceeds shall be
      filed
      by Seller. All proceeds from production, accounts receivables, notes
      receivables, income, revenues, monies and other items attributable to the Assets
      with respect to any period of time from and after the Effective Date shall
      belong to and be retained by or paid over to Buyer.

    

             (b)      Expenses.
      All accounts payable and accrued liabilities for costs and expenses attributable
      to the Assets with respect to any period of time prior to the Effective Date,
      including excise, severance, and similar taxes based on production or royalties,
      shall be the obligation of and paid by the Seller, and all necessary reports
      with respect to such costs and expenses shall be filed by Seller. All production
      royalties payable to Seller and exploration and drilling expenses as specified
      in the Agreement, along with any accounts payable and accrued liabilities for
      direct costs and expenses attributable to the Assets with respect to any period
      of time from and after the Effective Date shall be the obligation of and be
      paid
      by the Buyer.

    

             (c)      Ad
      Valorem And Property Taxes. All ad valorem taxes, real property taxes, personal
      property taxes and similar obligations (the "Taxes") shall be apportioned as
      of
      the Effective Date between Buyer and Seller. All such Taxes allocable to periods
      prior to the Effective Date shall be paid by Seller, and all such Taxes
      allocable to the Effective Date and after shall be paid by Buyer. Any refunds
      of
      Taxes allocable to periods prior to the Effective Date shall be the property
      of
      Seller. Any refunds of Taxes allocable to periods after the Effective Date
      shall
      be the property of Buyer. Buyer shall file or cause to be filed all required
      reports and returns incident to such Taxes which are due on or after the
      Effective Date, and shall pay or cause to be paid to the taxing authorities
      all
      such Taxes reflected on such reports and returns; provided, however, Seller
      shall promptly reimburse Buyer for any amounts owing by Seller with respect
      thereto pursuant to this paragraph.

     

    
      
        
        

      

      
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             (d)      Sales
      Taxes, Filing Fees, Etc. Buyer shall be liable for any sales taxes or other
      transfer taxes, as well as any applicable conveyance, transfer and recording
      fees, and real estate, transfer, stamp or other taxes imposed upon the sale
      of
      the Assets. Seller agrees to use its reasonable best efforts to assist Buyer
      in
      obtaining any applicable exemptions to any applicable state sales tax. If Seller
      is required by applicable state law to report and pay these taxes or fees,
      Buyer
      shall promptly deliver a check to Seller in full payment, and Seller shall
      deliver said check to the appropriate taxing authorities and shall bear any
      and
      all penalties, costs and expenses associated with the failure of Seller to
      deliver said check.

    

             (e)      Other
      Taxes. All production, severance or excise taxes, conservation fees and other
      similar such taxes or fees (other than income taxes), if any, relating to
      production attributable to the Assets prior to the Effective Date shall be
      paid
      by Seller and all such taxes and fees relating to such production attributable
      to the Assets on and after the Effective Date shall be paid by
      Buyer.

    

             (f)      Payments;
      Shared Obligations. If amounts are received by either Party hereto which, under
      the terms of this Article 9 belong to the other Party, such amount shall
      immediately be paid over to the proper Party. If an invoice or other evidence
      of
      an obligation is received which under the terms of this Article 9 is partially
      the obligation of Seller and partially the obligation of Buyer, then the Parties
      shall consult each other and each shall promptly pay its portion of such
      obligation to the obligee.

    

    ARTICLE
      10

    CONFIDENTIALITY
      AGREEMENT

    

             Each
      Party, its Affiliates and its and their directors, officers, employees, agents,
      representatives, consultants, investors and lenders, agree to keep the terms
      and
      conditions of this Agreement and all proprietary and confidential information
      exchanged between Buyer and Seller in connection with this Agreement,
      confidential, and to not disclose the existence of this Agreement without the
      prior written consent of the other Party, which consent may be withheld at
      either Party's sole discretion, for a period not to exceed one year from the
      Closing Date. The foregoing restriction shall not apply to disclosures and
      information which (i) are required to comply with applicable statutes and
      regulations; (ii) are required to enforce this Agreement; (iii) are required
      to
      obtain financing related to the transactions contemplated hereby; (iv) enter
      the
      public domain through a third party who does not thereby breach an obligation
      of
      confidentiality; or (v) are made in association with press releases issued
      in
      accordance with Article 15.01 hereof.

    

    ARTICLE
      11

    CONDITIONS
      OF CLOSING

    

             11.01    Seller's
      Conditions of Closing. Seller’s obligation to consummate the
      transactions provided for herein is subject to the satisfaction or waiver on
      or
      before the Closing Date of the following conditions:

     

    
      
        
        

      

      
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             (a)      Representations
      and Warranties. The representations and warranties of Buyer
      contained in this Agreement shall be true and correct in all material respects
      on the date of Closing as though made on and as of that date.

    

             (b)      Performance.
      Buyer shall have performed in all material respects the obligations,
      covenants and agreements required hereunder to be performed by it at or prior
      to
      the Closing.

    

             (c)      Pending
      Matters. No suit, action or other proceeding by a
      non-affiliated third party or a governmental authority shall be pending or
      threatened which seeks substantial damages from Seller in connection with,
      or
      seeks to restrain, enjoin or otherwise prohibit the consummation of the
      transactions contemplated by this Agreement.

    

             11.02   Buyer’s
      Conditions of Closing. Buyer’s obligation to consummate the
      transactions provided for herein is subject to me satisfaction or waiver on
      or
      before the Closing Date of the following conditions:

    

             (a)     Representations
      and Warranties. The representations and warranties of Seller contained in this
      Agreement shall be true and correct in all material respects on the
      date of Closing as though made on and as of that date.

    

             (b)     Performance.
      Seller shall have performed in all material respects the obligations, covenants
      and agreements required hereunder to be performed by it at or prior to the
      Closing.

    

             (c)     Pending
      Matters. No suit, action or other proceeding by a non-affiliated third party
      or
      a governmental authority shall be pending or threatened which seeks substantial
      damages from Buyer in connection with, or seeks to restrain, enjoin or otherwise
      prohibit, the consummation of the transactions contemplated by this
      Agreement.

    

             (d)     Operatorship.
      Buyer shall be satisfied in its sole discretion that it will succeed to or
      will
      become operator of all units and wells comprising a part of the Assets that
      were
      being operated by Seller at the Effective Date.

    

             (e)     No
      Material Adverse Change. Since the date of this Agreement, there shall
      have been no material adverse change in the value of the Assets and no event
      shall have occurred that has had, or is reasonably likely to have, a material
      adverse effect on the ability of Buyer to own and operate the Assets, and enjoy
      the benefits associated therewith, in the same fashion as Seller has prior
      to
      the date hereof.

     

             (f)     Satisfaction
      With Due Diligence. Buyer shall be satisfied in its sole discretion
      with the results of its due diligence investigation of the Assets, including,
      but not limited to: (a) the operational and environmental condition of the
      Assets; and (b) title to the Assets.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    
 

    ARTICLE
      12

    CASUALTY
      LOSS AND CONDEMNATION

    

             If,
      prior to the Closing Date, all or any portion of the Assets are destroyed by
      fire or other casualty or are taken in condemnation or under right of eminent
      domain or proceedings for such purpose are pending or threatened in writing,
      Buyer may elect to purchase such Assets or portions thereof notwithstanding
      any
      such destruction, taking or pending or threatened taking (without reduction
      in
      the Purchase Price with respect thereto), in which case Seller shall, at the
      Closing, pay to Buyer all sums paid to Seller by third parties (including
      insurers) by reason of the destruction or taking of such Assets, and shall
      assign, transfer and set over unto Buyer all of Seller's right, title and
      interest in and to any unpaid awards or other amounts due from third parties
      (including insurers) arising out of the destruction, taking or pending or
      threatened taking of such Assets or portions thereof. Prior to Closing, Seller
      shall not voluntarily compromise, settle or adjust any amounts payable by reason
      of any destruction, taking or pending or threatened taking as to the Assets
      or
      portions thereof without first obtaining the written consent of
      Buyer.

    

    ARTICLE
      13

    GOVERNMENTAL
      CONSENTS

    

             At
      the Closing, if any, Seller shall execute and deliver to Buyer such assignments
      of federal, state and Indian leases as require consent to assignment, on the
      forms required by the governmental or tribal agency having jurisdiction thereof.
      Buyer shall promptly file for and obtain the necessary approvals for such
      assignments. Until such approvals (the "Governmental Approvals") are obtained,
      Seller shall continue to hold governmental title to such leases as nominee
      for
      Buyer.

    

    ARTICLE
      14

    TERMINATION

    

             14.01
      Right of Termination. This Agreement and the transactions contemplated
      hereby may be terminated:

    

             (a)     At
      any time at or prior to Closing by mutual consent of Seller and Buyer;
      or

    

             (b)     At
      any time at or after July 31, 2007, by Seller or Buyer, by the delivery of
      written notice to the other Party, if the Closing shall not have occurred by
      such date;

    

    provided,
      however no such Party may exercise any right of termination pursuant to this
      Article 14.01 if the event giving rise to such termination right shall be due
      to
      the willful failure of such Party to perform or observe in any material respect
      any of the covenants or agreements set forth herein to be performed or observed
      by such Party.

    

             14.02
      Return of Data. Buyer agrees that if this Agreement is
      terminated for any reason whatsoever, Buyer shall use its good faith efforts
      to
      identify and promptly return to Seller all information furnished by or on behalf
      of Seller to Buyer, its officers, employees, and representatives in connection
      with this Agreement or Buyer’s investigation of the Assets, together with all
      copies, extracts or excerpts of such information.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

     

    ARTICLE
      15

    MISCELLANEOUS

    

             15.01
      Press Releases and Public Announcements. Neither Party shall issue any
      press release or make any public announcement relating to the subject matter
      of
      this Agreement prior to the Closing, if any, without the prior approval of
      the
      other Party, which approval shall not be unreasonably withheld; provided,
      however, that either Party may make any public disclosure it believes in good
      faith is required by applicable law or any listing or trading agreement
      concerning its publicly traded securities (in which case the disclosing Party
      will use its reasonable best efforts to advise the other Party prior to making
      the disclosure).

    

             15.02
      Entire Agreement. This Agreement (including the documents referred to
      herein) constitutes the entire agreement between the Parties and supersedes
      any
      prior agreements, or representations by or between the Parties, written or
      oral,
      to the extent they have related in any way to the subject matter
      hereof.

    

             15.03
      Succession and Assignment. This Agreement shall be binding upon and
      inure to the benefit of the Parties and their respective successors and
      permitted assigns. Neither Party may assign either this Agreement or any of
      its
      rights, interests, or obligations hereunder without the prior written approval
      of the other Party, which approval shall not be unreasonably
      withheld.

    

             15.04
      Counterparts. This Agreement may be executed in one or more
      counterparts, each of which shall be deemed an original but all of which
      together will constitute one and the same instrument.

    

             15.05
      Headings. The section or Article headings contained in this Agreement
      are inserted for convenience only and shall not affect in any way the meaning
      or
      interpretation of this Agreement.

    

             15.06
      Governing Law. This Agreement shall be governed by and construed in
      accordance with the domestic laws of the State of Colorado without giving effect
      to any choice or conflict of law provision or rule (whether of the State of
      Colorado or any other jurisdiction) that would cause the application of the
      laws
      of any jurisdiction other than the State of Colorado.

    

             15.07
      Legal Fees. The prevailing party in any legal proceeding brought under
      or to enforce this Agreement shall be additionally entitled to recover court
      costs and reasonable attorney's fees from the nonprevailing party. Each Party
      shall pay their respective legal costs associated with the negotiation and
      drafting of this Agreement.

    

             15.08
      Exhibits. All exhibits and schedules hereto which are referred to
      herein are hereby made a part hereof and incorporated herein by such
      reference.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

     

             15.09
      Waiver. Any of the terms, provisions, covenants, representations,
      warranties or conditions hereof may be waived only by written instrument
      executed by the Party waiving the compliance. The failure of either Party at
      any
      time or times to require performance of any provisions hereof shall in no manner
      affect such Party's right to enforce the same. No waiver by either Party of
      any
      condition or of the breach of any term, provision, covenant, representation
      or
      warranty contained in this Agreement, whether by conduct or otherwise, in any
      one or more instances, shall be deemed to be construed as a further or
      continuing waiver of any such condition or breach, or a waiver of any other
      condition or of the breach of any other term, provision, covenant,
      representation or warranty.

    

             15.10
      Further Assurances. After the Closing, if any, each of the Parties will
      execute, acknowledge, and deliver to the other such further instruments, and
      take such other actions, as may be reasonably requested in order to more
      effectively assure to said Party all of the respective properties, rights,
      titles, interests, estates, and privileges intended to be assigned, delivered,
      or inuring to the benefit of such Party in consummation of the transactions
      contemplated hereby.

    

             15.11
      Resignation as Operator, etc. At the Closing, Seller shall execute and
      deliver to Buyer appropriate letters resigning as the operator of any of the
      Assets that Seller is operating and other appropriate documents concerning
      transfer of operations. Buyer acknowledges and agrees that Seller cannot and
      does not covenant or warrant that Buyer shall become successor operator of
      all
      or any portion of the Assets, since the Assets or portions thereof may be
      subject to unit, pooling, communitization, operating or other agreements which
      control the appointment of a successor operator; provided, however, that Seller
      agrees to use its reasonable best efforts to assist Buyer in becoming successor
      operator.

    

             15.12
      Notices. All notices, requests, demands, claims and other
      communications hereunder will be in writing. Any notice, request, demand, claim
      or other communication hereunder shall be deemed duly given if (and then two
      business days after) it is sent by registered or certified mail, return receipt
      requested, postage prepaid, and addressed to the intended recipient as set
      forth
      below:

    

    IF
      TO
      SELLER:

    

    Armstrong
      Investments Incorporated

    P.O.
      Box
      294

    The
      Valley, Anguilla

    British
      West Indies

    

    IF
      TO
      BUYER:

    

    Jayhawk
      Energy, Inc.

    370
      Interlocken Blvd., Suite 400

    Broomfield,
      CO 80021

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

     

    Any
      Party
      may send any notice, request, demand, claim, or other communication hereunder
      to
      the intended recipient at the address set forth above using any other means
      (including personal delivery, expedited courier, messenger service, telecopy,
      telex, ordinary mail, or electronic mail), but no such notice, request, demand,
      claim, or other communication shall be deemed to have been duly given unless
      and
      until it actually is received by the intended recipient. Any Party may change
      the address to which notices, requests, demands, claims, and other
      communications hereunder are to be delivered by giving the other Party notice
      in
      the manner herein set forth.

    

             15.13
      Disclaimer of Representations and Warranties. Except as expressly set
      forth in this Agreement and in Conveyance Documents delivered pursuant to
      Article 3.03(a), the Parties hereto make no, and disclaim any, representation
      or
      warranty whatsoever, whether express or implied. Each Party hereto disclaims
      all
      liability and responsibility for any other representation, warranty, statement,
      or communication (orally or in writing) to the other Party (including, but
      not
      limited to, any information contained in any opinion, information, or advice
      that may have been provided to any such Party by any officer, stockholder,
      director, partner, member, manager, employee, agent, consultant, representative,
      or contractor of such disclaiming Party or its Affiliates or any engineer or
      engineering firm, or other agent, consultant, or representative) wherever and
      however made. Without limiting the generality of the foregoing, Seller makes
      no
      representation or warranty as to (a) the amount, value, quality, or
      deliverability of petroleum, natural gas, or other reserves attributable to
      the
      Assets or any portion thereof, or (b) any geological, engineering, or other
      interpretations or economic evaluations. SELLER MAKES NO, AND DISCLAIMS ANY,
      REPRESENTATION OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON
      LAW, STATUTE, OR OTHERWISE, AS TO (I) MERCHANTABILITY, (II) FITNESS FOR ANY
      PARTICULAR PURPOSE, (III) CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, AND/OR
      (IV) CONDITION OF THE LEASES OR ASSETS THAT ARE THE SUBJECT OF THIS AGREEMENT.
      The Parties agree that the preceding disclaimers of warranty are "conspicuous"
      disclaimers for purposes of any applicable law, rule, or order.

    

             15.14
      Severability. Any term or provision of this Agreement that is invalid
      or unenforceable in any situation and in any jurisdiction shall not affect
      the
      validity or enforceability of the remaining terms and provisions hereof or
      the
      validity or enforceability of the offending term or provision in any other
      situation or in any other jurisdiction.

    

             15.15
      No Third Party Beneficiaries. Except as provided for in Article 7
      hereof with respect to the rights of an Indemnified Party, this Agreement shall
      not confer any rights or remedies upon any person other than the Parties and
      their respective successors and permitted assigns, and other persons given
      rights of indemnification hereunder.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

     

             15.16
      Construction. The Parties have participated jointly in the negotiating
      and drafting of this Agreement. In the event ambiguity or question of intent
      or
      interpretation arises, this Agreement shall be construed as if drafted jointly
      by the Parties and no presumption or burden of proof shall arise favoring or
      disfavoring either Party by virtue of the authorship of any of the provisions
      of
      this Agreement. Any reference to any federal, state, local or foreign statute
      or
      law should be deemed also to refer to all rules and regulations promulgated
      thereunder, unless the contexts requires otherwise. The word "including" shall
      mean including, without limitation. If the date specified in this Agreement
      for
      giving any notice or taking any action is not a business day (or if the period
      during which any notices required to be given or any action taken expires on
      a
      date which is not a business day) then the date for giving such notice or taking
      such action (and the expiration date for such period during which notice is
      required to be given or action taken) shall be the next day which is a business
      day.

    

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

    

    BUYER:

    

    JAYHAWK
      ENERGY, INC.

    

    
      	
              By:

               

            	
               

              /s/ Lindsay Gorrill

            	 
	 	
              Lindsay Gorrill

               

            	 
	
               Its:

               

            	
              President

               

            	 

    

    
    

     

    
 

    SELLER:

    

    ARMSTRONG
      INVESTMENTS INCORPORATED

     

    
      
        	
                By:

                 

              	
                 

                /s/ Graham Crabtree

              	 
	 	
                Graham Crabtree

                 

              	 
	
                 Its:

                 

              	
                President

                 

              	 

      

    

    
      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

    

    

                  LIST
      OF EXHIBITS

    

    Exhibit
      A Leases

    Exhibit
      A-1 Well Bores

    Exhibit
      BConveyance Document for Leases

    Exhibit
      B-1Conveyance Document for Well
      Bores

     

     

    
 

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    
Exhibit A

     

    

      
        	
                Prospect

              	
                Lease
                  Date

              	
                T

              	
                R

              	
                Sec

              	
                Description

              	
                Gross
                  Acres

              	
                Net
                  Acres

              
	
                Uniontown

              	
                10/5/2004

              	
                23S

              	
                22E

              	
                24

              	
                NW

              	
                160

              	
                160

              
	
                Uniontown

              	
                10/5/2004

              	
                23S

              	
                22E

              	
                34

              	
                NW
                  NE

              	
                40

              	
                40

              
	
                Uniontown

              	
                12/29/2004

              	
                23S

              	
                22E

              	
                36

              	
                W/2
                  SW E of River

              	
                70

              	
                70

              
	
                Uniontown

              	
                3/29/2005

              	
                24S

              	
                21E

              	
                14

              	
                E/2
                  SE

              	
                80

              	
                80

              
	
                Uniontown

              	
                10/27/2004

              	
                24S

              	
                21E

              	
                24

              	
                NE;
                  E/2 SE

              	
                240

              	
                240

              
	
                Uniontown

              	
                10/27/2004

              	
                24S

              	
                21E

              	
                25

              	
                E/2
                  NE

              	
                80

              	
                80

              
	
                Uniontown

              	
                1/6/2005

              	
                24S

              	
                21E

              	
                25

              	
                SE

              	
                160

              	
                160

              
	
                Uniontown

              	
                12/14/2004

              	
                24S

              	
                21E

              	
                35

              	
                E/2
                  SW; W/2 SW

              	
                160

              	
                160

              
	
                Uniontown

              	
                12/29/2004

              	
                24S

              	
                22E

              	
                01

              	
                SE
                  SW; W/2 W/2 SE

              	
                80

              	
                80

              
	
                Uniontown

              	
                7/7/2005

              	
                24S

              	
                22E

              	
                2

              	
                Part
                  E/2 N/2 SE S of River; W/2 N/2 SE

              	
                75

              	
                75

              
	
                Uniontown

              	
                1/20/2005

              	
                24S

              	
                22E

              	
                03

              	
                Part
                  of NW

              	
                91.5

              	
                91.5

              
	
                Uniontown

              	
                12/29/2004

              	
                24S

              	
                22E

              	
                08

              	
                S/2
                  SW LESS the North 58.74 ft of SW SW

              	
                78

              	
                78

              
	
                Uniontown

              	
                11/18/2004

              	
                24S

              	
                22E

              	
                10

              	
                S/2
                  SE

              	
                80

              	
                80

              
	
                Uniontown

              	
                11/18/2004

              	
                24S

              	
                22E

              	
                12

              	
                S/2
                  SW

              	
                80

              	
                80

              
	
                Uniontown

              	
                12/29/2004

              	
                24S

              	
                22E

              	
                12

              	
                E/2
                  NW; NW NW

              	
                120

              	
                120

              
	
                Uniontown

              	
                11/18/2004

              	
                24S

              	
                22E

              	
                13

              	
                W/2
                  less the SE NE SW

              	
                310

              	
                310

              
	
                Uniontown

              	
                3/5/2005

              	
                24S

              	
                22E

              	
                13

              	
                S/2
                  NE; N/2 SE; SE NE SW

              	
                170

              	
                170

              
	
                Uniontown

              	
                11/18/2004

              	
                24S

              	
                22E

              	
                14

              	
                All
                  less S/2 SW

              	
                560

              	
                560

              
	
                Uniontown

              	
                11/16/2004

              	
                24S

              	
                22E

              	
                14

              	
                S/2
                  SW

              	
                80

              	
                80

              
	
                Uniontown

              	
                10/5/2004

              	
                24S

              	
                22E

              	
                15

              	
                SE;
                  S/2 NE

              	
                240

              	
                240

              
	
                Uniontown

              	
                11/18/2004

              	
                24S

              	
                22E

              	
                15

              	
                N/2
                  NE

              	
                80

              	
                80

              
	
                Uniontown

              	
                1/12/2005

              	
                24S

              	
                22E

              	
                16

              	
                NW;
                  SW

              	
                320

              	
                320

              
	
                Uniontown

              	
                12/8/2004

              	
                24S

              	
                22E

              	
                21

              	
                S
                  150 acrs of SW; SE

              	
                299

              	
                299

              
	
                Uniontown

              	
                12/29/2004

              	
                24S

              	
                22E

              	
                21

              	
                N/2
                  NE

              	
                80

              	
                80

              
	
                Uniontown

              	
                1/12/2005

              	
                24S

              	
                22E

              	
                21

              	
                N/2
                  NW

              	
                80

              	
                80

              
	
                Uniontown

              	
                10/5/2004

              	
                24S

              	
                22E

              	
                22

              	
                NE

              	
                160

              	
                160

              
	
                Uniontown

              	
                10/20/2004

              	
                24S

              	
                22E

              	
                22

              	
                SE;
                  E/2 SW

              	
                240

              	
                240

              
	
                Uniontown

              	
                10/15/2004

              	
                24S

              	
                22E

              	
                22

              	
                NW

              	
                160

              	
                160

              
	
                Uniontown

              	
                10/13/2004

              	
                24S

              	
                22E

              	
                23

              	
                S/2
                  SE

              	
                80

              	
                80

              
	
                Uniontown

              	
                11/18/2004

              	
                24S

              	
                22E

              	
                23

              	
                NE

              	
                160

              	
                160

              
	
                Uniontown

              	
                11/16/2004

              	
                24S

              	
                22E

              	
                23

              	
                NW

              	
                160

              	
                160

              
	
                Uniontown

              	
                11/13/2004

              	
                24S

              	
                22E

              	
                23

              	
                N/2
                  SE

              	
                80

              	
                80

              
	
                Uniontown

              	
                3/5/2005

              	
                24S

              	
                22E

              	
                23

              	
                SW
                  less tract

              	
                159.31

              	
                159.31

              
	
                Uniontown

              	
                10/5/2004

              	
                24S

              	
                22E

              	
                24

              	
                SE
                  SW LESS Part TRACT; S 60' of W 1290' NE SW

              	
                41

              	
                41

              
	
                Uniontown

              	
                10/13/2004

              	
                24S

              	
                22E

              	
                24

              	
                W/2
                  SW

              	
                80

              	
                80

              
	
                Uniontown

              	
                10/13/2004

              	
                24S

              	
                22E

              	
                24

              	
                E/2
                  SE NE

              	
                20

              	
                20

              
	
                Uniontown

              	
                11/13/2004

              	
                24S

              	
                22E

              	
                24

              	
                N/2
                  NW; SW NW

              	
                120

              	
                120

              
	
                Uniontown

              	
                3/5/2005

              	
                24S

              	
                22E

              	
                24

              	
                SE

              	
                160

              	
                160

              
	
                Uniontown

              	
                3/5/2005

              	
                24S

              	
                22E

              	
                24

              	
                N/2
                  NE; W 3/4 S/2 NE

              	
                140

              	
                140

              
	
                Uniontown

              	
                10/5/2004

              	
                24S

              	
                22E

              	
                25

              	
                NE
                  NW LESS E 30' off E Boundary line

              	
                40

              	
                40

              
	
                Uniontown

              	
                10/13/2004

              	
                24S

              	
                22E

              	
                25

              	
                SW
                  NW; NE SW; NW SE; NW NW; Part NW less exc

              	
                238.8

              	
                238.8

              
	
                Uniontown

              	
                3/5/2005

              	
                24S

              	
                22E

              	
                25

              	
                SW
                  SW; N/2 NE

              	
                120

              	
                120

              
	
                Uniontown

              	
                10/13/2004

              	
                24S

              	
                22E

              	
                26

              	
                NE
                  SE; E/2 NE

              	
                116.5

              	
                116.5

              
	
                Uniontown

              	
                3/5/2005

              	
                24S

              	
                22E

              	
                26

              	
                SE
                  SE;  W/2; W/2 SE

              	
                440

              	
                440

              

      

      
        
           

        

        
          Exhibit
            A
            Page 1

          
            

          

        

        
           

        

      

       

      
 

      
        	
                Uniontown

              	
                10/20/2004

              	
                24S

              	
                22E

              	
                27

              	
                All
                  excePart the W 2 rods of the SW NW

              	
                640

              	
                640

              
	
                Uniontown

              	
                12/14/2004

              	
                24S

              	
                22E

              	
                28

              	
                SW
                  NE; SE NW; W/2 SW

              	
                160

              	
                160

              
	
                Uniontown

              	
                5/30/2005

              	
                24S

              	
                22E

              	
                29

              	
                N/2
                  SW

              	
                80

              	
                80

              
	
                Uniontown

              	
                10/27/2004

              	
                24S

              	
                22E

              	
                30

              	
                W/2;
                  Part E/2

              	
                374.7

              	
                374.7

              
	
                Uniontown

              	
                11/16/2004

              	
                24S

              	
                22E

              	
                30

              	
                E/2
                  less Part

              	
                232.6

              	
                232.6

              
	
                Uniontown

              	
                10/27/2004

              	
                24S

              	
                22E

              	
                31

              	
                N/2
                  N/2

              	
                160

              	
                80

              
	
                Uniontown

              	
                2/16/2005

              	
                24S

              	
                22E

              	
                31

              	
                W/4
                  SE; SW

              	
                200

              	
                200

              
	
                Uniontown

              	
                11/4/2004

              	
                24S

              	
                22E

              	
                33

              	
                S/2
                  NE; SE; E/2 SW

              	
                320

              	
                320

              
	
                Uniontown

              	
                11/4/2004

              	
                24S

              	
                22E

              	
                34

              	
                W/2;
                  NE

              	
                480

              	
                480

              
	
                Uniontown

              	
                11/4/2004

              	
                24S

              	
                22E

              	
                34

              	
                SE

              	
                160

              	
                160

              
	
                Uniontown

              	
                11/4/2004

              	
                24S

              	
                22E

              	
                35

              	
                SW
                  SW; 2 acres in the SE corner NW SW

              	
                42

              	
                42

              
	
                Uniontown

              	
                3/5/2005

              	
                24S

              	
                22E

              	
                35

              	
                N/2
                  NE; N/2 NW less 2 acs in NE corner; SW NW

              	
                198

              	
                198

              
	
                Uniontown

              	
                3/5/2005

              	
                24S

              	
                22E

              	
                35

              	
                SE
                  SW; SW SE; E/2 SE; SE NE

              	
                200

              	
                200

              
	
                Uniontown

              	
                6/29/2001

              	
                24S

              	
                22E

              	
                36

              	
                SE
                  SE

              	
                40

              	
                40

              
	
                Uniontown

              	
                3/5/2005

              	
                24S

              	
                22E

              	
                36

              	
                NW
                  NW; S/2 NW; SW; SW SE

              	
                320

              	
                320

              
	
                Uniontown

              	
                1/14/2005

              	
                25S

              	
                22E

              	
                01

              	
                S1/2  SW
                  less 1 acre

              	
                79

              	
                79

              
	
                Uniontown

              	
                3/5/2005

              	
                25S

              	
                22E

              	
                01

              	
                NE
                  SW; strip E side SE SW

              	
                40.75

              	
                40.75

              
	
                Uniontown

              	
                3/5/2005

              	
                25S

              	
                22E

              	
                01

              	
                SE;
                  NW; NW SW; NE Less S/4 E/2 NE

              	
                500

              	
                500

              
	
                Uniontown

              	
                3/24/2004

              	
                25S

              	
                22E

              	
                02

              	
                35
                  A IN SW NW, S/2 NW NW

              	
                55

              	
                27.5

              
	
                Uniontown

              	
                3/24/2004

              	
                25S

              	
                22E

              	
                02

              	
                35
                  A IN SW NW, S/2 NW NW

              	
                55

              	
                27.5

              
	
                Uniontown

              	
                1/14/2005

              	
                25S

              	
                22E

              	
                02

              	
                SE
                  SE

              	
                40

              	
                40

              
	
                Uniontown

              	
                3/5/2005

              	
                25S

              	
                22E

              	
                02

              	
                E/2
                  SW; W/2 SE; S 40 acs W/2 NE; N/2 NW NW; SE NW;  N 40 acres W/2
                  NE; E/2 NE; NE SE

              	
                417.1

              	
                417.1

              
	
                Uniontown

              	
                3/24/2004

              	
                25S

              	
                22E

              	
                03

              	
                N/2
                  NE, 35 A IN SE NE

              	
                115

              	
                57.5

              
	
                Uniontown

              	
                3/24/2004

              	
                25S

              	
                22E

              	
                03

              	
                N/2
                  NE, 35 A IN SE NE

              	
                115

              	
                57.5

              
	
                Uniontown

              	
                1/11/2005

              	
                25S

              	
                22E

              	
                03

              	
                W
                  21 acs SW SW

              	
                21

              	
                21

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                03

              	
                NW
                  SW; E/2 SW SW Less a strip 2 rods wide alg the West-side
                  thereof

              	
                60

              	
                60

              
	
                Uniontown

              	
                3/24/2004

              	
                25S

              	
                22E

              	
                04

              	
                N/2
                  NW, S/2 NW, N/2 SW

              	
                240

              	
                120

              
	
                Uniontown

              	
                3/24/2004

              	
                25S

              	
                22E

              	
                04

              	
                N/2
                  NW, S/2 NW, N/2 SW

              	
                240

              	
                120

              
	
                Uniontown

              	
                1/11/2005

              	
                25S

              	
                22E

              	
                04

              	
                W/2
                  SE

              	
                80

              	
                80

              
	
                Uniontown

              	
                1/11/2005

              	
                25S

              	
                22E

              	
                04

              	
                SE
                  SE

              	
                40

              	
                40

              
	
                Uniontown

              	
                1/11/2005

              	
                25S

              	
                22E

              	
                04

              	
                S/2
                  SW

              	
                80

              	
                80

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                04

              	
                NE
                  SE

              	
                40

              	
                40

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                04

              	
                W/2
                  NE; SE NE

              	
                120

              	
                120

              
	
                Uniontown

              	
                11/3/2004

              	
                25S

              	
                22E

              	
                05

              	
                NE;
                  W/2 SE Less Part

              	
                226.41

              	
                226.41

              
	
                Uniontown

              	
                11/3/2004

              	
                25S

              	
                22E

              	
                05

              	
                W/2

              	
                317.32

              	
                317.32

              
	
                Uniontown

              	
                1/11/2005

              	
                25S

              	
                22E

              	
                05

              	
                E/2
                  SE

              	
                78

              	
                78

              
	
                Uniontown

              	
                12/6/2004

              	
                25S

              	
                22E

              	
                06

              	
                E/2
                  NW

              	
                80

              	
                80

              
	
                Uniontown

              	
                1/6/2005

              	
                25S

              	
                22E

              	
                06

              	
                NE

              	
                160

              	
                160

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                06

              	
                SE

              	
                160

              	
                160

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                07

              	
                Part
                  W/2 NW lying S. of Hwy; W/2 SW frac.

              	
                152.1

              	
                152.1

              

      

      
        
           

        

        
          Exhibit
            A
            Page 2

          
            

          

        

        
           

        

      

       

      
 

      
        	
                Uniontown

              	
                10/5/2004

              	
                25S

              	
                22E

              	
                08

              	
                W/2
                  LESS HWY ROW

              	
                309

              	
                309

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                08

              	
                E/2

              	
                320

              	
                320

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                09

              	
                NE/2;
                  W/2

              	
                480

              	
                480

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                09

              	
                SE

              	
                160

              	
                160

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                10

              	
                NW;
                  S/2 NE; N/2 S/2

              	
                400

              	
                400

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                10

              	
                S/2
                  S/2

              	
                160

              	
                160

              
	
                Uniontown

              	
                1/14/2005

              	
                25S

              	
                22E

              	
                11

              	
                N
                  8
                  acs NE NE Part

              	
                8

              	
                8

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                11

              	
                E/2
                  NW; W/2 NE; NW NW

              	
                200

              	
                180

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                11

              	
                South
                  72.0 acres of E/2 NE

              	
                72

              	
                72

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                11

              	
                NW
                  NW

              	
                40

              	
                20

              
	
                Uniontown

              	
                10/5/2004

              	
                25S

              	
                22E

              	
                12

              	
                S/2
                  NW; Part N/2 NW; Part N/2 NE;  Part TRACT SW NE

              	
                167.41

              	
                167.41

              
	
                Uniontown

              	
                1/14/2005

              	
                25S

              	
                22E

              	
                12

              	
                N
                  16 acs NW

              	
                16

              	
                16

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                12

              	
                SW

              	
                160

              	
                160

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                12

              	
                SE

              	
                160

              	
                160

              
	
                Uniontown

              	
                3/5/2005

              	
                25S

              	
                22E

              	
                12

              	
                E
                  55 ac N/2 NE

              	
                55

              	
                55

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                15

              	
                N/2
                  NW; N/2 NE; S/2 NW; S/2 NE Less Tract

              	
                300

              	
                300

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                15

              	
                W/2
                  SW

              	
                80

              	
                80

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                16

              	
                N/2
                  SW; NW

              	
                240

              	
                240

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                16

              	
                N/2
                  NE

              	
                80

              	
                80

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                16

              	
                SE;
                  S/2 NE

              	
                240

              	
                240

              
	
                Uniontown

              	
                8/15/2001

              	
                25S

              	
                22E

              	
                16

              	
                S/2
                  SW

              	
                80

              	
                80

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                17

              	
                N/2

              	
                320

              	
                320

              
	
                Uniontown

              	
                12/14/2004

              	
                25S

              	
                21E

              	
                11

              	
                Part
                  NW/4

              	
                83.73

              	
                83.73

              
	
                Uniontown

              	
                10/5/2004

              	
                25S

              	
                22E

              	
                13

              	
                E/2
                  NW LESS Part TRACT

              	
                77.00

              	
                77.00

              
	
                Uniontown

              	
                3/30/2005

              	
                25S

              	
                22E

              	
                13

              	
                W/2
                  NW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                3/30/2005

              	
                25S

              	
                22E

              	
                13

              	
                W/2
                  SE

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                3/30/2005

              	
                25S

              	
                22E

              	
                13

              	
                SW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                10/5/2004

              	
                25S

              	
                22E

              	
                14

              	
                NE
                  NE

              	
                40.00

              	
                40.00

              
	
                Uniontown

              	
                10/5/2004

              	
                25S

              	
                22E

              	
                14

              	
                S/2
                  SE LESS 10 acres off N side SW SE

              	
                65.00

              	
                65.00

              
	
                Uniontown

              	
                10/5/2004

              	
                25S

              	
                22E

              	
                14

              	
                W/2
                  SW LESS HWY ROW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                14

              	
                NW;
                  NW NE

              	
                200.00

              	
                200.00

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                14

              	
                S/2
                  NE; N/2 SE; E/2 SW; N/2 N/2 SW SE; W 80 rods of S. 2 rods of NW
                  Less a
                  strip of land 2 rods wide lying alg West side of the SW/4
                  NE/4

              	
                250.00

              	
                250.00

              
	
                Uniontown

              	
                10/5/2004

              	
                25S

              	
                22E

              	
                15

              	
                N/2
                  NE SE; W/2 SE; S/2 NE SE; SE SE; E/2 SW LESS HWY ROW

              	
                240.00

              	
                240.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                19

              	
                NW;
                  Part NW SW

              	
                27.70

              	
                27.70

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                19

              	
                All
                  that part of NW & NW SW lying E of R-O-W of Missouri Pacific RR
                  Co.

              	
                175.50

              	
                175.50

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                19

              	
                NE;
                  E/2 SE

              	
                240.00

              	
                240.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                20

              	
                SW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                20

              	
                E/2
                  Less Part

              	
                318.00

              	
                318.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                20

              	
                NW

              	
                158.00

              	
                158.00

              
	
                Uniontown

              	
                3/9/2005

              	
                25S

              	
                22E

              	
                20

              	
                4
                  AC in SE SE

              	
                4.00

              	
                4.00

              

      

      
        
           

        

        
          Exhibit
            A
            Page 3

          
            

          

        

        
           

        

      

      

      
        	
                Uniontown

              	
                6/26/2001

              	
                25S

              	
                22E

              	
                21

              	
                NE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                22E

              	
                22

              	
                Part
                  of the W/2 SE; Part SW NE; Part SE NW

              	
                100.00

              	
                100.00

              
	
                Uniontown

              	
                1/8/2002

              	
                25S

              	
                22E

              	
                22

              	
                N3/4
                  of the E/2 NE

              	
                60.00

              	
                30.00

              
	
                Uniontown

              	
                6/26/2001

              	
                25S

              	
                22E

              	
                22

              	
                W/2
                  NW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                10/5/2004

              	
                25S

              	
                22E

              	
                23

              	
                E/2
                  NW; W/2 NE

              	
                154.00

              	
                154.00

              
	
                Uniontown

              	
                10/5/2004

              	
                25S

              	
                22E

              	
                23

              	
                Part
                  TRACT NE NE

              	
                2.20

              	
                2.20

              
	
                Uniontown

              	
                1/8/2002

              	
                25S

              	
                22E

              	
                23

              	
                W/2
                  NW

              	
                80.00

              	
                40.00

              
	
                Uniontown

              	
                12/16/2004

              	
                25S

              	
                22E

              	
                24

              	
                Part
                  SE SE

              	
                3.50

              	
                3.50

              
	
                Uniontown

              	
                12/16/2004

              	
                25S

              	
                22E

              	
                24

              	
                SE
                  LessPart

              	
                137.85

              	
                137.85

              
	
                Uniontown

              	
                12/9/2004

              	
                25S

              	
                22E

              	
                24

              	
                Part
                  SW

              	
                2.00

              	
                2.00

              
	
                Uniontown

              	
                12/9/2004

              	
                25S

              	
                22E

              	
                24

              	
                S
                  120 acs of W 170 acs of S/2 less Part

              	
                118.00

              	
                118.00

              
	
                Uniontown

              	
                12/16/2004

              	
                25S

              	
                22E

              	
                25

              	
                Part
                  NE

              	
                93.70

              	
                93.70

              
	
                Uniontown

              	
                12/27/2001

              	
                25S

              	
                22E

              	
                25

              	
                E/2
                  SE

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                26

              	
                E/2
                  SW

              	
                80.00

              	
                40.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                26

              	
                W/2
                  E/2 S of Vac RR;  Part NE NW

              	
                187.00

              	
                187.00

              
	
                Uniontown

              	
                9/5/2001

              	
                25S

              	
                22E

              	
                27

              	
                SW
                  SW Less S 3.5 acres of W/4 SW SW AND SW SE SW Less Tract

              	
                41.50

              	
                41.50

              
	
                Uniontown

              	
                2/23/2005

              	
                25S

              	
                22E

              	
                27

              	
                SW
                  SE excePart NE SW SE N of River; NW SE S of River; E/2 SE SW E
                  of HWY 3;
                  N/2 E/4 SW S of River.

              	
                60.00

              	
                30.00

              
	
                Uniontown

              	
                2/23/2005

              	
                25S

              	
                22E

              	
                27

              	
                SW
                  SE S of River; NW SE S of River; E/2 SE SW E of HWY 3

              	
                60.00

              	
                30.00

              
	
                Uniontown

              	
                11/23/2004

              	
                25S

              	
                22E

              	
                28

              	
                SW
                  SW

              	
                40.00

              	
                40.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                28

              	
                W/2
                  NW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                12/11/2004

              	
                25S

              	
                22E

              	
                29

              	
                SE
                  SE

              	
                40.00

              	
                40.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                29

              	
                NE
                  NW; N 3/4 NE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                29

              	
                N/2
                  SE

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                29

              	
                NW
                  NW; S/2 NW; NW SW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                9/5/2001

              	
                25S

              	
                22E

              	
                29

              	
                S/2
                  S/2 NE

              	
                40.00

              	
                40.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                30

              	
                NE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                11/23/2004

              	
                25S

              	
                22E

              	
                31

              	
                W/2;
                  S/2 SE

              	
                401.50

              	
                401.50

              
	
                Uniontown

              	
                11/23/2004

              	
                25S

              	
                22E

              	
                32

              	
                E/2
                  SW

              	
                79.00

              	
                79.00

              
	
                Uniontown

              	
                11/23/2004

              	
                25S

              	
                22E

              	
                32

              	
                N/2
                  NE

              	
                75.00

              	
                75.00

              
	
                Uniontown

              	
                11/23/2004

              	
                25S

              	
                22E

              	
                32

              	
                SE;
                  S/2 NE

              	
                240.00

              	
                240.00

              
	
                Uniontown

              	
                11/23/2004

              	
                25S

              	
                22E

              	
                33

              	
                SW
                  NW; N/2 NW; S/2 less 3.0 acres

              	
                437.00

              	
                437.00

              
	
                Uniontown

              	
                2/4/2005

              	
                25S

              	
                22E

              	
                33

              	
                NW
                  NE; W/2 SW NE; SE NW; E/2 SW NE; Part of E/2 NE S. of Marmaton
                  River.

              	
                185.00

              	
                185.00

              
	
                Uniontown

              	
                10/18/2004

              	
                25S

              	
                22E

              	
                34

              	
                SE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                9/5/2001

              	
                25S

              	
                22E

              	
                34

              	
                NW
                  NW

              	
                40.00

              	
                40.00

              
	
                Uniontown

              	
                2/23/2005

              	
                25S

              	
                22E

              	
                34

              	
                NE;
                  Part E/2 NW lyg E of KS Hwy 3

              	
                173.00

              	
                86.50

              
	
                Uniontown

              	
                2/23/2005

              	
                25S

              	
                22E

              	
                34

              	
                NE;
                  Part E/2 NW lying E of KS Hwy 3

              	
                173.00

              	
                86.50

              

      

      
        
           

        

        
          Exhibit
            A
            Page 4

          
            

          

        

        
           

        

      

      

      
        	
                Uniontown

              	
                10/18/2004

              	
                25S

              	
                22E

              	
                35

              	
                S/2
                  NW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                10/25/2004

              	
                25S

              	
                22E

              	
                35

              	
                SW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                22E

              	
                35

              	
                NE
                  NW

              	
                40.00

              	
                20.00

              
	
                Uniontown

              	
                4/14/2005

              	
                25S

              	
                22E

              	
                35

              	
                SE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                4/14/2005

              	
                25S

              	
                22E

              	
                35

              	
                NE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                12/27/2001

              	
                25S

              	
                22E

              	
                36

              	
                E/2
                  E/2 NE

              	
                40.00

              	
                40.00

              
	
                Uniontown

              	
                5/16/2005

              	
                25S

              	
                22E

              	
                36

              	
                W
                  3/4 NE

              	
                120.00

              	
                120.00

              
	
                Uniontown

              	
                2/9/2005

              	
                25S

              	
                21E

              	
                24

              	
                Part
                  NE; E/2 NW; S/2 Less Part

              	
                559.70

              	
                532.00

              
	
                Uniontown

              	
                6/25/2001

              	
                25S

              	
                21E

              	
                24

              	
                All
                  that part of NE lying E of R-O-W of Missouri Pacific RR Co., EXC
                  a tract
                  described in Deed Book 118, Pg 636

              	
                14.00

              	
                14.00

              
	
                Uniontown

              	
                11/3/2004

              	
                25S

              	
                21E

              	
                26

              	
                E/2
                  SE

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                10/5/2004

              	
                25S

              	
                21E

              	
                35

              	
                W/2
                  NE

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                2/11/2005

              	
                26S

              	
                21E

              	
                02

              	
                N/2
                  SW; NW SE

              	
                120.00

              	
                120.00

              
	
                Uniontown

              	
                1/3/2005

              	
                26S

              	
                21E

              	
                11

              	
                NE
                  less exception

              	
                154.00

              	
                154.00

              
	
                Uniontown

              	
                1/25/2005

              	
                26S

              	
                21E

              	
                11

              	
                SE;
                  Part SW

              	
                228.00

              	
                228.00

              
	
                Uniontown

              	
                8/19/2005

              	
                26S

              	
                21E

              	
                25

              	
                S/2
                  NW, excePart the North 1 acre

              	
                78.00

              	
                39.00

              
	
                Uniontown

              	
                3/29/2005

              	
                26S

              	
                21E

              	
                25

              	
                W/2
                  SW; S/2 NW excePart N 1 acre

              	
                159.00

              	
                20.00

              
	
                Uniontown

              	
                3/31/2005

              	
                26S

              	
                21E

              	
                25

              	
                W/2
                  SW; S/2 NW excePart N 1 acre

              	
                159.00

              	
                39.75

              
	
                Uniontown

              	
                4/7/2005

              	
                26S

              	
                21E

              	
                25

              	
                W/2
                  SW

              	
                80.00

              	
                20.00

              
	
                Uniontown

              	
                4/5/2005

              	
                26S

              	
                21E

              	
                25

              	
                W/2
                  SW; S/2 NW EXCEPart N 1 acre.

              	
                159.00

              	
                39.75

              
	
                Uniontown

              	
                8/16/2005

              	
                26S

              	
                21E

              	
                26

              	
                Lot
                  1 exc W 1026.96 feet; All of Lots 6 & 7

              	
                95.00

              	
                95.00

              
	
                Uniontown

              	
                4/27/2005

              	
                26S

              	
                21E

              	
                36

              	
                NW;
                  SW; SE

              	
                480.00

              	
                480.00

              
	
                Uniontown

              	
                2/2/2005

              	
                26S

              	
                22E

              	
                01

              	
                N/2
                  SW; SE; SE SW

              	
                280.00

              	
                280.00

              
	
                Uniontown

              	
                2/15/2005

              	
                26S

              	
                22E

              	
                01

              	
                S/2
                  NW; SW SW

              	
                120.00

              	
                120.00

              
	
                Uniontown

              	
                4/6/2005

              	
                26S

              	
                22E

              	
                01

              	
                NE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                10/18/2004

              	
                26S

              	
                22E

              	
                02

              	
                N/2
                  NW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                10/25/2004

              	
                26S

              	
                22E

              	
                02

              	
                NE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                1/4/2005

              	
                26S

              	
                22E

              	
                02

              	
                SE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                11/23/2004

              	
                26S

              	
                22E

              	
                03

              	
                NW,
                  less 2.2 acres.

              	
                157.80

              	
                157.80

              
	
                Uniontown

              	
                2/1/2005

              	
                26S

              	
                22E

              	
                03

              	
                N/2
                  NE less ROW

              	
                78.70

              	
                78.70

              
	
                Uniontown

              	
                6/25/2001

              	
                26S

              	
                22E

              	
                03

              	
                SW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                10/25/2004

              	
                26S

              	
                22E

              	
                04

              	
                W/2
                  NW ; NW SW ; 15 acres in NE NW; 17.75 acres in NW NW

              	
                152.75

              	
                152.75

              
	
                Uniontown

              	
                11/23/2004

              	
                26S

              	
                22E

              	
                04

              	
                NE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                6/25/2001

              	
                26S

              	
                22E

              	
                04

              	
                SE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                9/5/2001

              	
                26S

              	
                22E

              	
                04

              	
                NE
                  SW; E/2 NW Less two tracts

              	
                87.00

              	
                87.00

              
	
                Uniontown

              	
                3/14/2005

              	
                26S

              	
                22E

              	
                04

              	
                S/2
                  SW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                11/23/2004

              	
                26S

              	
                22E

              	
                05

              	
                E/2
                  SW; E 17 ac of the SW SW

              	
                97.00

              	
                97.00

              
	
                Uniontown

              	
                2/9/2005

              	
                26S

              	
                22E

              	
                05

              	
                E/2
                  NE

              	
                80.00

              	
                80.00

              

      

      
        
           

        

        
          Exhibit
            A
            Page 5

          
            

          

        

        
           

        

      

      

      
        	
                Uniontown

              	
                2/9/2005

              	
                26S

              	
                22E

              	
                06

              	
                W/2
                  SW S of RD; W/2 SE SW

              	
                69.00

              	
                69.00

              
	
                Uniontown

              	
                6/25/2001

              	
                26S

              	
                22E

              	
                07

              	
                SE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                6/27/2001

              	
                26S

              	
                22E

              	
                07

              	
                S/2
                  NE; Comm @ SE cor NE NE, th W 47 rods;N 116 rods; W 2 rods; N 26
                  rods;
                  East to center of Marmaton River; th down river w/the thread thereof
                  to
                  where it intersects the E line of SE SE of Sec. 6; th S to
                  POB

              	
                114.00

              	
                114.00

              
	
                Uniontown

              	
                11/23/2004

              	
                26S

              	
                22E

              	
                08

              	
                NW
                  less tract; NW NE

              	
                184.00

              	
                184.00

              
	
                Uniontown

              	
                6/25/2001

              	
                26S

              	
                22E

              	
                08

              	
                E/2
                  SE

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                6/25/2001

              	
                26S

              	
                22E

              	
                08

              	
                W/2
                  SW; SE SW; SW SE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                6/27/2001

              	
                26S

              	
                22E

              	
                08

              	
                Part
                  of SE NW beg SE cor of NW; N 80 rods; W 24 rods; SW'ly 80 rods,
                  M/L to a
                  point on S line of NW, 40 rods from POB th. E to POB; SW NE; NE
                  SW; NW
                  SE

              	
                116.00

              	
                116.00

              
	
                Uniontown

              	
                1/12/2005

              	
                26S

              	
                22E

              	
                09

              	
                SE
                  SW

              	
                40.00

              	
                40.00

              
	
                Uniontown

              	
                6/25/2001

              	
                26S

              	
                22E

              	
                09

              	
                W/2
                  SW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                3/14/2005

              	
                26S

              	
                22E

              	
                09

              	
                E/2
                  NW; SW NW; NE SW; Part. Of SE; NW NW

              	
                347.80

              	
                347.80

              
	
                Uniontown

              	
                5/23/2005

              	
                26S

              	
                22E

              	
                9

              	
                NE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                8/25/2001

              	
                26S

              	
                22E

              	
                10

              	
                E/2
                  NW; W/2 NE; SW; W/2 SE

              	
                400.00

              	
                400.00

              
	
                Uniontown

              	
                10/31/2001

              	
                26S

              	
                22E

              	
                10

              	
                E/2NE

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                3/30/2005

              	
                26S

              	
                22E

              	
                11

              	
                W/2
                  SW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                4/12/2005

              	
                26S

              	
                22E

              	
                11

              	
                NW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                4/14/2005

              	
                26S

              	
                22E

              	
                11

              	
                N/2
                  NE

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                10/23/2001

              	
                26S

              	
                22E

              	
                11

              	
                N/2NE;
                  SE/4

              	
                240.00

              	
                240.00

              
	
                Uniontown

              	
                1/4/2005

              	
                26S

              	
                22E

              	
                12

              	
                SW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                2/2/2005

              	
                26S

              	
                22E

              	
                12

              	
                SE
                  NE; SW NE; SE NW

              	
                120.00

              	
                120.00

              
	
                Uniontown

              	
                2/15/2005

              	
                26S

              	
                22E

              	
                12

              	
                NE
                  NE

              	
                40.00

              	
                40.00

              
	
                Uniontown

              	
                6/28/2001

              	
                26S

              	
                22E

              	
                12

              	
                SE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                1/4/2005

              	
                26S

              	
                22E

              	
                13

              	
                NW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                2/16/2005

              	
                26S

              	
                22E

              	
                13

              	
                W
                  97 ac. SE

              	
                97.00

              	
                97.00

              
	
                Uniontown

              	
                10/31/2001

              	
                26S

              	
                22E

              	
                13

              	
                SW/4;
                  S/2NE

              	
                240.00

              	
                240.00

              
	
                Uniontown

              	
                10/8/2001

              	
                26S

              	
                22E

              	
                14

              	
                NW/4
                  less commencing at pt on W line NW/4

              	
                148.53

              	
                148.53

              
	
                Uniontown

              	
                10/26/2001

              	
                26S

              	
                22E

              	
                14

              	
                N/2

              	
                320.00

              	
                320.00

              
	
                Uniontown

              	
                10/31/2001

              	
                26S

              	
                22E

              	
                14

              	
                SW/4
                  Less tract beg 303' N of SW/c E 174' N 174' W 174' S174' to
                  POB.

              	
                159.30

              	
                159.30

              
	
                Uniontown

              	
                10/23/2001

              	
                26S

              	
                22E

              	
                14

              	
                SE/4

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                8/25/2001

              	
                26S

              	
                22E

              	
                15

              	
                S/2
                  Less Exc

              	
                318.00

              	
                318.00

              
	
                Uniontown

              	
                10/8/2001

              	
                26S

              	
                22E

              	
                15

              	
                N/2

              	
                320.00

              	
                320.00

              
	
                Uniontown

              	
                1/12/2005

              	
                26S

              	
                22E

              	
                16

              	
                NE
                  NW

              	
                40.00

              	
                40.00

              
	
                Uniontown

              	
                8/25/2001

              	
                26S

              	
                22E

              	
                16

              	
                SE
                  NW; S/2 NE; W/2 SE; NE SE

              	
                240.00

              	
                240.00

              
	
                Uniontown

              	
                6/29/2001

              	
                26S

              	
                22E

              	
                16

              	
                W/2
                  NW; SE SE W/exception

              	
                116.70

              	
                116.70

              

      

      
        
           

        

        
          Exhibit
            A
            Page 6

          
            

          

        

        
           

        

      

      

      
        	
                Uniontown

              	
                3/23/2005

              	
                26S

              	
                22E

              	
                16

              	
                N/2
                  NE

              	
                78.00

              	
                78.00

              
	
                Uniontown

              	
                3/23/2005

              	
                26S

              	
                22E

              	
                16

              	
                SW

              	
                157.00

              	
                157.00

              
	
                Uniontown

              	
                6/29/2001

              	
                26S

              	
                22E

              	
                17

              	
                NE
                  SE

              	
                40.00

              	
                40.00

              
	
                Uniontown

              	
                10/8/2001

              	
                26S

              	
                22E

              	
                17

              	
                N/2

              	
                320.00

              	
                320.00

              
	
                Uniontown

              	
                6/25/2001

              	
                26S

              	
                22E

              	
                18

              	
                NE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                4/30/2001

              	
                26S

              	
                22E

              	
                19

              	
                SE

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                1/5/2005

              	
                26S

              	
                22E

              	
                20

              	
                SE
                  SE exc NE 1acre; SW SE; SE SW exc

              	
                117.20

              	
                39.07

              
	
                Uniontown

              	
                1/5/2005

              	
                26S

              	
                22E

              	
                20

              	
                SE
                  SE exc NE 1acre; SW SE; SE SW exc

              	
                117.00

              	
                39.07

              
	
                Uniontown

              	
                6/29/2001

              	
                26S

              	
                22E

              	
                20

              	
                N/2
                  S/2

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                1/5/2005

              	
                26S

              	
                22E

              	
                20

              	
                SE
                  SE exc NE 1acre; SW SE; SE SW exc

              	
                117.00

              	
                39.07

              
	
                Uniontown

              	
                3/23/2005

              	
                26S

              	
                22E

              	
                20

              	
                NE
                  NE

              	
                39.00

              	
                39.00

              
	
                Uniontown

              	
                4/30/2001

              	
                26S

              	
                22E

              	
                20

              	
                NW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                4/8/2001

              	
                26S

              	
                22E

              	
                20

              	
                SW
                  SW

              	
                40.00

              	
                40.00

              
	
                Uniontown

              	
                1/19/2005

              	
                26S

              	
                22E

              	
                21

              	
                NW

              	
                159.00

              	
                159.00

              
	
                Uniontown

              	
                1/5/2005

              	
                26S

              	
                22E

              	
                21

              	
                NW
                  SW

              	
                40.00

              	
                13.33

              
	
                Uniontown

              	
                1/5/2005

              	
                26S

              	
                22E

              	
                21

              	
                NW
                  SW

              	
                40.00

              	
                13.33

              
	
                Uniontown

              	
                6/29/2001

              	
                26S

              	
                22E

              	
                21

              	
                E/2

              	
                320.00

              	
                320.00

              
	
                Uniontown

              	
                1/5/2005

              	
                26S

              	
                22E

              	
                21

              	
                NW
                  SW

              	
                40.00

              	
                13.33

              
	
                Uniontown

              	
                4/8/2001

              	
                26S

              	
                22E

              	
                21

              	
                S/2SW;
                  NE SW; SW SW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                8/15/2001

              	
                26S

              	
                22E

              	
                22

              	
                NE
                  Exc a 6 acre parcel

              	
                154.00

              	
                154.00

              
	
                Uniontown

              	
                6/29/2001

              	
                26S

              	
                22E

              	
                22

              	
                NW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                4/30/2001

              	
                26S

              	
                22E

              	
                22

              	
                SE;
                  E/2 SW

              	
                240.00

              	
                240.00

              
	
                Uniontown

              	
                10/31/2001

              	
                26S

              	
                22E

              	
                22

              	
                W/2SW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                10/18/2004

              	
                26S

              	
                22E

              	
                23

              	
                W/2
                  NW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                1/4/2005

              	
                26S

              	
                22E

              	
                23

              	
                N/2
                  SE exc strip off E. side

              	
                64.90

              	
                64.90

              
	
                Uniontown

              	
                2/4/2005

              	
                26S

              	
                22E

              	
                23

              	
                W/2
                  NE; E/2 NW

              	
                160.00

              	
                160.00

              
	
                Uniontown

              	
                6/25/2001

              	
                26S

              	
                22E

              	
                23

              	
                S/2
                  SW

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                10/23/2001

              	
                26S

              	
                22E

              	
                23

              	
                E/2NE

              	
                80.00

              	
                80.00

              
	
                Uniontown

              	
                2/2/2005

              	
                26S

              	
                22E

              	
                25

              	
                NE
                  Frl; Lot 3 being NE frl of NW; SE NW

              	
                225.00

              	
                225.00

              
	
                Uniontown

              	
                8/13/2005

              	
                27S

              	
                21E

              	
                24

              	
                W/2
                  NW

              	
                80.00

              	
                80.00

              
	
                 

              	
                 

              	
                 

              	
                 

              	
                 

              	
                 

              	
                38915.06

              	
                37203.86

              

      

      

    
      
         

      

      
        Exhibit
          A
          Page 7

        
          

        

      

      
         

      

    

    
 

    Exhibit A-1

    
 

    
      	
              Well
                Name

            	
              API
                #

            	
              Town

            	
              Range

            	
              Section

            	
              Desc

            	
              Longitude

            	
              Latitude

            	
              Total
                Depth

            
	
              Green
                Valley #4-26

            	
              15-011-23087

            	
              24S

            	
              22E

            	
              26

            	
              NWSENWNW

            	
              -94.96716

            	
              37.93326

            	
              1189
                feet

            
	
              Green
                Valley #14-2

            	
              15-011-23088

            	
              25S

            	
              22E

            	
              2

            	
              SESESW

            	
              -94.96165

            	
              37.89318

            	
              1030
                feet

            
	
              Troike
                #14-15

            	
              15-011-23098

            	
              26S

            	
              22E

            	
              15

            	
              SESW

            	
              -94.98989

            	
              37.77756

            	
              1104
                feet

            

    

    

    

     

    
      
        
        

      

      
        Exhibit
          A-1 Page 1

        
          

        

      

      
        
        

      

    

     

    

    Exhibit
B

    

    

    ASSIGNMENT

    

    BE
      IT KNOWN BY THESE PRESENTS, That,
Armstrong Investments Incorporated, an Anguilla corporation,
      (hereinafter collectively called “Assignor”), for and in consideration of One
      Dollar ($1.00) and other good and valuable considerations to Assignor in hand
      paid, the receipt of which is hereby acknowledged, hereby does sell, transfer,
      set over, and convey unto Jayhawk Energy, Inc., a Colorado
      corporation, hereinafter referred to as “ASSIGNEE”, an undivided one hundred
      percent of 8/8ths (100% x 8/8ths) leasehold working interest in and to the
      Oil
      and Gas Leases set out in Exhibit “A” insofar as the leases cover the lands
      described on said exhibit attached hereto and made a part hereof, except
      Assignor does hereby reserve and except unto itself, its heirs, successors
      and
      assigns an overriding royalty interest equal to the difference between all
      existing lease burdens as of this date and 17.50% of 8/8ths of the oil, gas
      or
      other hydrocarbons in and under and which may be produced, saved, and sold
      from
      said lands, it being the intent of Assignor to assign to Assignee 82.50% net
      revenue interest leases.  Said override to cover any extensions and
      renewals taken within 12 months of the expiration of the existing
      leases.  In the event the Leases or Assignor's interest in said Leases
      covers less than the entire mineral estate in the above described lands, then
      the overriding royalty interest reserved herein by Assignor shall be
      propor­tionately reduced.  Assignor hereby warrants the interests
      conveyed against the lawful claims and demands of all parties claiming by,
      through or under Assignor, but not otherwise.

    

    Assignor
      hereby warrants the interests herein assigned against all claims and demands
      of
      all parties claiming through or under Assignor and Assignor hereby grants to
      Assignee the benefit of all previous warranties in Assignor’s chain of
      title.

    

    Dated
      and effective this ___ day
      of July, 2007.

    

    Armstrong
      Investments
      Incorporated

    
       

      
        	 	
                By:

                 

              	
                 

                 

              	 
	 	 	Graham
                Crabtree	 
	 	Its:
                	Director	 

 

    

    The
      Valley, Anguilla, British West Indies

    

    On
      this ___ day of July, 2007,
      before me, a Notary Public appointed and practicing in Anguilla, British West
      Indies, personally appeared Graham Crabtree, to me known to be an officer of
      Armstrong Investments Incorporated, an Anguilla corporation on behalf of which
      he executed the foregoing instrument, and acknowledges the same to be the free
      act and deed.

    

    

    
      	 My
              commission does not expire.  	 	 
	 	 Valencia
              R. Hodge, Notary Public	 

    

     

     

    

    

    
      
        
        

      

      
        Exhibit
          B
          Page 1

        
          

        

      

      
        
        

      

    

     

     

    Exhibit
B-1

    

    

    ASSIGNMENT
      OF WELL BORES

    

    KNOW
      ALL MEN BY THESE PRESENTS:

    

    THAT,
Armstrong
      Investments
      Incorporated, an Anguilla corporation, hereinafter designated
“ASSIGNOR”, for and in consideration of One Dollar ($1.00) and other good and
      valuable considerations to Assignor in hand paid, the receipt of which is hereby
      acknowledged, hereby does sell, transfer, set over, convey and assign unto
      Jayhawk Energy, Inc., hereinafter referred to as “ASSIGNEE”,
      all of Assignor’s right, title and interest in and to those certain well bores
      set out on attached Exhibit A.  This Assignment is made expressly
      subject to, and Assignee’s rights are governed by an oil and gas lease or other
      instruments of record affecting the lands on which the well bores are
      located.

    

    Assignor
      shall be responsible for and shall indemnify and hold Assignee harmless against
      any claims, damages, losses, liabilities, cost and expenses arising out of
      the
      violation of any federal, state, or local environmental statute, regulation,
      rule, or ordinance, upon or with respect to the ownership and operation of
      said
      well bores that occurred prior to the date of this Assignment.

    

    Assignee
      agrees, by accepting this Assignment, to assume responsibility for the well
      bores and the risk, cost and expense of future operations, including plugging
      and abandoning the well bores.  Assignee agrees to indemnify and hold
      harmless Assignor, its agents, employees and assigns, from all liability, claim,
      demands or causes of action arising out of Assignee’s operations in or use of
      the assigned well bores, including without limitation the proper plugging and
      abandonment of the well bores.

    

    IN
      WITNESS WHEREOF, this instrument is
      duly executed this ___ day of July, 2007.

    

    Armstrong
      Investments
      Incorporated

     

     

    
      	 	
              By:

               

            	
               

               

            	 
	 	 	Graham
              Crabtree	 
	 	Its:
              	Director	 

    

    

    The
      Valley, Anguilla, British West Indies

    

    On
      this ___ day of July, 2007,
      before me the undersigned a Notary Public appointed and practicing in Anguilla,
      British West Indies, personally appeared Graham Crabtree, known to me to be
      an
      officer of Armstrong Investments Incorporated, an Anguilla corporation, on
      behalf of which he executed the foregoing instrument, and to me known as the
      person described in and who executed the foregoing instrument and acknowledged
      that he had executed the same as his free act and deed.

    

    
      	My
              commission does not expire.  	 	 
	 	 Valencia
              R. Hodge, Notary Public	 

    

    

    Exhibit
      B-1 Page 1exhibit10_3.htm

Exhibit 10.3

     

    THIS
      WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR QUALIFIED UNDER ANY
      APPLICABLE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
      HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT AND QUALIFICATION UNDER SUCH STATE SECURITIES
      LAWS OR AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY
      THAT
      SUCH REGISTRATION AND/OR QUALIFICATION IS NOT REQUIRED.

     

    JAYHAWK
      ENERGY, INC.

     

    WARRANT
      AGREEMENT

    

    July
      ___, 2007

    

    THIS
      CERTIFIES THAT , for value received, _______________, a _______________
      (the “ Investor ”), or Investor’s assigns (Investor and Investor’s
      assigns being the “ Holder ”), is entitled to subscribe for and purchase
      at any time during the Exercise Period from Jayhawk Energy, Inc., a Nevada
      corporation, with an office located at 370 Interlocken Blvd., Suite 400,
      Broomfield, CO 80021 (the “ Company ”), a number of shares of Common
      Stock equal to the Share Number at a per share price equal to the Exercise
      Price
      in effect at such time. This Warrant is issued in conjunction with the shares
      of
      the Company’s Common Stock issued pursuant to the Subscription Agreement dated
      as of _________ ___, 2007, by and between the Company and the
      Investor.

     

    1. Definitions.
      As used herein, the following terms shall have the following respective
      meanings:

     

    (a)
       “Aggregate Warrant Price” shall mean the dollar value obtained by
      multiplying $1.00 by ________.

     

    (b)
       “Common Stock” shall mean the common stock of the Company.

     

    (c)
       “Exercise Period” shall mean the period commencing on July ___, 2007, and
      ending on ______________ __, 2009.

     

    (d)
       “Exercise Price” shall mean $1.00 per share of Common Stock.

     

    (e)
       “Exercise Shares” shall mean any Common Stock acquired upon exercise of
      this Warrant.

     

    (f)
       “Share Number”, at any time, shall mean (i) the Aggregate Warrant Price
      minus the aggregate exercise price previously paid upon exercise of this
      Warrant, divided by (ii) the Exercise Price then in effect.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

     

    2. Exercise
      of Warrant .

     

    2.1
       General; Exercise of Warrant .

     

    (a)
       The rights represented by this Warrant may be exercised as a whole or in
      part at any time during the Exercise Period, by delivery of the following to
      the
      Company at its address set forth above (or at such other address as it may
      designate by notice in writing to the Holder):

     

    (i)           An
      executed Notice of Exercise in the form attached hereto;

     

    (ii)           Payment
      of the Exercise Price either in cash or by check; and

     

    (iii)           This
      Warrant.

     

    (b)
       Upon the exercise of the rights represented by this Warrant, a certificate
      or certificates for the Exercise Shares so purchased, registered in the name
      of
      the Holder or persons affiliated with the Holder, if the Holder so designates
      (and such designation is in compliance with applicable securities laws and
      any
      stockholders, investor rights or similar agreement), shall be issued and
      delivered to the Holder as promptly as practicable after the rights represented
      by this Warrant shall have been so exercised.

     

    (c)
       The person in whose name any certificate or certificates for Exercise
      Shares are to be issued upon exercise of this Warrant shall be deemed to have
      become the holder of record of such shares on the date on which this Warrant
      was
      surrendered and payment of the Exercise Price was made, irrespective of the
      date
      of delivery of such certificate or certificates, except that, if the date of
      such surrender and payment is a date when the stock transfer books of the
      Company are closed, such person shall be deemed to have become the holder of
      such shares at the close of business on the next succeeding date on which the
      stock transfer books are open.

     

    2.2
       Net Issue Exercise .

     

    (a)
       In lieu of paying the Exercise Price in cash or by check as provided in
      Section 2.1, the Holder may elect a “Net Issue Exercise” pursuant to which the
      Holder will receive Exercise Shares equal to the value (as determined below)
      of
      this Warrant (or the portion thereof being exercised) by surrender of this
      Warrant at the principal office of the Company together with an executed Notice
      of Exercise in the form attached hereto in which event the Company shall issue
      to the Holder a number of Exercise Shares computed using the following
      formula:

     

    X
      = Y
      (A-B)

    A

    Where:

     

    X
      = the
      number of Exercise Shares to be issued to the Holder;

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

     

    Y
      = the
      number of Exercise Shares purchasable under the Warrant or, if only a portion
      of
      the Warrant is being exercised, the portion of the Warrant being exercised
      (at
      the date of such exercise);

     

    A
      = the
      Fair Market Value of one share of the Company’s Common Stock (at the date of
      such exercise); and

     

    B
      = the
      Exercise Price (as adjusted to the date of such exercise).

     

    (b)
       For purposes of the above calculation, “Fair Market Value” shall be
      determined as follows:

     

    (i)
       If the Common Stock is listed on any established stock exchange or a
      national market system, including, without limitation, The Nasdaq Stock Market’s
      Global Select or Global Market, the Fair Market Value of a share of Common
      Stock
      will be the average closing sales price for such stock (or the closing bid,
      if
      no sales are reported) as quoted on that system or exchange (or the system
      or
      exchange with the greatest volume of trading in Common Stock), over the five
      (5)
      trading day period ending on the trading day immediately preceding the day
      the
      Warrant is being exercised, as reported in the Wall Street Journal or any other
      source the Company considers reliable.

     

    (ii)
       If the Common Stock is quoted on The Nasdaq Stock Market ( but not on The
      Nasdaq Stock Market’s Global Select or Global Market) or is regularly quoted
      elsewhere by recognized securities dealers but selling prices are not reported,
      the Fair Market Value of a share of Common Stock will be the average mean
      between the high bid and low asked prices for the Common Stock over the five
      (5)
      trading day period ending on the trading day immediately preceding the day
      the
      Warrant is being exercised, as reported in the Wall Street Journal or any other
      source the Company considers reliable.

     

    (iii)
       If the Common Stock is not traded as set forth above, the Fair Market
      Value will be determined in good faith by the Board of Directors of the
      Company.

     

    (c)
       If this Warrant is not exercised in full by a Net Issue Exercise, then,
      the “Share Number” in effect immediately after such partial exercise shall be
      appropriately adjusted to take into account the effect of the Net Issue
      Exercise.

     

    3. Covenants
      of the Company.

     

    3.1
       Covenants as to Exercise Shares . The Company covenants and agrees
      that all Exercise Shares that may be issued upon the exercise of the rights
      represented by this Warrant will, upon issuance, be validly issued and
      outstanding, fully paid and nonassessable, and free from all taxes, liens and
      charges with respect to the issuance thereof. The Company further covenants
      and
      agrees that the Company will at all times during the Exercise Period have
      authorized and reserved, free from preemptive rights, a sufficient number of
      shares of its Common Stock to provide for the exercise of the rights represented
      by this Warrant. If at any time during the Exercise Period the number of
      authorized but unissued shares of Common Stock shall not be sufficient to permit
      exercise of this Warrant, the Company will take such corporate action as may,
      in
      the opinion of its counsel, be necessary to increase its authorized but unissued
      shares of Common Stock to such number of shares as shall be sufficient for
      such
      purposes.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

     

    3.2
       No Impairment . Except and to the extent as waived or consented to
      by the Holder, the Company will not, by amendment of its Articles of
      Incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities, or any other voluntary action,
      avoid or seek to avoid the observance or performance of any of the terms to
      be
      observed or performed hereunder by the Company, but will at all times in good
      faith assist in the carrying out of all the provisions of this Warrant and
      in
      the taking of all such action as may be necessary or appropriate in order to
      protect the exercise rights of the Holder against impairment.

     

    3.3
       Notices of Record Date . In the event of any taking by the Company
      of a record of the holders of any class of securities for the purpose of
      determining the holders thereof who are entitled to receive any dividend (other
      than a cash dividend which is the same as cash dividends paid in previous
      quarters) or other distribution, the Company shall mail to the Holder, at least
      ten (10) days prior to the date specified herein, a notice specifying the date
      on which any such record is to be taken for the purpose of such dividend or
      distribution.

     

    4. Representations
      of Holder.

     

    4.1
       Acquisition of Warrant for Personal Account . The Holder represents
      and warrants that it is acquiring the Warrant and any shares of capital stock
      issued or issuable upon exercise or conversion of the Warrant for investment
      purposes only and not with a view to or for resale in connection with any
      distribution or public offering thereof within the meaning of the Act (as
      defined below). The Holder also represents that the entire legal and beneficial
      interests of the Warrant and Exercise Shares the Holder is acquiring is being
      acquired for, and will be held for, the account of the Holder only.

     

    4.2
       Accredited Investor; Off-Shore Transaction; Not a U.S. Person . The
      Holder represents and warrants that, unless not a “U.S. Person” as defined
      below, the Holder it is an “accredited investor” as such term is defined in Rule
      501 under the Securities Act of 1933, as amended (the “ Act ”). The
      Holder shall provide the Company with such additional information as the Company
      may reasonably request with respect to the Holder’s status as an “accredited
      investor.” The exercise of this Warrant and the transactions contemplated herein
      may constitute an “off-shore transaction,” as that term is defined in Rule
      902(h) of Regulations S promulgated under the Securities Act. If the Holder
      is
      not an accredited investor, then the Holder is not a “U.S. Person,” as that term
      is defined in Rule 902(k) of Regulation S promulgated under the Securities
      Act.

     

    4.3
       Securities Are Not Registered .

     

    (a)
       The Holder understands that the Warrant and the Exercise Shares have not
      been registered under the Act, on the basis that no distribution or public
      offering of the stock of the Company is to be effected, or registered or
      qualified under any applicable state securities laws. The Holder realizes that
      the basis for the exemption may not be present if, notwithstanding its
      representations, the Holder has a present intention of acquiring the securities
      for a fixed or determinable period and, in the future, selling (in connection
      with a distribution or otherwise), granting any participation in, or otherwise
      distributing the securities. The Holder has no such present
      intention.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

     

    (b)
       The Holder recognizes that the Warrant and the Exercise Shares must be
      held indefinitely unless they are subsequently registered under the Act or
      an
      exemption from such registration is available. The Company has no obligation
      to
      register the Warrant or the Exercise Shares of the Company, or to comply with
      any exemption from such registration.

     

    (c)
       The Holder is aware that neither the Warrant nor the Exercise Shares may
      be sold pursuant to Rule 144 adopted under the Act unless certain conditions
      are
      met, including, among other things, the existence of a public market for the
      shares, the availability of certain current public information about the
      Company, the resale following the required holding period under Rule 144 and
      the
      number of shares being sold during any three (3) month period not exceeding
      specified limitations. For so long as the Warrants are outstanding and for
      the
      two-year period thereafter, the Company will use its best efforts to satisfy
      these conditions.

     

    (d)
       The Holder is aware of the Company’s business affairs and financial
      condition and has acquired sufficient information about the Company to reach
      an
      informed and knowledgeable decision regarding its investment in the Company.
      The
      Holder is experienced in making investments of this type and has such knowledge
      and background in financial and business matters that the Holder is capable
      of
      evaluating the merits and risks of this investment and protecting its own
      interests. The Holder has had an opportunity to ask questions of, and receive
      answers from, the Company and its officers and employees regarding the business,
      financial affairs and other aspects of the Company, and has further had the
      opportunity to obtain information (to the extent the Company possesses or can
      acquire such information without unreasonable effort or expense) which the
      Holder deems necessary to evaluate an investment in the Company and to verify
      the accuracy of information otherwise provided to the Holder.

     

    4.4
       Disposition of Warrant and Exercise Shares .

     

    (a)
       Except for transfers by the Holder to its affiliates in compliance with
      all applicable securities laws, the Holder further agrees not to make any
      disposition of all or any part of the Warrant or Exercise Shares in any event
      unless and until:

     

    (i)
       The Company shall have received a letter secured by the Holder from the
      Securities and Exchange Commission stating that no action will be recommended
      to
      the Commission with respect to the proposed disposition; or

     

    (ii)
       There is then in effect a registration statement under the Act covering
      such proposed disposition and such disposition is made in accordance with said
      registration statement; or

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

     

    (iii)
       The Holder shall have shall have furnished the Company with an opinion of
      counsel, reasonably satisfactory to the Company, for the Holder to the effect
      that such disposition will not require registration of such Warrant or Exercise
      Shares under the Act or any applicable state securities laws.

     

    (b)
       The Holder understands and agrees that all certificates evidencing the
      Exercise Shares to be issued to the Holder may bear the following legend (in
      addition to any legend required under applicable state securities laws, the
      Company’s Bylaws, or as provided elsewhere in this Warrant):

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”) OR QUALIFIED UNDER ANY APPLICABLE SECURITIES LAWS. THEY
      MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR TRANSFERRED IN
      THE
      ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
      QUALIFICATION UNDER SUCH STATE SECURITIES LAWS OR AN OPINION OF COUNSEL OR
      OTHER
      EVIDENCE SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR QUALIFICATION
      IS NOT REQUIRED.

     

    5. Adjustments
      and Notices. The Exercise Price and the number of
      Exercise Shares issuable upon exercise of this Warrant shall be subject to
      adjustment from time to time in accordance with this Section 5.

     

    5.1
       Subdivision, Stock Dividends or Combinations . In case the Company
      shall at any time after the commencement of the Exercise Period subdivide the
      outstanding Common Stock or shall issue a stock dividend with respect to the
      Common Stock, the Exercise Price in effect immediately prior to such subdivision
      or the issuance of such dividend shall be proportionately decreased, and in
      case
      the Company shall at any time after the commencement of the Exercise Period
      combine the outstanding shares of Common Stock, the Exercise Price in effect
      immediately prior to such combination shall be proportionately increased, in
      each case effective at the close of business on the date of such subdivision,
      dividend, or combination, as the case may be.

     

    5.2
       Reclassification, Exchange, Substitution, In-Kind Distribution .
      Upon any reclassification, exchange, substitution or other event after the
      commencement of the Exercise Period that results in a change of the number
      and/or class of the securities issuable upon exercise or conversion of this
      Warrant or upon the payment after the commencement of the Exercise Period of
      a
      dividend in securities or property other than shares of Common Stock, the Holder
      shall be entitled to receive, upon exercise or conversion of this Warrant,
      the
      number and kind of securities and property that Holder would have received
      if
      this Warrant had been exercised or converted immediately before the record
      date
      for such reclassification, exchange, substitution, or other event or immediately
      prior to the record date for such dividend. The Company or its successor shall
      promptly issue to Holder a new warrant for such new securities or other
      property. The new warrant shall provide for adjustments, which shall be as
      nearly equivalent as may be practicable to the adjustments provided for in
      this
      Section 5, including, without limitation, adjustments to the Warrant Price
      and
      to the number of securities or property issuable upon exercise or conversion
      of
      the new warrant. The provisions of this Section 5.2 shall similarly apply to
      successive reclassifications, exchanges, substitutions, or other events and
      successive dividends.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

     

    5.3
       Consolidation, Merger, Sale and the Like . In case of any (i)
      merger or consolidation of the Company into or with another corporation where
      the Company is not the surviving corporation (but including a merger for the
      purpose of reincorporating in a new domicile) (ii) sale, transfer or lease
      (but
      not including a transfer or lease by pledge or mortgage to a bona fide lender)
      of all or substantially all of the assets of the Company or (iii) sale by
      the Company’s stockholders of 50% or more of the Company’s outstanding
      securities in one or more related transactions, the Company, or such successor
      or purchasing corporation, as the case may be, shall duly execute and deliver
      to
      the Holder hereof a new warrant so that the Holder shall have the right to
      receive upon exercise or conversion of the unexercised or unconverted portion
      of
      this Warrant, at a total purchase price not to exceed that payable upon the
      exercise or conversion of the unexercised or unconverted portion of this
      Warrant, and in lieu of shares of Common Stock theretofore issuable upon
      exercise or conversion of this Warrant, the kind and amount of shares of stock,
      or other securities, money and other property in lieu of such shares of stock,
      receivable upon or as a result of such reorganization, merger, or sale by a
      holder of the number of shares of Common Stock for which this Warrant is
      exercisable or convertible immediately prior to such event. Such new warrant
      shall provide for adjustments that shall be as nearly equivalent as may be
      practicable to the adjustments provided for in this Section 5. The provisions
      of
      this Section 5.3 shall similarly apply to successive reorganizations,
      mergers, and sales.

     

    5.4
       In each case of an adjustment or readjustment of the Exercise Price
      pursuant to this Section 5, the Company, at its expense, shall compute such
      adjustment or readjustment in accordance with the provisions hereof and prepare
      a certificate showing such adjustment or readjustment, and shall mail such
      certificate, by first class mail, postage prepaid, to the Holder at the Holder’s
      address as shown in the Company’s books. The certificate shall set forth such
      adjustment or readjustment, showing in reasonable detail the facts upon which
      such adjustment or readjustment is based, including a statement of, if
      applicable, the type and amount, if any, of other property which at the time
      would be received upon exercise of this Warrant.

     

    6. Fractional
      Shares. No fractional shares shall be issued upon
      the exercise of this Warrant as a consequence of any adjustment pursuant hereto.
      All Exercise Shares (including fractions) issuable upon exercise of this Warrant
      may be aggregated for purposes of determining whether the exercise would result
      in the issuance of any fractional share. No payments shall be made by the
      Company in respect of any fractional shares otherwise issuable pursuant to
      this
      Warrant.

     

    7. No
      Stockholder Rights. This Warrant in and of itself
      shall not entitle the Holder to any voting rights or other rights as a
      stockholder of the Company.

     

    8. Transfer
      of Warrant. Subject
      to applicable laws, the restriction on transfer set forth on the first page
      of
      this Warrant and in Section 4.4 and the terms of any applicable stockholders,
      investor rights, or similar agreements, this Warrant and all rights hereunder
      are transferable, by the Holder in person or by duly authorized attorney, upon
      delivery of this Warrant and the form of assignment attached hereto to any
      transferee designated by Holder, provided that the transferee shall have signed
      an investment letter in form and substance satisfactory to the Company and
      agreed to be bound by the provisions of this Warrant. Notwithstanding anything
      to the contrary, no partial transfer of this Warrant shall be
      permitted.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

     

    9. Lost,
      Stolen, Mutilated or Destroyed
      Warrant. If this Warrant is lost, stolen,
      mutilated, or destroyed, the Company may, on such terms as to indemnity or
      otherwise as it may reasonably impose (which shall, in the case of a mutilated
      Warrant, include the surrender thereof), issue a new Warrant of like
      denomination and tenor as the Warrant so lost, stolen, mutilated, or destroyed.
      Any such new Warrant shall constitute an original contractual obligation of
      the
      Company, whether or not the allegedly lost, stolen, mutilated, or destroyed
      Warrant shall be at any time enforceable by anyone.

    

    10.
       Notices, Etc.
All notices and
      other communications required or permitted hereunder
      shall be in writing and shall be sent by express mail or other form of rapid
      communications, if possible, and if not then such notice or communication shall
      be mailed by first-class mail, postage prepaid, addressed in each case to the
      party entitled thereto at the following addresses: (a) if to the Company, to
      Jayhawk Energy, Attention: President, 370 Interlocken Blvd., Suite 400,
      Broomfield, CO 80021 , and (b) if to the Holder, to such address as originally
      furnished to the Company by the Holder, or at such other address as one party
      may furnish to the other in writing. Notice shall be deemed effective on the
      date dispatched if by personal delivery, two days after mailing if by express
      mail, or three days after mailing if by first-class mail.

     

    11.
       Amendment. This
      Warrant may be amended or otherwise modified only by a writing signed by the
      Company and the Holder.

     

    12. Acceptance.
      Receipt of this Warrant by the Holder shall constitute acceptance of and
      agreement to all of the terms and conditions contained herein.

     

    13.
       Governing Law;
      Forum. This Warrant and all rights, obligations,
      and liabilities hereunder shall be governed by the internal laws of the State
      of
      Colorado and any actions related hereto shall be brought in a court of competent
      jurisdiction located in the County of Broomfield, State of
      Colorado.

     

    [NEXT
      PAGE IS SIGNATURE PAGE]

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
      duly
      authorized officer as of the date first written above.

     

     

    
      	
               

            	
              JAYHAWK
                ENERGY, INC.

            
	
               

            	
              a
                Colorado corporation

            
	
               

            	
               

            
	
               

            	
               

            
	
               

            	
              By:_________________________________________

            
	
               

            	
              Name:
                Lindsay Gorrill

            
	
               

            	
              Title:
                President 

            

    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    NOTICE
      OF EXERCISE

     

    To:           Jayhawk
      Energy, Inc.

     

    1.
       The undersigned hereby elects to purchase ________ shares of the Common
      Stock of Jayhawk Energy, Inc. (the “Company”) pursuant to the terms of
      the attached Warrant, and tenders herewith payment of the exercise price in
      full
      pursuant to the terms of Section 2.1 of the attached Warrant, or by net issue
      exercise pursuant to the terms of Section 2.2 of the attached Warrant, together
      with all applicable transfer taxes, if any.

     

    2.
       Please issue a certificate or certificates representing said shares of
      Common Stock in the name of the undersigned or in such other name as is
      specified below:

     

    
      	
               

            	
              ________________________

            
	
               

            	
              (Name)

            
	
               

            	
               

            
	
               

            	
              ________________________

            
	
               

            	
              ________________________

            
	
               

            	
              (Address)

            

    

     

    3.
       The undersigned represents that (i) the aforesaid shares of Common Stock
      are being acquired for the account of the undersigned for investment purposes
      only and not with a view to, or for resale in connection with, the distribution
      thereof and that the undersigned has no present intention of distributing or
      reselling such shares; (ii) the undersigned is aware of the Company’s
      business affairs and financial condition and has acquired sufficient information
      about the Company to reach an informed and knowledgeable decision regarding
      its
      investment in the Company; (iii) the undersigned is experienced in making
      investments of this type and has such knowledge and background in financial
      and
      business matters that the undersigned is capable of evaluating the merits and
      risks of this investment and protecting the undersigned’s own interests; (iv)
      the undersigned is an “accredited investor” as defined in Rule 501 under the
      Securities Act of 1933, as amended (the “ Securities Act ”); (v) the
      undersigned understands that the shares of Common Stock issuable upon exercise
      of this Warrant have not been registered under the Securities Act by reason
      of a
      specific exemption from the registration provisions of the Securities Act,
      which
      exemption depends upon, among other things, the bona fide nature of the
      investment intent as expressed herein, and, because such securities have not
      been registered under the Securities Act, they must be held indefinitely unless
      subsequently registered under the Securities Act or an exemption from such
      registration is available; (vi) the undersigned is aware that the aforesaid
      shares of Common Stock may not be sold pursuant to Rule 144 adopted under the
      Securities Act unless certain conditions are met and until the undersigned
      has
      held the shares for the number of years prescribed by Rule 144; and (vii) the
      undersigned agrees not to make any disposition of all or any part of the
      aforesaid shares of Common Stock unless and until there is then in effect a
      registration statement under the Securities Act covering such proposed
      disposition and such disposition is made in accordance with said registration
      statement, or the undersigned has provided the Company with an opinion of
      counsel satisfactory to the Company, stating that such registration is not
      required.

     

    
      	
              ________________________

            	
              ________________________

            
	
              (Date)

            	
              (Signature)

            
	
               

            	
               

            
	
               

            	
              ________________________

            
	
               

            	
              (Print
                name)

            

    

     

     

    10

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