Document:

EXECUTION
      COPY

    PURCHASE
      AND SALE AGREEMENT

    

    Between
      

    

    Samson
      Oil and Gas USA Inc.

    

    as

    Purchaser

    

    and
      

    

    Stanley
      Energy, Inc.

    and

    Stanley
      Energy W., Inc.

    as
      

    Seller

    

    Dated
      as of March 6, 2006

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

    

      
        	
                ARTICLE
                  1 PURCHASE AND SALE

              	 	
                1

              
	
                Section
                  1.1

              	
                Purchase
                  and Sale

              	 	
                1

              
	
                Section
                  1.2

              	
                Assets

              	 	
                1

              
	
                Section
                  1.3

              	
                Effective
                  Date and Time

              	 	
                3

              
	
                Section
                  1.4

              	
                Conveyance

              	 	
                3

              
	
                ARTICLE
                  2 PURCHASE PRICE

              	 	
                3

              
	
                Section
                  2.1

              	
                Purchase
                  Price

              	 	
                3

              
	
                Section
                  2.2

              	
                Determination
                  of Adjusted Purchase Price

              	 	
                3

              
	
                Section
                  2.3

              	
                Payment
                  of Adjusted Purchase Price

              	 	
                6

              
	
                Section
                  2.4

              	
                Preliminary
                  and Final Adjustment Statements

              	 	
                7

              
	
                Section
                  2.5

              	
                Allocation
                  of Purchase Price

              	 	
                8

              
	
                ARTICLE
                  3 DUE DILIGENCE INSPECTION

              	 	
                8

              
	
                Section
                  3.1

              	
                Access
                  to Information

              	 	
                8

              
	
                Section
                  3.2

              	
                Access
                  to the Assets

              	 	
                8

              
	
                ARTICLE
                  4 TITLE MATTERS

              	 	
                9

              
	
                Section
                  4.1

              	
                Defective
                  Interests; Adjustments

              	 	
                9

              
	
                Section
                  4.2

              	
                Identification
                  of Defective Interests

              	 	
                11

              
	
                Section
                  4.3

              	
                Casualty
                  Loss

              	 	
                14

              
	
                ARTICLE
                  5 ENVIRONMENTAL MATTERS

              	 	
                15

              
	
                Section
                  5.1

              	
                Definitions

              	 	
                15

              
	
                Section
                  5.2

              	
                Adjustments
                  for Environmental Defects

              	 	
                15

              

      

    

     

    
      
        
        

      

      
        i

        
          

        

      

      
        
        

      

    

    

      
        	
                ARTICLE
                  6 CLOSING, PAYMENT AND CERTAIN ACTIONS OF THE PARTIES PRIOR TO
                  CLOSING

              	 	
                16

              
	
                Section
                  6.1

              	
                Time
                  and Place of Closing

              	 	
                16

              
	
                 

              	 	 	 
	
                Section
                  6.2

              	
                Government
                  Reviews

              	 	
                17

              
	
                Section
                  6.3

              	
                Inconsistent
                  Activities

              	 	
                17

              
	
                Section
                  6.4

              	
                Division
                  Orders; Transfer Orders

              	 	
                17

              
	
                Section
                  6.5

              	
                Public
                  Announcements

              	 	
                18

              
	
                Section
                  6.6

              	
                Information
                  Kept Confidential

              	 	
                18

              
	
                Section
                  6.7

              	
                Operation
                  of Business

              	 	
                19

              
	
                Section
                  6.8

              	
                Notice
                  of Proceedings and Proposals

              	 	
                19

              
	
                Section
                  6.9

              	
                Consents

              	 	
                20

              
	
                Section
                  6.10

              	
                Financing

              	 	
                20

              
	
                ARTICLE
                  7 REPRESENTATIONS AND WARRANTIES OF SELLER

              	 	
                20

              
	
                Section
                  7.1

              	
                Organization,
                  Standing and Power

              	 	
                20

              
	
                Section
                  7.2

              	
                Authority
                  and Enforceability

              	 	
                21

              
	
                Section
                  7.3

              	
                Liability
                  for Brokers’ Fees

              	 	
                21

              
	
                Section
                  7.4

              	
                Compliance
                  with Laws; Litigation

              	 	
                21

              
	
                Section
                  7.5

              	
                Necessary
                  Governmental Authorizations

              	 	
                22

              
	
                Section
                  7.6

              	
                Tax
                  Matters

              	 	
                22

              
	
                Section
                  7.7

              	
                Operations

              	 	
                22

              
	
                Section
                  7.8

              	
                Operating
                  Agreements

              	 	
                23

              
	
                Section
                  7.9

              	
                Wells

              	 	
                23

              
	
                Section
                  7.10

              	
                Basic
                  Documents

              	 	
                23

              
	
                Section
                  7.11

              	
                Conduct
                  of Business

              	 	
                23

              
	
                Section
                  7.12

              	
                Leases

              	 	
                24

              

      

    

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

    

      
        	
                Section
                  7.13

              	
                Gas
                  Contracts

              	 	
                24

              
	
                Section
                  7.14

              	
                Calls
                  on Production; Prepayments; Imbalances

              	 	
                24

              
	
                Section
                  7.15

              	
                Taxpayer
                  Identification Number

              	 	
                25

              
	
                Section
                  7.16

              	
                No
                  Bankruptcy

              	 	
                25

              
	
                Section
                  7.17

              	
                Income
                  Taxes

              	 	
                25

              
	
                Section
                  7.18

              	
                Tax
                  Partnerships

              	 	
                25

              
	
                Section
                  7.19

              	
                Consents;
                  Preferential Rights to Purchase

              	 	
                25

              
	
                Section
                  7.20

              	
                Plugging
                  and Abandonment

              	 	
                25

              
	
                Section
                  7.21

              	
                Depth
                  Restrictions

              	 	
                25

              
	
                ARTICLE
                  8 REPRESENTATIONS AND WARRANTIES OF PURCHASER

              	 	
                26

              
	
                Section
                  8.1

              	
                Organization,
                  Standing and Power

              	 	
                26

              
	
                Section
                  8.2

              	
                Authority
                  and Enforceability

              	 	
                26

              
	
                Section
                  8.3

              	
                Liability
                  for Brokers’ Fees

              	 	
                26

              
	
                Section
                  8.4

              	
                Litigation

              	 	
                26

              
	
                Section
                  8.5

              	
                Necessary
                  Governmental Authorizations

              	 	
                27

              
	
                Section
                  8.6

              	
                Authority
                  to Hold Federal Leases

              	 	
                27

              
	
                Section
                  8.7

              	
                Independent
                  Evaluation

              	 	
                27

              
	
                ARTICLE
                  9 ASSUMPTION OF LIABILITIES INDEMNIFICATION

              	 	
                28

              
	
                Section
                  9.1

              	
                Purchaser
                  Assumption of Liabilities and Obligations

              	 	
                28

              
	
                Section
                  9.2

              	
                Seller's
                  Retention of Liabilities and Obligations

              	 	
                28

              
	
                Section
                  9.3

              	
                Indemnification

              	 	
                28

              
	
                Section
                  9.4

              	
                Procedure

              	 	
                29

              
	
                Section
                  9.5

              	
                No
                  Insurance, Subrogation

              	 	
                30

              
	
                Section
                  9.6

              	
                Reservation
                  as to Non-Parties

              	 	
                31

              

      

    

     

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    

      
        	
                Section
                  9.7

              	
                Survival
                  of Representations, Warranties and Covenants

              	 	
                31

              
	
                Section
                  9.8

              	
                Survival
                  of Indemnification Obligations; Guaranty

              	 	
                31

              
	
                ARTICLE
                  10 CONDITIONS TO CLOSING

              	 	
                31

              
	
                Section
                  10.1

              	
                Conditions
                  to Obligation of Purchaser to Close

              	 	
                31

              
	
                Section
                  10.2

              	
                Conditions
                  to Obligation of Seller to Close

              	 	
                32

              
	
                Section
                  10.3

              	
                Seller’s
                  Obligations at Closing

              	 	
                33

              
	
                Section
                  10.4

              	
                Purchaser’s
                  Obligations at Closing

              	 	
                33

              
	
                Section
                  10.5

              	
                Obligation
                  of Both Parties at Closing

              	 	
                34

              
	
                ARTICLE
                  11 TERMINATION AND AMENDMENT

              	 	
                34

              
	
                Section
                  11.1

              	
                Termination

              	 	
                34

              
	
                Section
                  11.2

              	
                Effect
                  of Termination

              	 	
                35

              
	
                Section
                  11.3

              	
                Amendment

              	 	
                36

              
	
                ARTICLE
                  12 EXPENSES AND TRANSFER TAXES

              	 	
                36

              
	
                Section
                  12.1

              	
                Expenses

              	 	
                36

              
	
                Section
                  12.2

              	
                Sales
                  Taxes and Assessments

              	 	
                36

              
	
                ARTICLE
                  13 POST-CLOSING OBLIGATIONS

              	 	
                36

              
	
                Section
                  13.1

              	
                Post-Closing
                  Production Receipts and Expenses

              	 	
                36

              
	
                Section
                  13.2

              	
                Cooperation

              	 	
                37

              
	
                ARTICLE
                  14 1031 EXCHANGE

              	 	
                37

              
	
                ARTICLE
                  15 MISCELLANEOUS

              	 	
                38

              
	
                Section
                  15.1

              	
                Counterparts

              	 	
                38

              
	
                Section
                  15.2

              	
                Notice

              	 	
                38

              
	
                Section
                  15.3

              	
                Further
                  Assurances

              	 	
                38

              
	
                Section
                  15.4

              	
                Recording
                  Fees and Similar Costs

              	 	
                38

              
	
                Section
                  15.5

              	
                Ad
                  Valorem and Other Taxes

              	 	
                39

              

      

    

     

    
      
        
        

      

      
        iv

        
          

        

      

      
        
        

      

      

        
          	
                  Section
                    15.6

                	
                  Governing
                    Law

                	 	
                  39

                
	
                  Section
                    15.7

                	
                  Captions

                	 	
                  
                    39

                  

                
	
                  Section
                    15.8

                	
                  Waivers

                	 	
                  
                    39

                  

                
	
                  Section
                    15.9

                	
                  Exhibits
                    and Schedules

                	 	
                  
                    39

                  

                
	
                  Section
                    15.10

                	
                  Entire
                    Agreement; Amendments

                	 	
                  
                    39

                  

                
	
                  Section
                    15.11

                	
                  Rights
                    Cumulative

                	 	
                  40

                
	
                  Section
                    15.12

                	
                  Binding
                    Effect; Benefits; Third Parties; Joint Ventures

                	 	
                  40

                

        

         

        
          
            
            

          

          
            v

            
              

            

          

          
            
            

          

           

        

      

    

    PURCHASE
      AND SALE AGREEMENT

     

    THIS
      PURCHASE AND SALE AGREEMENT
      (the
      “Agreement”)
      dated
      as of March 6, 2006, is between Samson Oil and Gas USA Inc., a Colorado
      corporation (“Purchaser”),
      with
      offices at 1726 Cole Blvd., Suite 210, Lakewood, Colorado 80401, and
      STANLEY ENERGY, INC.,
      a Nevada
      corporation (“SEI”),
      and
      STANLEY ENERGY W., INC., a Nevada corporation (“SEWI”
and,
      collectively with SEI, “Seller”),
      each
      with offices at 1776 Lincoln Street, Suite 1300, Denver, Colorado,
      80203. Purchaser and Seller are sometimes referred to herein individually as
      a
“Party”
and,
      collectively, as the “Parties”.

    

    RECITALS:

     

    WHEREAS,
      Seller is the owner of certain interests in and to those certain oil and gas
      leases described on Exhibit A
      attached
      hereto, together with associated wells and equipment located thereon or
      appurtenant thereto.

     

    WHEREAS,
      Seller desires to sell to Purchaser and Purchaser desires to purchase from
      Seller the assets, properties and rights of Seller hereinafter described in
      the
      manner and upon the terms and conditions hereinafter set forth.

     

    NOW,
      THEREFORE, in consideration of the premises and of the mutual promises,
      representations, warranties, covenants, conditions and agreements contained
      herein, the Parties, intending to be legally bound by the terms hereof, covenant
      and agree as follows:

     

    ARTICLE 1

    PURCHASE
      AND SALE

     

    Section 1.1  Purchase
      and Sale.

     

    Subject
      to the terms and conditions of this Agreement, Seller agrees to sell and convey
      exclusively to Purchaser and Purchaser agrees to purchase and pay for the Assets
      (as defined in Section 1.2 below).

     

    Section 1.2  Assets.

     

    All
      of
      the following shall herein be called the “Assets”:

     

    (a)  All
      of
      Seller’s undivided right, title and interest in, to and under the oil, gas and
      mineral leases (including all leasehold estates, royalty interests, overriding
      royalty interests and all other interests therein, whether described or not),
      mineral interests, licenses, permits, and other documents of title described
      in
Exhibit A,
      and any
      extensions, renewals, amendments, replacements or substitutions thereof (the
      “Leases”)
      insofar and only insofar as the Leases cover the lands described on said
      Exhibit A and lands pooled or unitized therewith (the “Lands”)
      and
      all of Seller’s right, title and interest in, to and under the wells identified
      on Exhibit
      B
      attached
      hereto (the “Wells”),
      and
      including in each case all other interests of Seller in the Leases, Lands and
      Wells, including, without limitation, reversionary interests, net profits
      interests, net revenue interests, fee mineral estate interests and any other
      interests of a similar nature (all of the foregoing referred to herein as the
      “Properties”
when
      referred to collectively and a “Property”
when
      referred to individually).

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

    

    (b)  All
      of
      Seller’s undivided right, title and interest in and to all petroleum,
      hydrocarbons and associated gases produced at and after the Effective Date,
      as
      hereinafter defined, from the Properties and all production produced from the
      Properties to the extent such production is in the tanks as of the Effective
      Time, as hereinafter defined (the “Hydrocarbons”).

     

    (c)  All
      of
      Seller’s right, title and interest in, to and under all contracts, documents and
      agreements listed on Exhibit C
      attached
      hereto which shall include all contracts, documents and agreements that are
      appurtenant to or used in connection with the ownership or operation of the
      Properties (excluding the Leases which are listed on Exhibit A) or to or
      used in connection with the production, treatment, transportation, sale or
      disposal of water, hydrocarbons or associated substances from the Properties
      (“Basic
      Documents”).

     

    (d)  Corresponding
      interests in and to all fixtures, production facilities, equipment, and personal
      property associated with the Wells and in and to all lease equipment, water
      gathering and disposal systems, service and downhole equipment, tanks, boilers,
      buildings, structures, fixtures, personal property, tubing, oil and gas
      production equipment, pumping units, motors, pipelines, gathering lines,
      electrical distribution systems, tubulars and inventory and all other machinery,
      equipment, appurtenances, ancillary facilities, improvements and property of
      every kind and character, movable or immovable now or as of the Effective Date
      or the Closing appurtenant to or used in the operation of the Properties or
      the
      production, treatment, transportation, sale or disposal of water, hydrocarbons
      or associated substances from the Properties (“Related
      Assets”).

     

    (e)  All
      books, records, files, data and information related to the Assets described
      in
      clauses (a), (b), (c), (d) and (f) hereof, including without limitation (i)
      all
      lease files, land files, abstracts, title opinions, electronic files, and (ii)
      all logs, core analyses, formation tests, films, surveyors’ notes, plane table
      sheets, shot point data bases and geologic and other scientific data, including
      seismic data, to the extent such data can be transferred to Purchaser (the
      “Files”);
      provided that Files shall not include any books, records, files or proprietary
      data to the extent only that the same relate to properties of Seller other
      than
      the Properties.

     

    (f)  All
      instruments, liens and security interests in favor of Seller under any law,
      rule, or regulation or under the Basic Documents arising from the sale or other
      disposition after the Effective Date of any of the Assets described in
      Section 1.2(a) through (e).

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    Section 1.3  Effective
      Date and Time.

     

    The
      purchase and sale of the Assets shall be effective as of November 1, 2005
      (the “Effective
      Date”),
      at
      7:00 a.m. Mountain Standard Time (the “Effective
      Time”).
      Except as otherwise specifically provided herein, Seller shall be entitled
      to
      production revenues or other amounts realized from and accruing to the Assets
      prior to the Effective Time and shall be liable for the payment of all costs,
      liabilities, obligations and expenses attributable to the Assets prior to the
      Effective Time, and Purchaser shall be entitled to production revenues or other
      amounts realized from and accruing to the Assets after the Effective Time and
      shall be liable for the payment of all costs, liabilities, obligations and
      expenses attributable to the Assets after the Effective Time.

     

    Section 1.4  Conveyance.

     

    Seller
      shall convey the Assets to Purchaser at Closing by a Conveyance, Assignment
      and
      Bill of Sale substantially in the form of Exhibit
      D
      attached
      hereto (the “Conveyance”)
      and
      any corresponding forms of assignment for any State or Federal Leases. The
      Conveyance shall be effective as of the Effective Time.

     

    ARTICLE 2

    PURCHASE
      PRICE

     

    Section 2.1  Purchase
      Price.

     

    The
      purchase price for the Assets shall be Thirty Six Million Three Hundred Thousand
      U.S. Dollars and No Cents (U.S.$36,300,000.00) (the “Purchase
      Price”),
      subject to adjustment as set forth in Section 2.2 below.

     

    Section 2.2  Determination
      of Adjusted Purchase Price.

     

    The
      Purchase Price shall be adjusted as set forth below and the resulting amount
      shall herein be called the “Adjusted
      Purchase Price.”
All
      adjustments to the Purchase Price shall be made (i) according to the
      factors described in this Section, (ii) in accordance with generally
      accepted accounting principles as consistently applied in the oil and gas
      industry, and (iii) without duplication.

     

    (a)  The
      Purchase Price shall be adjusted upward by the following:

     

    (1)  The
      amount of all costs incurred in the ordinary course of business that are, in
      accordance with generally accepted accounting principles, attributable to times
      after the Effective Time that have accrued to and been paid by Seller between
      the Effective Time and the Original Closing Date or Extended Closing Date,
      as
      applicable (such period herein, the “Adjustment
      Period”)
      including: (i) as costs of the ordinary course of production, processing or
      other operations directly related to the Assets, (ii) as costs incurred
      with respect to staking, surveying, title examination, surface grading and
      similar activities directly related to the Assets, (iii) as costs for the
      maintenance of any Property, (iv) as costs for the extension or renewal during
      the Adjustment Period of any Property, (v)  subject to Section 6.7
      hereof, as costs of any exploration or development activities on the Properties
      or related to drilling, completion, recompletion, or workover activities on
      Wells and conducted during the Adjustment Period, (vi) as unreimbursed
      costs of insurance coverage during the Adjustment Period on the Assets in
      accordance with Section 6.7 hereof, (vii) the aggregate amount of all
      other expenditures made by Seller prior to the Effective Time for costs and
      expenses directly attributable to the Assets after the Effective Time and
      (viii) otherwise from the ownership of the Assets during the Adjustment
      Period.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    (2)  The
      value
      of all merchantable oil or condensate produced from the Assets and in storage
      above the pipeline connection at the Effective Time that is credited to the
      Assets, such value to be the market or contract price in effect as of the
      Effective Time net of any applicable royalties, sales taxes, and taxes on
      production including, but not limited to, severance, conservation and ad valorem
      taxes.

     

    (3)  An
      amount
      per MMBtu equal to the arithmetic average of the first of the month spot price
      of gas delivered to Colorado Interstate Gas Company - Rocky Mountains as
      published in Inside
      FERC Gas Market Report
      for
      November 2005 and February 2006 for any gas which Seller may be entitled to
      take
      in excess of its fractional interest in the Wells as a result of underproduction
      by Seller from the Assets, such amount to be determined as of the Effective
      Time. Seller and Purchaser agree that for the purposes of the Preliminary
      Adjustment Statement, the gas imbalance volumes attributable to the Wells are
      set forth on Exhibit
      E
      attached
      hereto and made a part hereof. The Parties agree that such volumes will be
      subject to adjustment and confirmation in connection with preparation of the
      Final Adjustment Statement. 

     

    (4)  An
      amount, with respect to each Property in which the net revenue interest
      (“NRI”)
      plus
      overriding royalty interests (“ORRI”)
      owned
      by Seller (exclusive of nonconsent interests) exceeds the aggregate of the
      NRI
      plus ORRI for such Property as set forth in Exhibit
      G
      attached
      hereto, calculated by multiplying the Allocated Value (as defined in
      Section 2.5 below) of such Property set forth on Exhibit G by the quotient
      of (i) Seller’s actual NRI plus ORRI in such Property as delivered to Purchaser
      at Closing divided by (ii) the NRI plus ORRI in such Property as reflected
      on
      Exhibit G. 

     

    (5)  An
      amount
      equal to aggregate amounts paid by Seller prior to the date hereof as joint
      interest or similar billings in respect of drilling, completion or similar
      activities based on the Authorities for Expenditure (“AFEs”) listed on
Schedule 2.2
      hereto
      and any other amounts paid by Seller in connection with the drilling and
      completion of the Wells that are the subject of the AFEs listed on
      Schedule 2.2.

     

    (b)  The
      Purchase Price shall be adjusted downward by the following:

     

    (1)  The
      proceeds received by Seller during the Adjustment Period attributable to the
      Assets and that are, in accordance with generally accepted accounting
      principles, attributable to the period of time after the Effective Time
      including: (i) proceeds from the sale of oil, gas or other associated
      minerals (net of any production royalties or other burdens on production,
      transportation costs and of any taxes on production including, but not limited
      to, severance, conservation, and ad valorem taxes, not reimbursed to Seller
      by
      the purchaser of production) produced from the Properties during the Adjustment
      Period and proceeds attributable to prepayments, payments for over-production
      pursuant to gas balancing agreements, take-or-pay payments and similar payments,
      and (ii) subject to Section 6.7 hereof, proceeds from the sale, salvage or
      other disposition during the Adjustment Period of any property, equipment or
      rights included in the Assets.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    (2)  Except
      as
      provided in Section 2.2(a)(5), an amount equal to all unpaid expenses, burdens
      and obligations (including without limitation royalties, overriding royalties,
      rentals, and other charges, including charges billed under applicable operating
      agreements) which, in accordance with generally accepted accounting principles,
      accrue or are attributable to the Assets prior to the Effective Time (such
      costs
      shall be payable by Purchaser after Closing)

     

    (3)  An
      amount
      equal to all unpaid production taxes, including, but not limited to, severance,
      conservation and ad valorem taxes (“Taxes”)
      assessed on production from the Assets for the period ending on the Effective
      Date. To the extent of this Purchase Price adjustment, all such Taxes shall
      be
      payable by Purchaser after Closing. All Taxes determined by the value of any
      production shall be deemed to be attributable to the period during which such
      production occurred and not attributable to the year in which such Taxes are
      assessed including, but not limited to, ad valorem taxes to be assessed in
      2006
      on the basis of the value of production during 2005, and payable in two
      installments no later than November 10, 2006, and May 10, 2007, or in a single
      payment no later than December 31, 2006. The amount of the adjustment shall
      be
      determined as of the Effective Time based on the actual amount of the Tax
      assessed against the Assets, provided that if the actual amount of the
      assessment is not known, the amount shall be estimated in good faith by Seller
      based on the quantity of and sales prices for production from the Assets during
      2005 to the Effective Date and the tax rates in effect at the time of the
      estimate. The Parties agree that such estimates will be subject to adjustment
      and confirmation in connection with preparation of the Final Adjustment
      Statement. After Closing, Seller shall continue to be responsible for any
      liability asserted against the Assets for Taxes attributable to all time periods
      prior to the Effective Time for which no Purchase Price adjustment was taken
      pursuant to this subparagraph. 

     

    (4)  An
      amount
      equal to the sum of all adjustments provided for in this Agreement for Defective
      Interests, Title Defects, Environmental Defects and Casualty Losses (as those
      terms are hereinafter defined), and for preferential rights to
      purchase.

     

    (5)  An
      amount
      per MMBtu equal to the arithmetic average of the first of the month spot price
      of gas delivered to Colorado Interstate Gas Company - Rocky Mountains as
      published in Inside
      FERC Gas Market Report
      for
      November 2005 and February 2006 for any gas which Seller may be obligated to
      deliver out of its fractional interest in the Wells as a result of
      overproduction by Seller from the Assets, such amount to be determined as of
      the
      Effective Time. Seller and Purchaser agree that for the purposes of the
      Preliminary Adjustment Statement, the gas imbalance volumes attributable to
      the
      Wells are set forth on Exhibit E attached hereto and made a part hereof. The
      Parties agree that such volumes will be subject to adjustment and confirmation
      in connection with preparation of the Final Adjustment Statement. 

     

    
      
        
        

      

      
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    (6)  An
      amount
      with respect to each Property in which the NRI plus ORRI owned by Seller
      (exclusive of nonconsent interests) is less than the aggregate of the NRI plus
      ORRI for such Property as set forth in Exhibit G. With respect to each such
      Property, the amount of downward adjustment in the Purchase Price shall be
      calculated by multiplying the Allocated Value of such Property set forth on
      Exhibit G by the quotient of (i) Seller’s actual NRI plus ORRI in such
      Property as delivered to Purchaser at Closing divided by (ii) the NRI plus
      ORRI
      in such Property as reflected on Exhibit G.

     

    Section 2.3  Payment
      of Adjusted Purchase Price.

     

    (a)  At
      Closing, Purchaser shall pay to Seller, by bank transfer of immediately
      available funds to the account designated by Seller at least two business days
      prior to Closing, an amount which is equal to the estimated Adjusted Purchase
      Price as shown in the Preliminary Adjustment Statement (as hereafter defined),
      less the amount of the First Extension Deposit (as defined in
      Section 6.1(c) below), if any, the Second Extension Deposit (as defined in
      Section 6.1(d) below), if any, the Third Extension Deposit (as defined in
      Section 6.1(e) below), if any, as applicable, and any amounts to be placed
      at Closing into an Escrow Account as described in Sections 2.4(a), 4.1(c),
      and 5.2(b)(2) below. The costs of any Escrow Account shall be borne equally
      by
      the Parties.

     

    (b)  Three
      business days after the Final Adjustment Statement (as hereafter defined)
      becomes binding as set forth in Section 2.4(b) below, Seller or Purchaser,
      as the case may be, shall pay or cause to be paid to the other Party the amount
      shown in the final and binding Final Adjustment Statement as being due to the
      other Party. Such payment shall be made by bank wire transfer of immediately
      available funds to an account designated by the payee. Any disputed amounts
      deposited in the Escrow Account pursuant to Section 2.4(a) of this Agreement,
      less escrow fees, shall be applied to the amount shown in the final and binding
      Final Adjustment Statement and the Parties shall execute joint written
      instructions to the Escrow Agent to cause the Escrow Account to be distributed
      in a manner consistent with the final and binding Final Adjustment Statement.
      Interest on disputed amounts deposited in the Escrow Account shall be
      distributed in the same manner as the principal amount of the Escrow Account
      and
      shall be owed in addition to the amount shown in the final and binding Final
      Adjustment Statement. 

     

    
      
        
        

      

      
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        Section 2.4  Preliminary
          and Final Adjustment Statements.

         

        (a)  Seller
          shall deliver to Purchaser two business days prior to the Original Closing
          Date
          or Extended Closing Date, as applicable, a statement (the “Preliminary
          Adjustment Statement”)
          setting forth Seller’s estimate on a cash basis of the Adjusted Purchase Price.
          The Preliminary Adjustment Statement shall be based upon actual information
          available to Seller at the time of its preparation and upon Seller’s good faith
          estimates and assumptions. There shall be attached to the Preliminary Adjustment
          Statement such supporting documentation and other data as is reasonably
          necessary to provide a basis for Seller’s estimate of the Adjusted Purchase
          Price. Seller and Purchaser shall mutually agree on the Preliminary Adjustment
          Statement one business day prior to Closing, with any disagreements to
          be
          handled in the Final Adjustment Statement and the dispute resolution mechanism
          set forth in subparagraph (b) below. Any amounts in dispute shall be placed
          at
          Closing into an escrow account (“Escrow Account”) established pursuant to an
          escrow agreement (the “Escrow
          Agreement”)
          with
          Wells Fargo Bank NA or another mutually acceptable financial institution
          (“Escrow
          Agent”)
          until
          the Final Adjustment Statement has become binding as provided in subparagraph
          (b) below. 

         

      

    

    (b)  After
      Closing, Purchaser and its representatives may conduct an audit of the
      Preliminary Adjustment Statement and each adjustment or payment that was not
      finally determined as of Closing and recalculate the estimated Adjusted Purchase
      Price, as described in Section 2.4(a) hereof. On or prior to the 60th day
      after the Closing, Purchaser may present Seller with a statement setting forth
      exceptions, if any, to the Preliminary Adjustment Statement and any final
      determinations of adjustments or payments (the “Final
      Adjustment Statement”).
      The
      Final Adjustment Statement shall become final and binding on Seller and
      Purchaser on the 30th day following the date the Final Adjustment Statement
      is
      received by Seller, unless prior to such 30th day Seller shall deliver to
      Purchaser a written report containing any changes that Seller proposes to make
      to the Final Adjustment Statement. If Seller has delivered a notice of
      disagreement, then the Final Adjustment Statement will become final and binding
      upon written agreement between Purchaser and Seller resolving all disagreements
      of Seller. If the Final Adjustment Statement has not become final and binding
      by
      the 45th day following its receipt by Seller, then Seller’s disagreements with
      the Final Adjustment Statement shall be determined by binding arbitration
      conducted by the accounting firm of Ehrhardt Keefe Steiner Hottman PC
      (“Accounting
      Firm”)
      in
      accordance with the following procedures. No later than 20 days after
      initiating the arbitration procedure, the Accounting Firm shall conduct a
      hearing, at which time the Parties shall present such evidence and witnesses
      as
      they may choose, with or without counsel. Adherence to formal rules of evidence
      shall not be required, but the arbitrator shall consider any evidence and
      testimony that it determines to be relevant, in accordance with procedures
      that
      it determines to be appropriate. The arbitrator shall render its written
      decision regarding Seller’s disagreements with the Final Adjustment Statement
      within 30 days after the hearing. A decision may be filed in any court of
      competent jurisdiction and may be enforced by any Party as a final judgment
      of
      such court. Without the consent of Purchaser and Seller, the arbitration shall
      not determine any issues other than Seller’s disagreements with the Final
      Adjustment Statement. The fees and expenses of such arbitration shall be borne
      50% by Seller and 50% by Purchaser. 

     

    
      
        
        

      

      
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    Section 2.5  Allocation
      of Purchase Price. 

     

    Exhibit
      G
      attached
      hereto sets forth the allocation of the Purchase Price among the Properties
      (the
“Allocated
      Value”
of
      the
      respective Properties, as applicable). Seller and Purchaser agree that the
      Allocated Values shall be used by the Parties for calculating adjustments to
      the
      Purchase Price as provided herein. 

     

    ARTICLE 3

    DUE
      DILIGENCE INSPECTION

     

    Section 3.1  Access
      to Information.
      

     

    Between
      the date of this Agreement and the Original Closing Date, Seller shall, subject
      to Section 6.6 hereof, take all commercially reasonable steps to (a) give
      Purchaser and its representatives full access at all reasonable times to the
      Assets and full access to, and the right to copy, all the books, records,
      accountants’ work papers, surveys, maps, studies, contracts, geological,
      geophysical, engineering or other data, computer runs, title opinions, curative
      materials and other documents of Seller pertaining to the ownership and
      operation of the Assets; provided that Seller shall have no obligation hereunder
      to provide Purchaser or its representatives with access to geological,
      geophysical, engineering or other data to the extent that such data is subject
      to a confidentiality or contractual obligation to a third party or to an
      attorney/client or attorney work product privilege, or relates to properties
      or
      interests which are not Assets, and (b) furnish or make available to Purchaser
      such financial and operating data and other information with respect to the
      Assets as Purchaser shall from time to time reasonably request, but in either
      case only to the extent that Seller may do so without violating any
      confidentiality or contractual obligation to a third party and to the extent
      that Seller has authority to grant such access, and without violating any
      privilege; provided, however, that Seller shall use all commercially reasonable
      efforts as soon as practicable after the date hereof to obtain permission from
      any such third party to grant Purchaser the access contemplated hereby. If
      copying of materials by Purchaser is prohibited due to the effect of the
      preceding, Seller shall (to the extent not also prohibited) provide Purchaser
      with reasonable access for the review of such materials for a period of one
      year
      following the Closing. Except as provided in Section 7.10(a) hereof, no
      warranty is made by Seller as to the information so supplied, and Purchaser
      agrees that any conclusions drawn therefrom are the result of its own
      independent review and judgment.

     

    Section 3.2  Access
      to the Assets.

     

    (a)  Prior
      to
      the Original Closing Date, Seller shall take all commercially reasonable steps
      to enable Purchaser and/or Purchaser's authorized representatives, agents and
      employees during normal business hours and, upon advance notice, to have
      reasonable access to the Assets to allow Purchaser to conduct, at Purchaser's
      sole risk and expense, on-site inspections and environmental assessments of
      the
      Assets including the right to collect air, soil, groundwater or surface water
      samples and to perform other environmental testing (“Environmental
      Examination”).
      In
      connection with such Environmental Examination, Purchaser agrees not to
      unreasonably interfere with activities on or the normal operation of the Assets.
      Except to the extent directly caused by Seller's or operator’s gross negligence
      or willful misconduct, Purchaser agrees to indemnify, defend and hold harmless
      Seller from and against all Losses (as defined in Section 9.3) arising from
      or related to the activities of Purchaser, its representatives, agents or
      employees in connection with such inspection regardless of the negligence or
      strict liability of Seller.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    (b)  Purchaser
      shall give Seller prior written notice of any environmental inspections or
      tests, and Purchaser shall give Seller the opportunity to participate in all
      such inspections and tests and shall provide Seller and the operator of the
      applicable Assets, at no cost to Seller or the operator of the applicable
      Assets, all reports of such environmental inspections and tests, provided that
      all such reports shall be deemed to be confidential between the Parties and
      such
      operator and part of the information set forth in Section 6.6.

     

    ARTICLE 4

    TITLE
      MATTERS

     

    Section 4.1  Defective
      Interests; Adjustments.

     

    (a)  On
      or
      before 5:00 p.m. MST on March 6, 2006, (the “Defects
      Date”),
      Purchaser shall deliver to Seller written notice of Defective Interests (as
      hereinafter defined), if any. Such notice shall include (i) a description of
      the
      Defective Interests, (ii) the basis for the defect (“Defect”)
      that
      Purchaser believes causes such Assets to be treated as Defective Interests,
      (iii) the Allocated Values of the Defective Interests, and (iv) the amount
      by
      which Purchaser reasonably believes the Allocated Values of the Defective
      Interests have been reduced (the “Defect
      Amounts”)
      and the
      computation and information upon which Purchaser’s belief is based. Purchaser
      shall be deemed to have waived all rights under this Article 4, but not under
      the special warranty of title included in the Conveyance to be delivered at
      Closing, with respect to Title Defects, as defined below, unless such Title
      Defects are included in a written notice given by the Defects Date.

     

    (b)  “Defective
      Interests”
shall
      mean that portion of the Properties that Purchaser is entitled under
      Section 4.2 to treat as defective. 

     

    (c)  Except
      as
      otherwise provided in clause (f) below, the Parties shall proceed as follows
      with respect to Defective Interests: 

     

    (1)  as
      to
      those Assets which are Defective Interests for which, prior to the Closing,
      the
      Defect or other basis for treating such Assets as Defective Interests has been
      removed to the reasonable satisfaction of Purchaser, or Purchaser has agreed
      to
      waive the relevant Title Defect (as defined below) or other Defect and purchase
      such Assets notwithstanding the Defect, or Seller has provided to Purchaser
      an
      indemnity reasonably acceptable to Purchaser indemnifying Purchaser against
      all
      Losses, as defined in Section 9.3 hereof, with respect to such Assets
      arising from the Defect or basis for such Assets being treated as Defective
      Interests, there shall be no adjustment to the Purchase Price; 

     

    
      
        
        

      

      
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    (2)  as
      to
      those Assets which are Defective Interests for which Purchaser and Seller agree
      to the Defect Amounts, the Purchase Price shall be reduced by such aggregate
      amount of such Defect Amounts; 

     

    (3)  as
      to
      those Assets which are Defective Interests for which the Parties agree that
      Seller may attempt to cure such Defective Interests to the satisfaction of
      Purchaser within ninety (90) days after the Closing, an amount equal to the
      Allocated Value of the Assets affected by such Defective Interests shall be
      placed in the Escrow Account as provided in Section 2.3(a) of this
      Agreement pending such cure; and 

     

    (4)  except
      as
      otherwise provided in Section 2.2(b)(6), as to those Assets which are Defective
      Interests for which Seller does not elect to cure or is unable to cure to the
      reasonable satisfaction of Purchaser within the time provided in this
      subparagraph or such later date as is mutually agreed to by the Parties or
      as to
      which the Parties do not agree on the amount of the Purchase Price adjustment
      under (c)(2) above, such Defective Interests shall be excluded from the Assets
      to be purchased by Purchaser hereunder and the Purchase Price shall be reduced
      by an amount equal to the aggregate Allocated Values of such excluded Defective
      Interests.

     

    (d)  In
      determining which portion of the Assets are Defective Interests, it is the
      intent of the Parties to include, when practical, only that portion of the
      Assets materially affected by the Defect or the basis for such Assets being
      treated as Defective Interests. Defect Amounts shall be determined by the
      Parties in good faith taking into account all relevant factors; provided that
      if
      the Defect is a lien or encumbrance on a Property, the Defect Amount shall
      be
      the cost of removing such lien or encumbrance. 

     

    (e)  If
      the
      aggregate total of the Defect Amounts and Environmental Defects exceeds Ten
      Percent (10.0%) of the Purchase Price, then either Seller or Purchaser may
      terminate this Agreement pursuant to Section 11.1, without liability to the
      other, by giving notice on or before the Original Closing Date or, if the
      Purchaser elects to extend the Closing pursuant to Section 6.1(c), by the First
      Extension Date, provided, however, that in that event the First Extension
      Deposit shall promptly be returned to Purchaser.

     

    (f)  Notwithstanding
      anything to the contrary, in no event shall there be any adjustments to the
      Purchase Price unless, and only to the extent that, the aggregate of the
      applicable Defect Amounts exceeds $150,000 (“Defects
      Threshold”);
      provided, however, that Seller shall nevertheless provide reasonable assistance,
      as requested by Purchaser, but at Purchaser’s cost and expense, to cure the
      Defects even if the applicable Defect Amounts total less than the Defects
      Threshold. 

     

    
      
        
        

      

      
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    Section 4.2  Identification
      of Defective Interests.

     

    (a)  If,
      prior
      to the Defects Date, there has been material noncompliance with the laws, rules,
      regulations, ordinances or orders (“Legal
      Requirements”)
      of any
      governmental, agency or authority having jurisdiction over the Assets
      (“Governmental
      Authority”),
      resulting in substantial risk of loss of the Assets or value thereof, then
      Purchaser may elect to treat such of the Assets as are materially and adversely
      affected by such noncompliance as Defective Interests.

     

    (b)  If
      any
      necessary third party consent to the sale and transfer of the Assets is not
      obtained prior to the Defects Date, Purchaser may elect to treat that portion
      of
      the Assets subject to such consent requirement as Defective
      Interests.

     

    (c)  If,
      prior
      to the Defects Date, there exists any suit, action or other proceeding before
      any court or government agency that would result in substantial loss or
      impairment of Seller’s title to any material portion of the Assets or a material
      portion of the value thereof, Purchaser may elect to treat that portion of
      the
      Assets substantially and
      materially affected thereby as Defective Interests.

     

    (d)  If
      any
      preferential right to purchase is exercised, that portion of the Assets affected
      by the exercise of such preferential right shall be treated as Defective
      Interests; provided, however, that the provisions of Section 4.1 with
      respect to reduction of the Purchase Price shall not be applicable, except
      the
      provisions of 4.1(e), and Seller instead shall pay to Purchaser all
      consideration received by Seller due to exercise of such preferential right.
      Such payment shall be made on the later of the date of Closing or the date
      on
      which the consideration is received.

     

    (e)  If
      there
      are any division orders or sales contracts not terminable as to Seller or
      Seller’s interests in the Assets upon 30 days’ notice to the other parties
      thereto or  contracts
      other than those listed on Exhibit C hereto, Purchaser may elect to treat
      that portion of the Assets subject to such division orders, sales contracts
      or
      contracts as Defective Interests. 

     

    (f)  If
      any
      Property is affected by a matter which constitutes a Title Defect, Purchaser
      may
      elect to treat that portion of the Property subject to such Title Defect as
      a
      Defective Interest. The term “Title
      Defect”
as
      used
      herein shall mean any material encumbrance, encroachment, irregularity, defect
      in, or objection to Seller’s title to any Property (other than Permitted
      Encumbrances (as hereinafter defined)), which, based upon petroleum industry
      standards for the area in which the Properties are located, alone or in
      combination with other defects, renders Seller’s title to such Property less
      than good and marketable, or which would unreasonably interfere with Purchaser’s
      enjoyment of such Property. The term “good
      and marketable”
as
      used
      herein shall mean that title of Seller, as reflected in the real property
      records of the county or counties where the Assets are located as of the Closing
      Date, which entitles Seller to receive from a Property not less than the
      interest shown on Exhibit G hereto as the aggregate NRI plus ORRI without
      reduction, suspension or termination throughout the duration of such Property,
      obligates Seller to bear a percentage of costs and expenses relating to the
      maintenance, development and operation of such Property not greater than the
      interest shown on Exhibit G hereto as WI (unless there is a corresponding
      increase in the NRI plus ORRI), and is free and clear of material liens,
      encumbrances, obligations or defects taken or effective at or prior to Closing
      (other than the Permitted Encumbrances). The term “Permitted
      Encumbrances”
as
      used
      herein shall mean: 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    (1)  lessors’
      royalties, overriding royalties, reversionary interests and similar burdens
      of
      record, in each case so long as they do not operate to reduce the NRI plus
      ORRI
      of Seller below that set out in Exhibit G; 

     

    (2)  preferential
      rights to purchase and required third-party consents and similar agreements
      with
      respect to which waivers or consents are obtained from the appropriate parties
      or the appropriate time period for asserting the right has expired without
      an
      exercise of the rights; 

     

    (3)  any
      non-perfected liens for taxes or assessments or, if perfected, that are being
      contested in good faith in the normal course of business; 

     

    (4)  any
      non-perfected materialman’s, mechanic’s, repairman’s, employee’s, contractor’s,
      operator’s and other similar liens or charges arising in the ordinary course of
      business or, if perfected, their validity is being contested in good faith
      by
      appropriate action;

     

    (5)  all
      rights to consent by, required notices to, filings with, or other actions by
      governmental entities in connection with the sale or conveyance of oil and
      gas
      leases or interests therein if they are customarily obtained subsequent to
      the
      sale or conveyance; 

     

    (6)  conventional
      rights of reassignment prior to release or termination of a leasehold interest
      requiring ninety (90) days or less notice to the holders of the rights;

     

    (7)  easements,
      rights-of-way, servitudes, permits, surface leases and other rights in respect
      of surface operations which do not materially impair the use of the Properties
      as currently owned and operated;

     

    (8)  all
      rights reserved to or vested in any Governmental Authority to control or
      regulate any of the Assets in any manner, and all applicable laws, rules and
      orders of a Governmental Authority;

     

    (9)  any
      encumbrance on or affecting the Assets which is paid by Seller at or prior
      to
      Closing or which is discharged at or prior to Closing;

     

    (10)  any
      Title
      Defects that Purchaser shall have expressly waived in writing or which are
      deemed to have been waived by operation of Section 4.1(a);

     

    (11)  liens
      and
      security interests that are to be released at Closing;

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

    (12)  defects
      in the early chain of title consisting of the mere failure to recite marital
      status in a document or omission of successors of heirship proceedings, unless
      Purchaser provides affirmative evidence that such failure or omission has
      resulted in another party’s actual and superior claim of title to the relevant
      Property;

     

    (13)  defects
      that have been cured by possession under applicable statutes of limitation
      for
      adverse possession or prescription;

     

    (14)  defects
      whatsoever if Seller or its predecessors in title have received proceeds of
      such
      production from the relevant property for the last seven years without
      interruption or challenges based on the alleged defect;

     

    (15)  defects
      based on lack of information in Seller’s files or arising out of lack of survey,
      unless a survey is required by applicable laws or regulations; 

     

    (16)  defects
      based on a gap in Seller’s chain of title in the Bureau of Land Management
      (“BLM”) records as to Federal Leases, in the State’s records as to State Leases
      or in the county records as to fee Leases, unless such gap is affirmatively
      shown to exist in such records by an abstract of title, title opinion or
      landman’s title chain, which documents shall be included in Purchaser’s notice
      of Defective Interests; and

     

    (17)  changes
      in WI, NRI or ORI which are based on changes in drilling and spacing units,
      tract allocation or other changes in pool or unit participation occurring after
      the Closing.

     

    (g)  If,
      prior
      to the Defects Date, Purchaser becomes aware of (i) any call upon, option
      to purchase or similar rights with respect to any portion of production from
      the
      Assets (other than any right of a third party operator of any of the Properties
      to market Seller’s share of production from such Properties which such right is
      terminable on thirty days’ notice or less) or (ii) any Well is subject to
      penalties on allowables after the date of this Agreement because of any
      overproduction or violation of applicable Legal Requirements, Purchaser may
      treat the Asset affected thereby as a Defective Interest.

     

    (h)  If,
      prior
      to the Defects Date, Purchaser becomes aware of any material Basic Document
      (i) which is not in full force and effect or valid and legally binding on
      Seller, (ii) as to which Seller is in breach or default in a material
      respect, or (iii) under which Seller has failed to timely make any required
      payments, Purchaser may treat the Asset materially and adversely affected
      thereby as a Defective Interest.

     

    (i)  If
      any
      Assets are burdened by surface use restrictions, excluding BLM restrictions
      typical for the area in which the Assets are located, that would be unacceptable
      to a prudent operator, or there are rights of third parties which could
      interfere with operations for the exploration, development and production within
      a time that would be acceptable to a prudent operator, Purchaser may treat
      the
      Assets materially and adversely affected thereby as a Defective
      Interest.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

    (j)  If
      there
      are any tax partnership agreements or other agreements requiring payment of
      costs on a basis disproportionate with the working interest to be acquired
      by
      Purchaser, Purchaser may treat the Assets affected thereby as a Defective
      Interest.

     

    Section 4.3  Casualty
      Loss.

     

    If,
      prior
      to Closing, any of the Assets are damaged or destroyed by fire, blowout or
      other
      casualty (“Casualty
      Defect”),
      Seller shall notify Purchaser promptly after Seller learns of such event. Seller
      shall have the right, but not the obligation, to cure any such Casualty Defect
      by repairing such damage or, in the case of personal property or fixtures,
      replacing the Assets affected thereby with equivalent items, no later than
      the
      date of Closing. To the extent Seller anticipates that a Casualty Defect cannot
      or will not be cured prior to Closing, Seller shall notify Purchaser promptly
      and the parties will promptly meet in good faith and attempt to agree upon
      the
      aggregate reduction in value of such Assets (including associated damages)
      on
      account of such Casualty Defects. If the parties are unable to agree on such
      amount prior to Closing, then such determination shall be made by an appraiser
      knowledgeable in the field and acceptable to both parties. If Seller and
      Purchaser are unable to agree on an appraiser, each shall select an appraiser
      and the appraisers so selected shall select a third appraiser to make such
      determination. If such value in aggregate is determined to be less than ten
      percent (10%) of the Purchase Price, Purchaser shall proceed to purchase the
      Assets and, at the option of Purchaser, either (a) the Purchase Price will
      be reduced by the aggregate reduction in the value of the Assets attributable
      to
      the Casualty Defects (as agreed by the parties or determined by an appraiser)
      and Seller shall retain all insurance proceeds and claims against other parties
      in respect of any such Casualty Defect, or (b) Seller shall assign to
      Purchaser all of its rights to receive insurance proceeds, and all claims
      against other parties, in each case in respect of any such Casualty Defect,
      and
      the Purchase Price will be reduced by an amount equal to the sum of Seller’s
      retention or deductible under the Seller’s insurance policies plus the amount by
      which such aggregate reduction in value exceeds Seller’s insurance policies
      limits. If the aggregate reduction in value of the Assets attributable to
      Casualty Defects equals or exceeds ten percent (10%) of the Purchase Price,
      Purchaser will have the right to terminate this Agreement pursuant to
      Section 9.1.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    ARTICLE 5

    ENVIRONMENTAL
      MATTERS 

     

    Section 5.1  Definitions. 

     

    For
      the
      purposes of the Agreement, the following terms shall have the following
      meanings:

     

    “Environmental
      Defect”
means
      a
      condition in, on or under the Assets (including, without limitation, air, land,
      soil, surface and subsurface strata, surface water, ground water, or sediments)
      that causes an Asset to be in material violation of an Environmental Legal
      Requirement or a condition that can reasonably be expected to give rise to
      costs
      or liability under applicable Environmental Legal Requirements.

    

    “Environmental
      Legal Requirement”
means
      any statute, rule, regulation, code or order, issued by any Governmental
      Authority in effect, and as in effect, on or before the Effective Time relating
      to the protection of the environment or the release or disposal of waste
      materials.

    

    Section 5.2  Adjustments
      for Environmental Defects.
      

     

    (a)  Notice
      of Environmental Defects.
      Purchaser shall provide Seller with written notice of any Environmental Defect
      which Purchaser's Environmental Examination reveals and will provide evidence
      thereof. Such notice and evidence shall be given on or before the Defects Date
      set forth in Section 4.1 hereof. Purchaser shall be deemed to have waived
      all rights under this Article 5, but not its rights and remedies under Articles
      7 and 9 hereof or under any other provisions of this Agreement, with respect
      to
      Environmental Defects unless such Environmental Defects are included in a
      written notice given by the Defects Date.

     

    (b)  Defect
      Adjustments.
      Upon
      timely delivery of written notice of an Environmental Defect, the Parties shall
      proceed as follows:

     

    (1)  Seller
      shall have the option to attempt to remediate such Environmental Defects to
      the
      satisfaction of Purchaser on or before the Closing Date;

     

    (2)  By
      mutual
      consent of the Parties, Seller shall have the option to attempt to remediate
      such Environmental Defects to the satisfaction of Purchaser within ninety (90)
      days after the Closing provided, however, that an amount equal to the Allocated
      Value of the Assets affected by such Environmental Defects shall be placed
      in
      the Escrow Account as provided in Section 2.3(a) of this Agreement pending
      such remediation; 

     

    (3)  If
      Seller
      does not elect to cure or is unable to cure such Environmental Defects to the
      reasonable satisfaction of Purchaser on or before the Closing Date or such
      later
      date as is mutually agreed to by the Parties, Purchaser shall have the option
      to
      either accept assignment of the Assets affected by such Environmental Defects
      or
      to exclude such Assets from this Agreement (together with any Defective
      Interests excluded from this Agreement pursuant to Section 4.1(c)(4), the
“Excluded
      Assets”).
      If
      Purchaser elects to exclude such Assets, the Purchase Price shall be adjusted
      downward by an amount equal to the Allocated Value of such Excluded
      Assets.

     

    
      
        
        

      

      
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    ARTICLE 6

    CLOSING,
      PAYMENT AND CERTAIN ACTIONS

    OF
      THE PARTIES PRIOR TO CLOSING

     

    Section 6.1  Time
      and Place of Closing.

     

    (a)  The
      purchase by Purchaser and the sale by Seller of the Assets as contemplated
      by
      this Agreement (the “Closing”)
      shall,
      unless otherwise agreed to in writing by Purchaser and Seller, take place at
      the
      offices of Holland & Hart LLP,
      at
      555 Seventeenth Street, Suite 3200, Denver, Colorado.

     

    (b)  Except
      as
      provided in this Section 6.1, the Closing shall be March 6, 2006
      (“Original
      Closing Date”).
      

     

    (c)  Purchaser
      may elect to extend the Closing by ten (10) business days to March 16, 2006
      (the
“First
      Extended Closing Date”)
      by the
      payment of Five Hundred Thousand Dollars and No Cents ($500,000.00) (the
“First
      Extension Deposit”)
      to
      Seller in immediately available funds no later than 5:00 pm, MST, on or before
      the next business day after the Original Closing Date. The First Extension
      Deposit shall be nonrefundable in the event the Closing does not occur except
      as
      otherwise provided in Article 11. The First Extension Deposit shall be
      creditable against the Purchase Price at Closing under Section 2.3 of this
      Agreement.

     

    (d)  If
      Purchaser has made the election under clause (c) above, Purchaser may elect
      to further extend the Closing to April 28, 2006 (the “Second
      Extended Closing Date”)
      by (i)
      notifying Seller in writing no later than the business day preceding the First
      Extended Closing Date (i.e., no later than 5:00 p.m., MST, on or before March
      15, 2006), and (ii) the payment of Seven Hundred Fifty Thousand Dollars and
      No
      Cents ($750,000.00) (the “Second
      Extension Deposit”)
      to
      Seller in immediately available funds no later than 5:00 pm, MST, on or before
      the First Extended Closing Date. The Second Extension Deposit shall be
      nonrefundable if the Closing does not occur except as otherwise provided in
      Article 11. The Second Extension Deposit shall be creditable against the
      Purchase Price at Closing under Section 2.3 of this Agreement.

     

    (e)  If
      Purchaser has made the election under clause (d) above, Purchaser may elect
      to
      further extend the Closing by a final thirty (30) days to May 30, 2006 (the
      “Third
      Extended Closing Date”)
      by (i)
      notifying Seller in writing no later than the second business day preceding
      the
      Second Extended Closing Date (i.e., no later than 5:00 p.m., MST, on or before
      April 26, 2006), and (ii) the payment of One Million Dollars and no cents
      ($1,000,000.00) (the “Third
      Extension Deposit”)
      to
      Seller in immediately available funds no later than 5:00 pm, MST, on or before
      the Second Extended Closing Date. The Third Extension Deposit shall be
      nonrefundable if the Closing does not occur except as otherwise provided in
      Article 11. The Third Extension Deposit shall be creditable against the Purchase
      Price at Closing under Section 2.3 of this Agreement.

     

    
      
        
        

      

      
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    (f)  The
      payment of a First Extension Deposit, a Second Extension Deposit, or a Third
      Extension Deposit, and any elections under subparagraphs (c) through (e) above,
      shall not extend or otherwise affect the Defects Date in
      Section 4.1(a).

     

    (g)  Notwithstanding
      anything to the contrary herein, Purchaser shall use reasonable good faith
      efforts to notify Seller as soon as it has determined that it will not be making
      a First Extension Deposit as provided in subparagraph (c) and no later than
      April 1, 2006 if it has then determined that it will not be making the Third
      Extension Deposit as provided in subparagraph (e). 

     

    Section 6.2  Government
      Reviews.

     

    Seller
      and Purchaser shall in a timely manner (a) make all required filings, if any,
      with, and prepare applications to and conduct negotiations with, each
      Governmental Authority as to which such filings, applications or negotiations
      are necessary or appropriate in the consummation of the transactions
      contemplated hereby, and (b) provide such information as each may reasonably
      request to make such filings, prepare such applications and conduct such
      negotiations. Each party shall cooperate with and use all reasonable efforts
      to
      assist the other with respect to such filings, applications and
      negotiations.

     

    Section 6.3  Inconsistent
      Activities.

     

    Unless
      and until this Agreement has been terminated pursuant to Section 11.1
      hereof, Seller shall not, without the prior written consent of Purchaser,
      directly or indirectly sell or otherwise transfer, negotiate to sell or
      otherwise transfer, or enter into any agreement with any party other than
      Purchaser that provides for the purchase and sale or other transfer of the
      Assets.

     

    Section 6.4  Division
      Orders; Transfer Orders.

     

    (a)  Seller
      shall execute at the Closing Letters in Lieu of Division and Transfer Orders
      relating to the Assets on forms prepared by Purchaser and reasonably
      satisfactory to Seller to reflect the transactions contemplated
      hereby.

     

    (b)  Seller
      shall execute at the Closing the Conveyance and all other assignments necessary
      to convey to Purchaser all Federal or State leases and properties included
      in
      the Assets in the form as prescribed by the applicable Governmental
      Authority.

     

    (c)  Seller
      shall at the Closing execute with regard to each operating agreement to which
      Seller is a party and relating to the Assets, each notice prepared by Purchaser,
      in a form reasonably acceptable to Seller, stating that Seller has assigned
      to
      Purchaser its interest in the property subject to such operating
      agreement.

     

    
      
        
        

      

      
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    Section 6.5  Public
      Announcements.

     

    Each
      Party shall obtain the written consent of the other Party hereto prior to any
      public announcement by such Party regarding the existence of this Agreement,
      the
      contents hereof or the transactions contemplated hereby; provided, however,
      the
      foregoing shall not restrict disclosures by Purchaser (or Purchaser’s parent
      company) or Seller in compliance with applicable securities or other laws or
      in
      compliance with existing loan or other agreements binding such Party (or its
      parent companies) in such Party’s discretion.

     

    Section 6.6  Information
      Kept Confidential.

     

    Purchaser
      and Seller shall hold in strict confidence all aspects of the transactions
      contemplated by this Agreement and all information and data concerning the
      Assets and obtained in connection with the transactions contemplated by this
      Agreement (other than information and data that becomes generally available
      to
      the public other than through disclosure by a party hereto or its partners,
      officers, employees or representatives) and without the prior written consent
      of
      the other party hereto neither Purchaser nor Seller shall disclose any such
      information to anyone other than to its officers, employees and representatives;
      provided, however, the foregoing shall not restrict disclosures by Purchaser
      (or
      Purchaser’s parent company) or Seller in the event and to the extent outside
      counsel for the Purchaser or Seller, as applicable, advises the disclosing
      party
      that such disclosure is required to comply with applicable securities or other
      laws or with existing loan or other agreements binding such party (or its
      affiliated companies). The aforesaid obligation shall terminate on the earlier
      to occur of (a) the Closing or (b) as the information and data in
      question become generally available to the public other than through the breach
      by either party or its partners, officers, employees or representatives of
      said
      obligation. Seller agrees that, after the Closing, it will hold in strict
      confidence and not disclose to anyone other than its representatives any
      information and data concerning the Assets provided to Purchaser in connection
      with the transactions contemplated by this Agreement unless such information
      and
      data have become generally available to the public other than through disclosure
      by Seller or its partners, officers, employees or representatives. If this
      Agreement is terminated for any reason, Purchaser shall promptly return to
      Seller or, with Seller’s prior written consent, destroy all information and data
      furnished or made available by Seller to Purchaser and obtained by Purchaser
      in
      the course of its investigation of the Assets and Purchaser agrees not to retain
      copies of any such information or data in such event, to keep all such
      information and data confidential, and not to disclose any such information
      or
      data to any third party without obtaining the prior written consent of Seller
      to
      such disclosure unless such information and data have become generally available
      to the public other than through disclosure by Purchaser or its officers,
      employees or representatives or unless otherwise required under applicable
      securities or other laws or by existing loan or other agreements binding such
      party (or its affiliated companies).

     

    
      
        
        

      

      
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    Section 6.7  Operation
      of Business.

     

    From
      the
      date hereof until the Closing, Seller (i) shall obtain the prior written
      consent of Purchaser with respect to all material decisions to be made with
      respect to the Assets, including without limitation any drilling, completion,
      reworking or similar operations or decisions, and any termination, modification,
      entering into or extension of any material Basic Documents or understandings
      affecting the Assets, (ii) shall operate the Assets in a manner consistent
      with past practices, and in accordance with applicable Legal Requirements and
      existing operating agreements, including maintaining customary books and records
      with respect to the Assets consistent with prior practice, (iii) shall act
      with respect to the Assets in good faith and in accordance with its best
      business judgment as if the Assets were not being sold to Purchaser hereunder,
      (iv) shall maintain insurance coverage on the Assets in the amounts and of
      the types presently in force, (v) shall use commercially reasonable efforts
      to maintain in full force and effect all Leases and other Basic Documents
      relating to the Properties, (vi) shall use commercially reasonable efforts
      to maintain in full force and effect all material permits and approvals
      affecting the Assets, (vii) shall not transfer, sell, hypothecate, encumber
      or otherwise dispose of any of the Assets, (viii) shall not take any action
      with respect to the Assets that would create any liabilities other than those
      created in the ordinary course of business, (ix) shall use commercially
      reasonable efforts to maintain the Properties in a manner consistent with past
      practices and in a state of repair and operation at least as good as at present,
      except for ordinary wear and tear and depreciation, and (x) shall not
      modify, terminate, renew, suspend or abrogate any Basic Document.

     

    Section 6.8  Notice
      of Proceedings and Proposals.

     

    If
      between the date hereof and the Closing Seller should obtain actual knowledge
      of
      (i) any pending or threatened suit, action, proceeding, claim,
      investigation or inquiry by any person, entity or Governmental Authority which
      could affect the Assets, (ii) any proposal from any third party to engage
      in any material transaction with respect to the Assets, or (iii) any
      material adverse change in the Assets (or any occurrence or circumstance
      affecting the Assets which might reasonably be expected to result in any such
      change), Seller shall give prompt written notice to Purchaser of such
      matter.

     

    Section 6.9  Consents.

     

    Seller
      shall promptly take such reasonable actions necessary to obtain and deliver
      at
      Closing all third party consents which are required to consummate the
      transaction contemplated hereby. The form and content of all of Seller's
      solicitations for consents affecting the Assets shall be subject to Purchaser's
      approval. Purchaser shall use its commercially reasonable efforts to promptly
      identify to Seller any such third party consents of which it becomes aware
      prior
      to Closing.

     

    
      
        
        

      

      
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    Section 6.10  Financing.

     

    Purchaser
      shall promptly take such reasonable actions necessary to obtain financing
      necessary to consummate the transactions contemplated herein. Purchaser shall
      keep Seller reasonably informed on a weekly basis concerning the status and
      results of its efforts to obtain such financing.

     

    ARTICLE 7

    REPRESENTATIONS
      AND WARRANTIES OF SELLER

     

    To
      the
      extent the same are transferable, Seller shall assign to Purchaser, its
      successors and assigns, at Closing, all of Seller's rights under and by virtue
      of all covenants and representations, warranties and indemnifications pertaining
      to the Assets, express or implied (including, without limitation, title and
      environmental representations, warranties and indemnifications) that were
      received by Seller in connection with its acquisitions of the Assets. To the
      extent the same are not transferable, Seller shall use reasonable good faith
      efforts to enforce the same at the request of and on behalf of
      Purchaser.

    

    Seller
      makes the following representations and warranties as of the Effective Time
      and
      as of Closing. As used in this Article 7, “to the best of Seller’s knowledge”
means the actual knowledge of Lewis W. Douglas, Jr., Scott R. Clark or Douglas
      Battin, after reasonable inquiry, including, but not limited to, reasonable
      inquiry of the operators of the Properties.

     

    Section 7.1  Organization,
      Standing and Power.

     

    SEI
      is a
      Nevada corporation duly formed, validly existing and in good standing under
      the
      laws of the State of Nevada, and SEWI is a Nevada corporation duly formed,
      validly existing and in good standing under the laws of the State of Nevada.
      Seller has all requisite power and authority to own, lease and operate its
      properties and to carry on its business as now being conducted, and is duly
      qualified to do business as a foreign corporation and is in good standing in
      each jurisdiction in which the ownership of the Assets or the nature of its
      activities makes such qualification necessary. Seller has all requisite power
      and authority to execute, deliver and perform this Agreement and to consummate
      the transaction contemplated hereby. 

     

    
      
        
        

      

      
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        Section 7.2  Authority
          and Enforceability.

         

        The
          execution, delivery and performance by Seller of this Agreement, and the
          consummation of the transaction contemplated hereby, have been duly and
          validly
          authorized by all necessary action on the part of Seller, and this Agreement
          constitutes the valid and binding obligation of Seller, enforceable against
          Seller in accordance with its terms except as such enforceability may be
          limited
          by applicable bankruptcy or other similar laws affecting the rights of
          creditors
          generally. Neither the execution and delivery by Seller of this Agreement
          or the
          Conveyance nor the consummation of the transactions contemplated hereby
          or
          thereby, nor compliance by Seller with any of the provisions hereof or
          thereof,
          shall (a) conflict with or result in a breach of any provision of its
          articles or certificate of organization, or bylaws, (b) conflict with or
          result in a breach of any agreement, instrument, mortgage, deed of trust,
          lease
          or other obligation to which Seller is a party or by which Seller or any
          of the
          Assets is bound or affected, (c) violate any judgment, order, ruling or
          decree applicable to Seller or to any of the Assets, (d) violate any
          statute, rule or regulation applicable to Seller or the Assets, assuming
          receipt
          of all routine governmental consents normally acquired after the consummation
          of
          transactions such as transactions of the nature contemplated by this Agreement,
          or (e) result in the imposition of any security interest, lien, claim,
          charge or encumbrance upon the Assets.

         

      

    

    Section 7.3  Liability
      for Brokers’ Fees.

     

    Purchaser
      shall not directly or indirectly incur any liability or expense, as a result
      of
      undertakings or agreements of Seller, for brokerage fees, finder’s fees, agent’s
      commissions or other similar forms of compensation in connection with this
      Agreement or any agreement or transaction contemplated hereby.

     

    Section 7.4  Compliance
      with Laws; Litigation.

     

    (a)  Except
      as
      set forth in Schedule 7.4(a),
      to
      Seller’s knowledge, there have been no material violations of any applicable
      Legal Requirement (including, but not limited to, Environmental Legal
      Requirements) promulgated by any Governmental Authority which relate to the
      Assets or the production therefrom or the operation thereof.

     

    (b)  To
      Seller’s knowledge, all material permits, licenses and other authorizations
      relating to the Properties which are necessary under Legal Requirements
      (including, but not limited to, Environmental Legal Requirements) with respect
      to pollution or protection of the environment have been obtained, including
      Legal Requirements (including, but not limited to, Environmental Legal
      Requirements) relating to actual or threatened emissions, discharges, or
      releases of hazardous materials or wastes into ambient air, surface water,
      ground water or land, or otherwise relating to the manufacture, processing,
      distribution, use, treatment, storage, disposal, transport, or handling of
      hazardous materials or wastes and the Properties are in compliance in all
      material respects with all terms and conditions of such permits, licenses and
      authorizations, and with all other limitations, restrictions, conditions,
      standards, prohibitions, requirements, obligations, schedules and timetables
      contained in such Legal Requirements (including, but not limited to,
      Environmental Legal Requirements) or contained in any regulation, code, plan,
      order, decree, judgment, notice or demand letter issued, entered, promulgated
      or
      approved thereunder relating to the Properties. Seller has received no notice
      of, and has no actual knowledge of circumstances relating to, any past, present
      or future events, conditions, circumstances, activities, practices, incidents,
      actions or plans which are reasonably likely to materially interfere with or
      prevent continued material compliance with Legal Requirements (including, but
      not limited to, Environmental Legal Requirements), or which are reasonably
      likely to give rise to any material liability, based on or related to the
      processing, distribution, use, treatment, storage, disposal, transport, or
      handling, or the emission, discharge, release or threatened release into the
      environment, of any hazardous toxic material or waste from or attributable
      to
      the Properties.

     

    
      
        
        

      

      
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    (c)  Except
      as
      otherwise provided in Schedule 7.4(c),
      to
      Seller’s knowledge, there are no claims, actions, suits, investigations,
      inquiries or proceedings pending or threatened against Seller or any affiliate
      of Seller or affecting the Assets that may have an adverse effect on the Assets
      taken as a whole or on the operation thereof, that, if adversely determined,
      would prevent or hinder the consummation of the transactions contemplated
      hereby, or that seek or could result in the modification, revocation,
      termination, suspension or other limitation of any Lease or Basic Document.
      To
      Seller’s knowledge, there are no outstanding judgments requiring Seller to take
      any action of any kind with respect to the Assets, or to which Seller or any
      of
      the Assets are subject or by which they are bound or affected.

     

    Section 7.5  Necessary
      Governmental Authorizations.

     

    To
      Seller’s knowledge, neither execution and delivery of, nor performance under
      this Agreement or the Conveyance or any other document or instrument to be
      executed and delivered by Seller at Closing is prohibited by or requires any
      consent, authorization, approval or registration (other than pursuant to the
      Mineral Leasing Act of 1920 with respect to holding federal leases, and as
      are
      customarily obtained subsequent to the consummation of transactions such as
      the
      transactions contemplated hereby) under any Legal Requirement, or any judgment,
      order, writ, injunction or decree binding upon Seller.

     

    Section 7.6  Tax
      Matters.

     

    To
      Seller’s knowledge, all Taxes relating to the Assets that have become due and
      payable through the Effective Time have been properly paid.

     

    Section 7.7  Operations.

     

    (a)  To
      Seller’s knowledge, the Properties are being developed, operated and maintained
      in material compliance with all leases, contracts and commitments to which
      Seller is a party or by which Seller or any of such Properties are
      bound.

     

    (b)  To
      Seller’s knowledge: (i) Seller is not, and immediately after the Closing
      Purchaser will not be, dependent with respect to the Properties on the right
      to
      use the properties of others, except under valid and enforceable leases,
      contracts, pooling or unitization agreements, rights or other arrangements,
      (ii) all buildings, fixtures, machinery and equipment currently used in the
      operations related to the Properties are adequate for their normal operations
      consistent with industry practice, and conform with all applicable Legal
      Requirements (including but not limited to Legal Requirements relating to
      environmental protection or health and safety) and (iii) there is no
      pending or threatened condemnation or expropriation of any part of the
      Assets.

     

    
      
        
        

      

      
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    Section 7.8  Operating
      Agreements.

     

    To
      Seller’s knowledge, and except as identified on Exhibit C or
      Schedule 2.2 hereto, with respect to the joint, unit or other operating
      agreements relating to the Assets: (i) there are no outstanding calls or
      payments under authorities for expenditures for payments which are due or which
      Seller has committed to make which have not been made; (ii) there are no
      operations under the operating agreements with respect to which any Seller
      has
      become a non-consenting party; and (iii) there are no outstanding proposals
      soliciting authorities for expenditures. Seller has not elected under any joint
      operating agreement included in the Assets to carry any share of any
      non-consenting party’s share of costs of any operations proposed under such
      joint operating agreements.

     

    Section 7.9  Wells.

     

    To
      Seller’s knowledge, all of the Wells included in the Assets have been drilled
      and completed within the boundaries of the Leases included in the Assets or
      within the limits otherwise permitted by contract, pooling or unit agreement,
      and by applicable Legal Requirements, and no Well included in the Assets is
      subject to penalties because of any violation of applicable Legal
      Requirements.

     

    Section 7.10  Basic
      Documents.

     

    (a)  Prior
      to
      the date hereof, Seller has furnished to Purchaser copies of, or complete access
      to, all Basic Documents and all Files except the contracts described in
      paragraphs 18, 20 and 34 of Exhibit C. After providing access to the
      Files to Purchaser, Seller has and will continue to furnish Purchaser such
      information known to Seller as is necessary to update the Files until the
      Closing.

     

    (b)  Exhibit C
      is a complete list of all Basic Documents, other than the Leases listed on
      Exhibit A.

     

    (c)  With
      respect to the Properties, to the knowledge of Seller, (i) all Basic
      Documents are in full force and effect and are 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 obligations pursuant to any such Basic Documents, and Seller has
      not
      received written notice of any claim of breach or default; (iii) all
      payments under the Basic Documents have been timely and properly paid; and
      (iv)  no other party to any Basic Document is in breach or default with
      respect to its obligations thereunder. 

     

    Section 7.11  Conduct
      of Business.

     

    To
      the
      knowledge of Seller, since the Effective Time, it has not (a) sustained a loss
      of, or damage to, any of the Assets, or (b) waived any right of substantial
      value relating to the Assets; and there has not been (c) any material adverse
      change in any of the Assets, whether or not arising in the ordinary course
      of
      business, or (d) any occurrence or circumstance which might reasonably be
      expected to result in any such change other than (i) changes in accordance
      with
      normal and expected production decline curves and usual operating conditions,
      and (ii) general changes or expected changes in market prices for production
      or
      in the oil and gas industry generally. 

     

    
      
        
        

      

      
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    Section 7.12  Leases.

     

    (a)  With
      respect to the Leases, to the knowledge of Seller, (i) all Leases are in
      full force and effect and are 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
      obligations pursuant to any Lease, and Seller has not received written notice
      of
      any claim of breach or default; (iii) except as set forth in Schedule 7.12(a),
      all
      payments (including without limitation royalties, delay rentals, shut-in
      royalties and joint interest or other billings) have been timely and properly
      paid; and (iv)  no other party to any Lease is in breach or default with
      respect to its obligations thereunder.

     

    (b)  To
      Seller’s knowledge, with respect to the Leases, unit agreements, pooling
      agreements, communitization agreements, and other documents creating interests
      comprising the Assets: (i) other than sliding scale royalty clauses
      contained in certain of the federal oil and gas Leases, there are no express
      provisions of the Leases or other documents which increase the royalty share
      of
      the lessor; (ii) there are no express provisions of any Leases which prohibit
      the payment of royalty on the basis of proceeds received under a prudently
      negotiated arms-length contract; (iii) upon establishment of production in
      commercial quantities and until such production should cease, the Leases may
      be
      maintained in full force and effect over the economic life of the property
      involved in accordance with the respective habendum clauses contained in such
      Leases beyond the respective primary terms set forth in said Leases; and
      (iv) there are no fixed-term Leases which cannot be extended by production
      at the end of the term.

     

    Section 7.13  Gas
      Contracts.

     

    Except
      as
      described on Exhibit C, there are no gas purchase and sale agreements,
      gathering agreements, processing agreements, transportation agreements or other
      agreements pertaining to the disposition of production to which the Assets,
      or
      any portion of the Assets, are dedicated as of the date of this Agreement.
      

     

    Section 7.14  Calls
      on Production; Prepayments; Imbalances.

     

    Except
      with respect to the rights of third-party operators to market Seller’s share of
      production, which such rights are terminable on thirty-days notice or less,
      there are no calls on production or options to purchase production or similar
      rights with respect to the Assets or to the production therefrom. The Assets
      are
      not obligated by virtue of a prepayment arrangement under any contract for
      the
      sale of hydrocarbons. Except as set forth on Exhibit E, there are no situations
      where Seller, pursuant to any balancing arrangements or similar circumstances
      or
      under the common law, is required to allow another party to produce more than
      an
      insignificant quantity of hydrocarbons which, in the absence of such balancing
      arrangements or similar situation, would have been produced by Seller, and
      there
      are no existing production or pipeline imbalances affecting Seller’s interest in
      any of the Properties. Seller is not liable, directly or indirectly, for any
      scheduling or imbalance penalties or charges imposed by any pipeline in
      connection with the transportation of gas produced from any of the
      Assets.

     

    
      
        
        

      

      
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    Section 7.15  Taxpayer
      Identification Number.

     

    SEI’s
      Taxpayer Identification Number is 84-1182765, and SEWI’s is
      95-4298135.

     

    Section 7.16  No
      Bankruptcy.
      

     

    There
      are
      no bankruptcy proceedings pending, being contemplated by, or to Seller's
      knowledge, based upon reasonable inquiry and investigation, threatened against
      Seller.

     

    Section 7.17  Income
      Taxes.
      

     

    All
      of
      Seller’s income taxes and obligations relating thereto that could result in a
      lien or other claim against any of the Assets have been properly paid.

     

    Section 7.18  Tax
      Partnerships. 

     

    The
      Assets are not subject to any tax partnership agreements requiring a partnership
      income tax return to be filed under Subchapter K of Chapter 1 of Subtitle A
      of
      the Code.

     

    Section 7.19  Consents;
      Preferential Rights to Purchase.
      

     

    Except
      for governmental consents which are customarily obtained post Closing, and
      except as set forth on Schedule 7.19,
      no
      consents or approvals are required to be obtained for the assignment of the
      Assets to Purchaser which have not been obtained. No person or entity holds
      a
      right or option to purchase or preferential right to purchase the Assets, or
      any
      part thereof.

     

    Section 7.20  Plugging
      and Abandonment.
      

     

    Except
      as
      set forth on Schedule 7.20,
      none of
      the Wells has been plugged or abandoned and, to the knowledge of Seller, there
      are no other wells on the Land which have been shut in but not plugged and
      abandoned.

     

    Section
      7.21 Depth
      Restrictions.
      

     

    
      
        
        

      

      
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    Except
      as
      described on Exhibit A, none of the Leases contain any depth restrictions.

     

    ARTICLE 8

    REPRESENTATIONS
      AND WARRANTIES OF PURCHASER

     

    Purchaser
      represents and warrants to Seller as follows in this Article 8:

     

    Section 8.1  Organization,
      Standing and Power.

     

    Purchaser
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of Colorado and has full legal power and right to carry on its business
      as
      such is now being conducted. Purchaser is or will be by Closing duly qualified
      as a foreign corporation in the State of Wyoming.

     

    Section 8.2  Authority
      and Enforceability.

     

    The
      execution and delivery by Purchaser of this Agreement, and the consummation
      of
      the transactions contemplated hereby, have been duly and validly authorized
      by
      all requisite action on the part of Purchaser. This Agreement constitutes the
      valid and binding obligation of Purchaser, enforceable against Purchaser in
      accordance with its terms except as such enforceability may be limited by
      applicable bankruptcy or other similar laws affecting the rights of creditors
      generally. Neither the execution and delivery by Purchaser of this Agreement
      nor
      the consummation of the transactions contemplated hereby nor the compliance
      by
      Purchaser with any of the provisions hereof, shall (a) conflict with or result
      in a breach of any provision of its articles of incorporation or bylaws,
      (b) conflict with or result in a breach of any material agreement or
      instrument to which Purchaser is a party or by which Purchaser is bound, (c)
      violate any judgment, order, ruling, or decree applicable to Purchaser, or
      (d)
      violate any statute, rule or regulation applicable to Purchaser, assuming
      receipt of all routine governmental consents normally acquired after the
      consummation of transactions such as transactions of the nature contemplated
      by
      this Agreement.

     

    Section 8.3  Liability
      for Brokers’ Fees.

     

    Seller
      shall not directly or indirectly incur any liability or expense as a result
      of
      undertakings or agreements of Purchaser for brokerage fees, finder’s fees,
      agent’s commissions or other similar forms of compensation in connection with
      this Agreement or any agreement or transaction contemplated hereby.

     

    Section 8.4  Litigation.

     

    There
      is
      no suit, action, claim, investigation, or inquiry by any person or entity or
      by
      any Governmental Authority and no legal, administrative or arbitration
      proceeding pending or to Purchaser’s best knowledge, threatened proceeding
      against Purchaser or any affiliate of Purchaser which has or will materially
      affect Purchaser’s ability to consummate the transactions herein.

     

    
      
        
        

      

      
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    Section 8.5  Necessary
      Governmental Authorizations.

     

    Neither
      execution and delivery or, nor performance under this Agreement or the
      Conveyance or any other document or instrument to be executed and delivered
      by
      Purchaser at Closing is prohibited by or requires any consent authorization,
      approval or registration (other than as are customarily obtained subsequent
      to
      the consummation of transactions such as the transactions contemplated hereby)
      under any Legal Requirement, or any judgment, order, writ, injunction or decree
      binding on Purchaser.

     

    Section 8.6  Authority
      to Hold Federal Leases.

     

    Purchaser
      is a corporation duly incorporated under the laws of one of the states of the
      United States of America, is authorized to, and upon the Closing hereof shall,
      take title to and ownership of the federal Leases included in the
      Properties.

     

    Section 8.7  Independent
      Evaluation.

     

    Purchaser
      is an experienced and knowledgeable investor in the oil and gas business and
      its
      risks. Purchaser has retained and taken advice concerning the Assets and the
      transactions herein from advisors and consultants which are knowledgeable about
      the oil and gas business and its risks. Purchaser has been afforded the
      opportunity to examine Seller’s books and records and other information made
      available by Seller concerning the Assets (the “Background Materials”). The
      Background Materials contain files, or copies thereof, that Seller has used
      in
      its normal course of business and other information about the Assets that Seller
      has compiled or generated; provided, however, that Purchaser acknowledges and
      agrees that, except for the express representations and warranties of Seller
      contained in this Agreement, Seller has made no representations or warranties,
      express or implied, written or oral, as to the accuracy or completeness of
      the
      Background Materials or, except for the express representations and warranties
      of Seller contained in this Agreement, as to any other information concerning
      the Assets, furnished or to be furnished to Purchaser or its representatives
      by
      or on behalf of Seller, including without limitation any estimate with respect
      to the value of the Assets or reserves or any projections as to events that
      could or could not occur. In entering into this Agreement, Purchaser
      acknowledges and affirms that it has relied and will rely solely on the terms
      of
      this Agreement and upon its independent analysis, evaluation and investigation
      of, and judgment with respect to, the business, economic, legal, tax or other
      consequences of the transactions herein including its own estimate and appraisal
      of the extent and value of the petroleum, natural gas and other reserves
      attributable to the Properties. Except as expressly provided in this Agreement,
      Seller shall have no liability to Purchaser resulting from any use, authorized
      or unauthorized, of the Background Materials or any other information relating
      to the Assets provided by or on behalf of Seller. PURCHASER
      ACKNOWLEDGES AND AGREES THAT THE RELATED ASSETS ARE BEING SOLD “AS IS” “WHERE
      IS”, WITH NO REPRESENTATIONS, WARRANTIES OR GUARANTIES, EXPRESS OR IMPLIED,
      EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT.

     

    
      
        
        

      

      
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    ARTICLE 9

    ASSUMPTION
      OF LIABILITIES

    INDEMNIFICATION

     

    Section 9.1  Purchaser
      Assumption of Liabilities and Obligations.
      

     

    Upon
      Closing, Purchaser shall (a) assume and pay, perform, fulfill and discharge
      its
      pro rata share of all duties, claims, costs, expenses, liabilities and
      obligations attributable to the Assets from and after the Effective Time and
      (b)
      except to the extent of any Purchase Price adjustment made pursuant to
      Section 2.2(a)(5), assume and pay all amounts owing under the AFEs listed
      on Schedule 2.2 regardless of whether such AFE amounts are attributable
      under generally accepted accounting principles to periods of time before or
      after the Effective Time, (c) assume and pay the first $250,000.00 in Losses
      incurred by Purchaser as provided in Section 9.4(a) below, (d) assume any
      costs to cure or Losses associated with the Defect Threshold under Section
      4.1(f), and (e) assume and pay all expenses, burdens and obligations and Taxes
      for which and only to the extent Purchaser received a downward adjustment of
      the
      Purchase Price at Closing pursuant to Sections 2.2(b)(2) and 2.2(b)(3),
      respectively (collectively, the “Purchaser’s Assumed
      Liabilities”).

     

    Section 9.2  Seller's
      Retention of Liabilities and Obligations.
      

     

    Upon
      Closing, Seller retains all duties, claims, costs, expenses, liabilities and
      obligations attributable to the Assets prior to the Effective Time other than
      (a) the Purchaser’s Assumed Liabilities, (b) Taxes to be paid by Purchaser under
      Section 15.5 for which it has received a Purchase Price adjustment under
      Section 2.2(b)(3), and (c) those Defective Interests, if any, (i) which
      Purchaser has waived under Section 4.1(c)(1), or (ii) for which Purchaser
      has received an adjustment under Section 4.1(c)(2) (collectively, the
“Seller’s Retained
      Liabilities”).
      

     

    Section 9.3  Indemnification.
      

     

    “Losses”
shall
      mean any actual losses, costs, expenses (including court costs, reasonable
      fees
      and expenses of attorneys, technical experts and expert witnesses and the cost
      of investigation), liabilities, damages, demands, suits, claims, and sanctions
      of every kind and character (including civil fines) arising from, related to
      or
      reasonably incident to matters indemnified against; excluding however any
      special, consequential, punitive or exemplary damages, diminution of value
      of an
      Asset, loss of profits incurred by a party hereto or Loss incurred as a result
      of the indemnified party indemnifying a third party.

     

    After
      the
      Closing, subject to Sections 9.4 and 9.7, Purchaser and Seller shall indemnify
      each other as follows:

     

    (a)  Seller's
      Indemnification of Purchaser.
      Seller
      assumes all risk, liability, obligation and Losses in connection with, and
      shall
      defend, indemnify, and save and hold harmless Purchaser, its officers,
      directors, employees and agents, from and against all Losses which arise from
      or
      in connection with (i) Seller's Retained Liabilities, (ii) any breach
      of any representation or warranty made by Seller in this Agreement, (iii)
 any other matter for which Seller has agreed to indemnify Buyer under this
      Agreement, and (iv) any breach by Seller of this Agreement; provided,
      however, that Seller’s maximum liability under this indemnification obligation
      shall not exceed the Purchase Price. 

     

    
      
        
        

      

      
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    (b)  Purchaser’s
      Indemnification of Seller.
      Purchaser assumes all risk, liability, obligation and Losses in connection
      with,
      and shall defend, indemnify, and save and hold harmless Seller, its officers,
      directors, employees and agents, from and against all Losses which arise from
      or
      in connection with (i) Purchaser's Assumed Liabilities, (ii) any
      breach of any representation or warranty made by Purchaser in this Agreement,
      (iii) any other matter for which Purchaser has agreed to indemnify Seller under
      this Agreement, and (iv) any breach by Purchaser of this
      Agreement.

     

    Section 9.4  Procedure.
      

     

    The
      indemnifications contained in Section 9.3 shall be implemented as
      follows:

     

    (a)  Coverage.
      Such
      indemnity shall extend to all Losses suffered or incurred by the indemnified
      party exceeding the first $250,000.00 in Losses.

     

    (b)  Claim
      Notice.
      The
      party seeking indemnification under the terms of this Agreement (“Indemnified
      Party”)
      shall
      submit a written “Claim
      Notice”
to
      the
      other party (“Indemnifying
      Party”)
      which,
      to be effective, must state: (i) the amount of each payment claimed by an
      Indemnified Party to be owing, (ii) the basis for such claim, with
      supporting documentation, and (iii) a list identifying to the extent
      reasonably possible each separate item of Loss for which payment is so claimed.
      The amount claimed shall be paid by the Indemnifying Party to the extent
      required herein within ten (10) days after receipt of the Claim Notice, or
      after the amount of such payment has been finally established, whichever last
      occurs.

     

    (c)  Information.
      Within
      20 days after the Indemnified Party receives notice of a claim or legal
      action that may result in a Loss for which indemnification may be sought under
      this Article 9 (“Claim”),
      the
      Indemnified Party shall give written notice of such Claim to the Indemnifying
      Party. If the Indemnifying Party or its counsel so requests, the Indemnified
      Party shall furnish the Indemnifying Party with copies of all pleadings and
      other information with respect to such Claim. At the election of the
      Indemnifying Party made within 60 days after receipt of such notice, the
      Indemnified Party shall permit the Indemnifying Party, as its own expense,
      to
      assume control of such Claim (to the extent only that such Claim, legal action
      or other matter relates to a Loss for which the Indemnifying Party is liable),
      including the determination of all appropriate actions, the negotiation of
      settlements on behalf of the Indemnified Party, and the conduct of litigation
      through attorneys of the Indemnifying Party's choice; provided, however, that
      no
      such settlement can result in any liability or cost to the Indemnified Party
      for
      which it is entitled to be indemnified hereunder without its consent. If the
      Indemnifying Party elects to assume control, (i) any expense incurred by
      the Indemnified Party thereafter for investigation or defense of the matter
      shall be borne by the Indemnified Party, and (ii) the Indemnified Party
      shall give all reasonable information and assistance, other than pecuniary,
      that
      the Indemnifying Party shall deem necessary to the proper defense of such Claim,
      legal action, or other matter. In the absence of such an election, the
      Indemnified Party will use its best efforts to defend, at the Indemnifying
      Party's expense, any claim, legal action or other matter to which such other
      party's indemnification under this Article 9 applies until the Indemnifying
      Party assumes such defense, and, if the Indemnifying Party fails to assume
      such
      defense within the time period provided above, settle the same in the
      Indemnified Party's reasonable discretion at the Indemnifying Party's expense.
      If such a Claim requires immediate action, both the Indemnified Party and the
      Indemnifying Party will cooperate in good faith to take appropriate action
      so as
      not to jeopardize defense of such Claim or either party's position with respect
      to such Claim.

     

    
      
        
        

      

      
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    (d)  Dispute.
      If the
      existence of a valid Claim or amount to be paid by an Indemnifying Party is
      in
      dispute, the parties agree to submit determination of the existence of a valid
      Claim or the amount to be paid pursuant to the Claim Notice to binding
      arbitration in Wyoming, such arbitration to be conducted as follows: The
      arbitration proceeding shall be governed by Wyoming law and shall be conducted
      in accordance with the Commercial Arbitration Rules of the American Arbitration
      Association (“AAA”),
      with
      discovery to be conducted in accordance with the Federal Rules of Civil
      Procedure, and with any disputes over the scope of discovery to be determined
      by
      the arbitrators. The arbitration shall be before a three person panel of neutral
      arbitrators, consisting of one person from each of the following categories:
      (1) an attorney who has practiced in the area of oil and gas law for at
      least ten years; (2) a retired judge at the Wyoming or United States
      District Court or Appellate Court level; and (3) a person with at least ten
      years of oil and gas industry experience as a petroleum engineer. The AAA shall
      submit a list of persons meeting the criteria outlined above for each category
      of arbitrator, and the parties shall select one person from each category in
      the
      manner established by the AAA. The arbitrators shall conduct a hearing no later
      than 60 days after submission of the matter to arbitration, and a written
      decision shall be rendered by the arbitrators within 30 days of the
      hearing. At the hearing, the parties shall present such evidence and witnesses
      as they may choose, with or without counsel. Adherence to formal rules of
      evidence shall not be required but the arbitration panel shall consider any
      evidence and testimony that it determines to be relevant, in accordance with
      procedures that it determines to be appropriate. Any award entered in the
      arbitration shall be made by a written opinion stating the reasons and basis
      for
      the award made and any payment due pursuant to the arbitration shall be made
      within 15 days of the arbitrators' decision. The final decision may be
      filed in a court of competent jurisdiction and may be enforced by any party
      as a
      final judgment of such court. The costs of the arbitration shall be borne by
      the
      party against whom any award entered in the arbitration is made, unless the
      arbitration panel determines otherwise.

     

    Section 9.5  No
      Insurance; Subrogation.
      

     

    The
      indemnifications provided in this Article 9 shall not be construed as a
      form of insurance. Purchaser and Seller hereby waive for themselves, their
      successors or assigns, including, without limitation, any insurers, any rights
      to subrogation for Losses for which each of them is respectively liable or
      against which each respectively indemnifies the other, and, if required by
      applicable policies, Purchaser and Seller shall obtain waiver of such
      subrogation from their respective insurers.

     

    
      
        
        

      

      
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    Section 9.6  Reservation
      as to Non-Parties.
      

     

    Nothing
      herein is intended to limit or otherwise waive any recourse Purchaser or Seller
      may have against any non-party for any obligations or liabilities that may
      be
      incurred with respect to the Assets.

     

    Section 9.7  Survival
      of Representations, Warranties and Covenants.

     

    The
      representations and warranties of Seller and Purchaser in this Agreement shall
      survive Closing for a period of eighteen (18) months except (a) those contained
      in Sections 7.1, 7.2, 8.1 and 8.2 which shall survive indefinitely, and (b)
      those contained in Sections 7.4 and 7.6 which shall survive for the applicable
      statutes of limitation periods. Seller and Purchaser shall have no liability
      under Sections 9.3(a)(ii) and 9.3(b)(ii), respectively, unless a Claim Notice
      is
      submitted by Purchaser or Seller, as the case may be, within the applicable
      survival period. The covenants of Seller and Purchaser shall survive until
      fully
      performed.

     

    Section 9.8.
      Survival
      of Indemnification Obligations; Guaranty.
      Except
      as provided in Section 9.7 hereof, the Indemnification Obligations under
      Section 9.3 shall survive Closing. Seller shall deliver to Purchaser at
      closing a guaranty executed by Lewis W. Douglas, Jr. guaranteeing the full
      and
      prompt payment and performance of all of Seller’s obligations under this
      Agreement, including, but not limited to, Seller’s Indemnification obligations,
      in substantially the form set forth in Exhibit
      H
      hereto.

     

    ARTICLE 10

    CONDITIONS
      TO CLOSING

     

    Section 10.1  Conditions
      to Obligation of Purchaser to Close.

     

    The
      obligation of Purchaser to consummate the transactions contemplated by this
      Agreement is subject to the satisfaction of the following conditions unless
      waived in writing by Purchaser:

     

    (a)  Purchaser
      shall not have been denied access to information, as described in
      Section 3.1, or the ability to conduct an Environmental Examination, as
      described in Section 3.2, by any third party operators of the assets or any
      other third parties having consent rights.

     

    (b)  The
      representations and warranties of Seller set forth herein shall be true and
      correct in all material respects as of the date of this Agreement and as of
      the
      Closing as though made on such dates (including representations and warranties
      made as of a specific date being true and correct as though that specific date
      were changed to the date of this Agreement or the Closing); 

     

    
      
        
        

      

      
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    (c)  Seller
      shall have performed all obligations and agreements and complied with all
      covenants and conditions applicable to it contained in this Agreement prior
      to
      or on the Closing and shall have executed and delivered the Conveyance prior
      to
      or on the Closing;

     

    (d)  Purchaser
      shall have received certificates executed by an officer of Seller, dated as
      of
      Closing, reasonably satisfactory in form and substance to Purchaser, certifying
      that the conditions specified in Sections 10.1(b) and 10.1(c) have been
      satisfied;

     

    (e)  No
      suit,
      action or other proceeding by a third party or Governmental Authority shall
      be
      pending or threatened which seeks damages from Purchaser in connection with,
      or
      seeks to restrain, enjoin or otherwise prohibit, the consummation of the
      transactions contemplated by this Agreement;

     

    (f)  All
      third-party consents required as a condition to the transfer of the Assets
      or
      the benefit of ownership to Purchaser of the Assets shall have been obtained
      and
      remain in effect;

     

    (g)  There
      is
      available to Purchaser financing for this transaction on commercially reasonable
      terms in the discretion of Purchaser’s Board of Directors; 

     

    (h)  No
      changes in or to the Assets shall have occurred between the Effective Time
      and
      the Closing which, taken as a whole, are materially adverse to Purchaser, other
      than (i) changes in accordance with normal and expected production decline
      curves and usual operating conditions, (ii) changes in operations
      undertaken with the written consent of Purchaser pursuant to the provisions
      of
      this Agreement, and (iii) general changes or expected changes in market
      prices for production or in the oil and gas industry generally; and

     

    (i)  Purchaser
      shall have received the guaranty described in Section 9.8
      hereof.

     

    Section 10.2  Conditions
      to Obligation of Seller to Close.

     

    The
      obligation of Seller to consummate the transactions contemplated by this
      Agreement is subject to the satisfaction of the following conditions unless
      waived in writing by Seller:

     

    (a)  The
      representations and warranties of Purchaser set forth herein shall be true
      and
      correct in all material respects as of the date of this Agreement, the Effective
      Date and as of the Closing as though made on and as of all such
      dates;

     

    (b)  Purchaser
      shall have performed all obligations and agreements and complied with all
      covenants and conditions applicable to it contained in this Agreement prior
      to
      or on the Closing; 

     

    
      
        
        

      

      
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    (c)  Seller
      shall have received a certificate executed by an officer of Purchaser, dated
      as
      of Closing, reasonably satisfactory in form and substance to Seller, certifying
      that the conditions specified in Sections 10.2(a) and 10.2(b) have been
      satisfied; and 

     

    (d)  No
      suit,
      action or other proceeding by a 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.

     

    (e)  Purchaser
      shall have delivered bonds or commitments to issue bonds sufficient to cover
      the
      operation of the Assets as required by applicable Legal
      Requirements.

     

    (f)  Seller
      shall have received a guaranty executed by Samson Oil & Gas Limited
      guaranteeing the full and prompt payment and performance of all of Purchaser’s
      obligations under this Agreement in substantially the form set forth in
Exhibit
      I
      hereto.

     

    Section 10.3  Seller’s
      Obligations at Closing.

     

    At
      Closing, Seller shall deliver to Purchaser the following:

     

    (a)  An
      executed counterpart of the Conveyance; 

     

    (b)  Assignments
      of the Properties, to the extent required, on officially approved federal and/or
      state assignment forms;

     

    (c)  Exclusive
      possession of the Assets; 

     

    (d)  The
      originals or copies of the Files, provided, however, that for a period not
      to
      exceed two years after the Closing, upon reasonable request for litigation,
      tax
      or other legitimate business purposes Purchaser shall allow Seller, and its
      agents, employees, and representatives access to examine and copy, at Seller’s
      own expense, during normal business hours the Files; 

     

    (e)  The
      Preliminary Adjustment Statement; and

     

    (f)  Such
      other documents and instruments as shall be reasonably requested by Purchaser
      and its counsel to effect the intent of this Agreement and consummate the
      transaction contemplated hereby.

     

    Section 10.4  Purchaser’s
      Obligations at Closing.

     

    At
      Closing, Purchaser shall deliver to Seller the following:

     

    (a)  The
      estimated Adjusted Purchase Price by bank transfer of immediately available
      funds as set forth in Section 2.3, less the amount of the Deposit, First
      Extension Deposit, Second Extension Deposit, Third Extension Deposit, as
      applicable, and any amounts to be paid into Escrow pursuant to Section 2.4
      (which Escrow shall be funded at Closing);

     

    
      
        
        

      

      
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    (b)  An
      executed counterpart of the Conveyance, evidencing Purchaser’s acceptance of
      same and assumption of the Assumed Obligations; 

     

    (c)  Evidence
      reasonably satisfactory to Seller of Purchaser’s compliance with
      Section 10.2(e); and

     

    (d)  Such
      other documents and instruments as shall be reasonably requested by Seller
      and
      its counsel to effect the intent of this Agreement and consummate the
      transaction contemplated hereby.

     

    Section 10.5  Obligation
      of Both Parties at Closing.

     

    At
      Closing and thereafter as may be necessary, the parties hereto shall execute,
      acknowledge and deliver transfer orders, and/or letters-in-lieu of transfer
      orders, notifying all oil and gas purchasers to begin directing that all
      proceeds of production from the Properties which have heretofore been paid
      to
      Seller shall immediately be paid to the account of Purchaser. Thereafter, the
      Parties shall execute, acknowledge, and deliver transfer orders and any other
      documents and shall take such other action as may be necessary to carry out
      their obligations under this Agreement.

     

    ARTICLE 11

    TERMINATION
      AND AMENDMENT

     

    Section 11.1  Termination.

     

    This
      Agreement may be terminated: 

     

    (a) by
      the
      mutual agreement of Seller and Purchaser at any time prior to the Closing;
      

     

    (b) by
      either
      Party, by written notice delivered to the other Party prior to the Original
      Closing Date or, if the Purchaser elects to extend the Closing pursuant to
      Section 6.1(c), by the First Extended Closing Date, if the provisions of
      Section 4.1(e) give such Party the right to terminate; 

     

    (c) by
      Purchaser if the provisions of Section 4.3 give it the right to terminate;

     

    (d) by
      Seller, by written notice delivered to Purchaser prior to the Original Closing
      Date, if Seller reasonably believes the Defects identified in Purchaser’s
      notice, if any, delivered pursuant to Section 4.1(a) and the Environmental
      Defects identified in Purchaser’s notice, if any, delivered pursuant to
      Section 5.2(a) (other than Defects and Environmental Defects upon which a
      Purchase Price adjustment is made at Closing or which relate to Excluded Assets)
      will be unduly burdensome or costly to cure or remediate; 

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

       

    

    (e) by
      Seller
      if the conditions set forth in Section 10.2 are not satisfied on or before
      the Original Closing Date or, if the Closing Date is extended as provided in
      Article VI, the Extended Closing Date, or 

     

    (f) by
      Purchaser if the conditions set forth in Section 10.1 are not satisfied on
      or before the Original Closing Date or, if the Closing Date is extended as
      provided in Article VI, the Extended Closing Date; 

     

    provided
      that the terminating Party shall not have breached the obligations it has
      undertaken hereunder to perform at Closing. Any Party shall exercise a right
      of
      termination provided above by written notice to the other Party In the event
      Closing has not occurred on the Original Closing Date or, if the Closing Date
      is
      extended as provided in Article VI, the Extended Closing Date (the “Outside
      Closing Date”),
      this
      Agreement shall automatically terminate except as otherwise provided by the
      Parties in an executed amendment hereto. 

     

    Section 11.2  Effect
      of Termination.
      Neither
      Party shall have any liability whatsoever to the other Party arising out of
      termination of this Agreement except, and only to the extent, as
      follows:

     

    (a)  When
      Extension Deposits Are To Be Returned. If
      Purchaser has paid any Extension Deposits pursuant to Sections 6.1(c), (d)
      or
      (e) and this Agreement is terminated pursuant to Sections 11.1 (a), (b), (c),
      (d), Section 11.1(e) if Seller’s condition to Closing in Section 10.2(d) is not
      satisfied, or Section 11.1(f) if any of Purchaser’s conditions to Closing are
      not satisfied except the financing condition in Section 10.1(g), Purchaser
      shall
      be entitled to a refund of such Deposits within five (5) business days after
      Seller’s receipt of Purchaser’s notice of termination. 

     

    (b)  Termination
      Under Section 11.1(e); Purchaser’s Unauthorized Termination.
      Notwithstanding any other provisions of this Agreement to the contrary, the
      Parties acknowledge that the Extension Deposits provided for in Sections 6.1(c),
      (d) and (e) are option payments that give the Purchaser the right, but not
      the
      obligation, to consummate the transaction contemplated by this Agreement and,
      therefore, if the Closing is extended pursuant to Sections 6.1(c), (d) or (e),
      and, thereafter, the transaction contemplated by this Agreement is not
      consummated on or before the Outside Closing Date by reason of Seller’s
      termination of this Agreement pursuant to Section 11.1(e) or by Purchaser’s
      termination of this Agreement by notice to Seller and such termination is not
      authorized by this Agreement, Purchaser shall nevertheless have no liability
      whatsoever for such termination and Seller shall be entitled to retain all
      Extension Deposits paid by Purchaser prior to such termination (except for
      a
      termination because Seller’s condition to closing in Section 10.2(d) is not
      satisfied).

     

    (c)  Termination
      Under Section 11.1(f); Seller’s Wrongful Failure to Tender
      Performance.
      If the
      transaction contemplated by this Agreement is not consummated on or before
      the
      Outside Closing Date by reason of the Purchaser’s termination of this Agreement
      pursuant to Section 11.1(f) (other than for the reason that the financing
      condition set forth in Section 10.1(g) has not been satisfied) or by reason
      of
      Seller’s wrongful failure to tender performance and the Purchaser is in
      compliance with the terms of this Agreement, then the Purchaser retains all
      legal and equitable remedies against Seller. 

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

       

    

    Section 11.3  Amendment.

     

    (a)  At
      any
      time prior to the Closing this Agreement may be amended or modified in any
      respect by the Parties by an agreement in writing executed in the same manner
      as
      this Agreement.

     

    (b)  No
      supplement, modification, waiver or termination of this Agreement shall be
      binding unless executed in writing by the Parties to be bound
      thereby.

     

    ARTICLE 12

    EXPENSES
      AND TRANSFER TAXES

     

    Section 12.1  Expenses.

     

    All
      expenses incurred by Seller in connection with or related to the authorization,
      preparation or execution of this Agreement, the Conveyance and the Exhibits
      and
      Schedules hereto and thereto, and all other matters related to the Closing,
      including without limitation, all fees and expenses of counsel, accountants
      and
      financial advisers employed by Seller, shall be borne solely and entirely by
      Seller; and all such expenses incurred by Purchaser shall be borne solely and
      entirely by Purchaser.

     

    Section 12.2  Sales
      Taxes and Assessments.

     

    All
      sales, use, transfer and similar taxes or assessments (including duties, levies
      and other governmental charges incurred by or imposed on the Parties with
      respect to the property transfers or other transactions undertaken pursuant
      to
      this Agreement) arising from or payable by reason of the conveyance of the
      Assets to Purchaser shall be borne by Purchaser.

     

    ARTICLE 13

    POST-CLOSING
      OBLIGATIONS

     

    Section 13.1  Post-Closing
      Production Receipts and Expenses.

     

    Seller
      shall be entitled to all proceeds of hydrocarbons production attributable to
      the
      Assets, and, except as provided herein, is responsible for all costs and
      expenses, attributable to periods of time prior to the Effective Time, and
      Purchaser shall be entitled to all proceeds of hydrocarbons production
      attributable to the Assets, and is responsible for all costs and expenses,
      attributable to periods of time from and after the Effective Time, and for
      the
      AFE costs as provided in Section 9.1(b) of this Agreement. Should either
      Party receive proceeds from hydrocarbons production from the Assets to which
      the
      other Party is entitled (which proceeds have not previously been the subject
      of
      Purchase Price adjustments pursuant to Article 2), the receiving Party
      shall pay over such proceeds to the entitled Party not later than ten days
      after
      its receipt of such proceeds. Should either Party receive a statement or invoice
      for costs which are the responsibility of the other Party (which costs have
      not
      previously been the subject of Purchase Price adjustments pursuant to Article
      2), the receiving Party shall forward such statement or invoice to the
      responsible Party and the responsible Party shall timely and properly pay such
      statement or invoice. 

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

       

    

    Section 13.2  Cooperation.

     

    Each
      Party shall provide the other Party with reasonable access to all relevant
      documents, data and other information which may be required by the other Party
      for the purpose of preparing tax returns and responding to any audit by any
      taxing jurisdiction. Each Party to this Agreement shall cooperate with all
      reasonable requests of the other Party made in connection with contesting the
      imposition of taxes. Notwithstanding anything to the contrary in this Agreement,
      neither Party shall be required at any time to disclose to the other Party
      any
      tax returns or other confidential tax information.

     

    ARTICLE 14

    1031
      EXCHANGE

     

    Seller
      reserves the right, at or prior to Closing, to assign its rights under this
      Agreement with respect to a portion of the Purchase Price and that portion
      of
      the Assets associated therewith (“1031 Assets”), to a Qualified Intermediary (as
      that term is defined in Section 1.1031(k)-1(g)(4)(v) of the Treasury
      Regulations) to accomplish this transaction in a manner that will comply, either
      in whole or in part, with the requirements of a Like-Kind Exchange. Accordingly,
      Seller may assign its rights under this Agreement to the 1031 Assets to the
      Qualified Intermediary. Purchaser hereby (i) consents to Seller's
      assignment of its rights in this Agreement with respect to the 1031 Assets,
      and
      (ii) if such an assignment is made, agrees to pay a portion of the Purchase
      Price into the qualified trust account at Closing as set forth in the 1031
      Exchange Agreement used to accomplish the Like-Kind Exchange as directed in
      writing by Seller. Seller and Purchaser acknowledge and agree that an assignment
      of this Agreement to a Qualified Intermediary shall not release either party
      from any of their respective liabilities and obligations to each other or expand
      any such respective liabilities or obligations under this Agreement, and that
      neither party represents to the other that any particular tax treatment will
      be
      given to either party as a result thereof. Purchaser shall not be obligated
      to
      pay any additional costs or incur any additional obligations as a result of
      Seller's Like-Kind Exchange, and Seller shall indemnify and hold Purchaser
      harmless from and against all claims, losses and liabilities, if any, resulting
      from such a Like-Kind Exchange.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

       

    

    ARTICLE 15

    MISCELLANEOUS

     

    Section 15.1  Counterparts.

     

    This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original instrument, but all such counterparts together shall
      constitute but one agreement.

     

    Section 15.2  Notice.

     

    All
      notices which are required or may be given pursuant to this Agreement shall
      be
      sufficient in all respects if given in writing and delivered personally or
      by
      registered or certified mail, postage prepaid, or by facsimile transmission
      as
      follows:

     

    If
      to
      Purchaser:      Samson
      Oil and Gas USA Inc.

    1726
      Cole
      Boulevard, Suite 210

    Lakewood,
      Colorado 80401

    Attention:
      Terry Barr

    FAX:
      303-295-1361

    

    If
      to
      Seller:        
c/o
      Stanley Energy, Inc.

    1776
      Lincoln Street, Suite 1300

    Denver,
      CO 80203

    Attention:
      Lewis W. Douglas, Jr.

    FAX:
      303-830-8576

     

    All
      notices shall be deemed to have been duly given at the time of receipt by the
      Party to which such notice is addressed. For facsimile transmissions, if
      received after the close of business on any day, such notices shall be deemed
      to
      have been given on the next business day.

     

    Section 15.3  Further
      Assurances.

     

    From
      and
      after the Closing, at the request of Purchaser but without further
      consideration, Seller shall execute and deliver or cause to be executed and
      delivered such other instruments of conveyance and transfer and take such other
      action as necessary to effectively vest in Purchaser and to put Purchaser in
      possession of, any of the Assets and rights and relations thereto. This
      obligation shall include, but not be limited to, taking such action as may
      be
      required of Seller to cure any Defective Interests conveyed to Purchaser.

     

    Section 15.4  Recording
      Fees and Similar Costs.

     

    Purchaser
      shall bear any documentary, filing, and recording fees and similar costs
      incurred and imposed upon, or with respect to, the property transfers
      contemplated hereby.

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

       

    

    Section 15.5  Ad
      Valorem and Other Taxes.

     

    Except
      as
      specifically provided in this Section 15.5, Seller shall pay. when due
      (whether before or after the Closing), all Taxes (as defined in
      Section 2.2(b)(3)) for which Purchaser has not received a Purchase Price
      adjustment under Section 2.2(b)(3) and shall protect, defend, indemnify and
      hold Purchaser harmless from and against all Losses suffered or incurred by
      Purchaser by reason of Seller’s failure to timely and fully pay all of such
      taxes. Purchaser shall pay when due all Taxes for which Purchaser has received
      a
      Purchase Price adjustment under Section 2.2(b)(3). 

     

    Section 15.6  Governing
      Law.

     

    This
      Agreement and the legal relations between the parties shall be governed by
      and
      construed in accordance with the laws of the State of Colorado without regard
      to
      principles of conflicts of laws otherwise applicable to such
      determinations.

     

    Section 15.7  Captions.

     

    The
      captions in this Agreement are for convenience only and shall not be considered
      a part of or affect the construction or interpretation of any provision of
      this
      Agreement.

     

    Section 15.8  Waivers.

     

    Any
      failure by any Party or Parties to comply with any of its or their obligations,
      agreements or conditions herein contained may be waived in writing, but not
      in
      any other manner, by the Party or Parties to whom such compliance is owed.
      No
      waiver of, or consent to a change in, any of the provisions of this Agreement
      shall be deemed or shall constitute a waiver of, or consent to a change in,
      other provisions hereof (whether or not similar) nor shall such waiver
      constitute a continuing waiver unless otherwise expressly provided.

     

    Section 15.9  Exhibits
      and Schedules.

     

    All
      Exhibits and Schedules attached to or referred to in this Agreement are
      incorporated into and made a part of this Agreement.

     

    Section 15.10  Entire
      Agreement; Amendments.

     

    This
      Agreement, the Exhibits and Schedules attached hereto or referred to herein,
      and
      the instruments and documents delivered or to be delivered at Closing, embody
      the entire agreement between the Parties with respect to the subject matter
      hereof and supersede all prior representations, agreements and understandings,
      oral or written, with respect thereto. This Agreement may not be modified
      orally, but only by an agreement signed by the Party or Parties against whom
      any
      waiver, change, amendment, modification or discharge may be sought to be
      enforced.

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

       

    

    Section 15.11  Rights
      Cumulative.

     

    The
      rights and remedies of the Parties under this Agreement shall be cumulative
      and
      not exclusive of any rights or remedies which any Party would otherwise have
      hereunder or at law or in equity or by statute.

     

    Section 15.12  Binding
      Effect; Benefits; Third Parties; Joint Ventures.

     

    This
      Agreement will inure to the benefit of and will be binding upon the Parties
      and
      their respective successors and permitted assigns. Seller shall not assign
      this
      Agreement or delegate any of its duties hereunder to any other person or entity
      without the prior written consent of the Purchaser. Purchaser shall not assign
      this Agreement or delegate any of its duties hereunder to any other person
      or
      entity without the prior written consent of the Seller. This Agreement
      constitutes an agreement solely among the Parties, and, except as otherwise
      provided herein, is not intended to and will not confer any rights, remedies,
      obligations or liabilities, legal or equitable, including any right of
      employment, on any person or entity other than the Parties and their respective
      successors or permitted assigns, or otherwise constitute any person or entity
      a
      third party beneficiary under or by reason of this Agreement. Nothing in this
      Agreement, express or implied, is intended to or will constitute the Parties
      hereto partners or participants in a joint venture.

     

    [THE
      REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

    

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, this Agreement has been signed by each of the Parties, all
      as
      of the date first above written.

     

    
      	 	 	 
	 	
              PURCHASER:

            
	 	 
	 	
              Samson
                Oil and Gas USA Inc.

            
	 
 	 
 	 
 
	
            	
            	
              /s/
                Terry Barr 

            
	 	
              

              Name: T.M.
                Barr

            
	 	
              Title: Managing
                Director

            

    

     

    
      	 	 	 
	 	
              SELLER:

            
	 	 
	 	
              Stanley
                Energy, Inc.

            
	 
 	 
 	 
 
	
            	
            	
              /s/
                Lewis W. Douglas Jr.

            
	 	
              

              Name: Lewis
                W. Douglas, Jr.

            
	 	
              Title: President

            

    

     

    
      	 	 	 
	 	
              Stanley
                Energy W., Inc.

            
	 
 	 
 	 
 
	
            	
            	
              /s/
                Lewis W. Douglas Jr.

            
	 	
              

              Name: Lewis
                W. Douglas, Jr.

            
	 	
              Title: President

            

    

    

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    LIST
      OF EXHIBITS AND SCHEDULES

     

    
      	
              Exhibit A

            	
              Oil
                & Gas Leases and Lands

            
	 	 
	
              Exhibit
                B

            	
              Oil
                & Gas Wells

            
	 	 
	
              Exhibit C

            	
              Basic
                Documents 

            
	 	 
	
              Exhibit
                D

            	
              Form
                of Conveyance

            
	 	 
	
              Exhibit
                E

            	
              Wellhead
                and Pipeline Imbalances

            
	 	 
	
              Exhibit
                F

            	
              WI,
                NRI, and ORRI

            
	 	 
	
              Exhibit
                G

            	
              Allocation
                of Purchase Price

            
	 	 
	
              Exhibit
                H

            	
              Form
                of Douglas Guaranty

            
	 	 
	
              Exhibit
                I

            	
              Form
                of Samson Parent Guaranty

            
	 	 
	
              Schedule
                2.2

            	
              AFEs

            
	 	 
	
              Schedule
                7.4(a)

            	
              Legal
                Requirements

            
	 	 
	
              Schedule
                7.4(c)

            	
              Pending
                Claims

            
	 	 
	
              Schedule
                7.12(a)

            	
              Lease
                payment claims

            
	 	 
	
              Schedule
                7.19

            	
              Consents

            
	 	 
	
              Schedule
                7.20

            	
              Shut-in
                or Temporarily Abandoned WellsExhibit
      4.1

    

    REGISTRATION
      RIGHTS AGREEMENT

     

    This
      Registration Rights Agreement (this "Agreement")
      is made
      and entered into as of June [ ], 2007, by and among China Agritech, Inc., a
      Delaware corporation (the "Company"),
      and
      the investors signatory hereto (each a "Investor"
      and
      collectively, the "Investors").

     

    This
      Agreement is made pursuant to the Securities Purchase Agreement, dated as of
      the
      date hereof among the Company and the Investors (the "Purchase
      Agreement").

     

    The
      Company and the Investors hereby agree as follows: 

     

    1. Definitions.
      Capitalized terms used and not otherwise defined herein that are defined in
      the
      Purchase Agreement will have the meanings given such terms in the Purchase
      Agreement. As used in this Agreement, the following terms have the respective
      meanings set forth in this Section 1:

     

    "Advice"
      has
      the
      meaning set forth in Section 6(d).

     

    "Commission
      Comments" means
      written comments pertaining
      solely to Rule 415 which
      are received by the Company from the Commission, and a copy of which shall
      have
      been provided by the Company to the Holders, to a filed Registration Statement
      which requires the Company to limit the amount of shares which may be included
      therein to a number of shares which is less than such amount sought to be
      included thereon as filed with the Commission.

     

    "Effective
      Date"
      means,
      as to a Registration Statement, the date on which such Registration Statement
      is
      first declared effective by the Commission.

     

    “Effectiveness
      Date”
      means
      (a) with respect to the initial Registration Statement required to be filed
      under Section 2(a), the earlier of: (a)(i) the 120th
      day
      following the Filing Date; provided,
      that,
      if the Commission reviews and has written comments to the filed Registration
      Statement that would require the filing of a pre-effective amendment thereto
      with the Commission, then the Effectiveness Date under this clause (a)(i) shall
      be the 150th
      day
      following the Filing Date, and (ii) the fifth Trading Day following the date
      on
      which the Company is notified by the Commission that the initial Registration
      Statement will not be reviewed or is no longer subject to further review and
      comments; (b) with respect to a Registration Statement required to be filed
      under Section 2(b), the earlier of: (i) the 60th
      day
      following the Filing
      Date for any Registration
      Statement required to be filed under Section 2(b),
      and (ii)
      the fifth Trading Day following the date on which the Company is notified by
      the
      Commission that such Registration Statement will not be reviewed or is no longer
      subject to further review and comments; and (c) with respect to a Registration
      Statement required to be filed under Section 2(c), the earlier of: (c)(i) the
      90th
      day
      following the date on which the Company becomes eligible to utilize Form S-3
      to
      register the resale of Common Stock; provided,
      that,
      if the Commission reviews and has written comments to such filed Registration
      Statement that would require the filing of a pre-effective amendment thereto
      with the Commission, then the Effectiveness Date under this clause (c)(i) shall
      be the 120th
      day
      following the date on which the Company becomes eligible to utilize Form S-3
      to
      register the resale of Common Stock, and (ii) the fifth Trading Day following
      the date on which the Company is notified by the Commission that the initial
      Registration Statement will not be reviewed or is no longer subject to further
      review and comments.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    "Effectiveness
      Period"
      means,
      as to any Registration Statement required to be filed pursuant to this
      Agreement, the period commencing on the Effective Date of such Registration
      Statement and ending on the earliest to occur of (a) the second anniversary
      of
      such Effective Date, (b) such time as all of the Registrable Securities covered
      by such Registration Statement have been publicly sold by the Holders of the
      Registrable Securities included therein, or (iii) such time as all of the
      Registrable Securities covered by such Registration Statement may be sold by
      the
      Holders pursuant to Rule 144(k) as determined by the counsel to the Company
      pursuant to a written opinion letter to such effect, addressed and acceptable
      to
      the Company's transfer agent and the affected Holders.

     

    "Exchange
      Act"
      means
      the Securities Exchange Act of 1934, as amended.

     

    "Filing
      Date"
      means
      (a) with respect to the initial Registration Statement required to be filed
      under Section 2(a), the 45th
      day
      following the Closing Date; (b) with respect to any
      Registration Statements
      required
      to be filed under Section 2(b),
      each such Registration Statement shall be filed by the
      earlier of (i) for
      the initial Registration Statement required to be filed under Section 2(b),
      the
      six-month anniversary of the Effective Date of the Registration Statement
      required to be filed under Section 2(a) and for
      all subsequent Registration Statements, the six-month anniversary of the
      Effective Date of the immediately preceding Registration Statement required
      to
      be filed under Section 2(b), as applicable, and (ii) for the initial
      Registration Statement required to be filed under Section 2(b), the
      60th
      day
      following such time as 75%
      of all
      Registrable Securities which are included in the Registration Statement required
      to be filed under Section 2(a) have been sold
      and for all subsequent Registration Statements, the 60th
      day following such time as 75% of all Registrable Securities which are included
      in the immediately preceding Registration Statement required to be filed under
      Section 2(b) have been sold, as applicable;
      and (c)
      with respect to a Registration Statement required to be filed under Section
      2(c), the 30th
      day
      following the date on which the Company becomes eligible to utilize Form S-3
      to
      register the resale of Common Stock.

     

    "Holder"
      or
"Holders"
      means
      the holder or holders, as the case may be, from time to time of Registrable
      Securities.

     

    “Indemnified
      Party”
      has the
      meaning set forth in Section 5(c).

     

    “Indemnifying
      Party”
      has the
      meaning set forth in Section 5(c).

     

    “Losses”
      has the
      meaning set forth in Section 5(a).

     

    “New
      York Courts”
      means
      the state and federal courts sitting in the City of New York, Borough of
      Manhattan.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    "Proceeding"
      means an
      action, claim, suit, investigation or proceeding (including, without limitation,
      an investigation or partial proceeding, such as a deposition), whether commenced
      or threatened.

     

    “Prospectus”
      means
      the prospectus included in a Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by a Registration Statement,
      and
      all other amendments and supplements to the Prospectus, including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such Prospectus.

     

    "Registrable
      Securities"
      means:
      (i) the Shares, (ii) any shares of Common Stock issuable upon exercise of
      warrants issued to any placement agent as compensation in connection with the
      financing that is the subject of the Purchase Agreement ("Placement
      Agent Warrant Shares"),
      and
      (iii) any securities issued or issuable upon any stock split, dividend or other
      distribution, recapitalization or similar event, or any exercise price
      adjustment with respect to any of the securities referenced in (i) or (ii)
      above.

     

    "Registration
      Statement"
      means
      the initial registration statement required to be filed in accordance with
      Section 2(a) and any additional registration statement(s) required to be filed
      under Section 2(b) and 2(c), including (in each case) the Prospectus, amendments
      and supplements to such registration statements or Prospectus, including pre-
      and post-effective amendments, all exhibits thereto, and all material
      incorporated by reference or deemed to be incorporated by reference
      therein.

     

    "Rule
      144"
      means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    "Rule
      415"
      means
      Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    "Rule
      424"
      means
      Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    "Securities
      Act"
      means
      the Securities Act of 1933, as amended.

     

    "Shares"
      means
      the shares of Common Stock issued or issuable to the Investors pursuant to
      the
      Purchase Agreement.

     

    2. Registration.

     

    (a) On
      or
      prior to the applicable Filing Date, the Company shall prepare and file with
      the
      Commission a Registration Statement covering the resale of all Registrable
      Securities not already covered by an existing and effective Registration
      Statement for an offering to be made on a continuous basis pursuant to Rule
      415,
      on Form S-1 (or on such other form appropriate for such purpose). Such
      Registration Statement shall contain (except if otherwise required pursuant
      to
      written comments received from the Commission upon a review of such Registration
      Statement) the "Plan of Distribution" attached hereto as Annex A. The Company
      shall cause such Registration Statement to be declared effective under the
      Securities Act as
      soon as
      possible but, in any event, no later than its Effectiveness Date, and shall
      use
      its reasonable best efforts to keep the Registration Statement continuously
      effective during the entire Effectiveness Period. The initial Registration
      Statement shall contain 1) the Shares, 2) the Placement Agent Warrant Shares
      and
      3) the securities set forth on Schedule
      3.1(v)
      to the
      Purchase Agreement. In the event that the amount of securities which may be
      included in the Registration Statement filed pursuant to this Section 2(a)
      is
      limited due to Commission Comments, the number of securities being registered
      for resale by each selling stockholder on such Registration Statement shall
      be
      cut back pro rata in relation to the aggregate number of securities of the
      Company being cut back and removed from such Registration Statement. By 5:00
      p.m. (New York City time) on the Business Day immediately following the
      Effective Date of such Registration Statement, the Company shall file with
      the
      Commission in accordance with Rule 424 under the Securities Act the final
      prospectus to be used in connection with sales pursuant to such Registration
      Statement (whether or not such filing is technically required under such Rule).
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) If
      all of
      the Registrable Securities to be included in the Registration Statement filed
      pursuant to Section 2(a) cannot be so included due to Commission Comments,
      then
      the Company shall prepare and file by the applicable
      Filing
      Date for such Registration Statement(s),
      such
      number of
      additional Registration Statements
      as may be necessary in order to ensure that
      all
      Registrable Securities are
      covered
      by an existing and effective Registration Statement. Accordingly,
      if for example, an initial Registration Statement is filed under Section 2(b)
      to
      register Registrable Securities removed from a Registration Statement filed
      under Section 2(a) due to Commission Comments and Commission Comments again
      require shares to be removed for such newly filed Registration Statement under
      this Section 2(b), then the Company will prepare and file additional
      Registration Statements until such time as all such required shares are covered
      by effective Registration Statements. Any Registration Statements to be filed
      under this Section shall be
      for an
      offering to be made on a continuous basis pursuant to Rule 415, on Form S-1
      (or
      on such other form appropriate for such purpose). Such Registration Statement
      shall contain (except if otherwise required pursuant to written comments
      received from the Commission upon a review of such Registration Statement)
      the
      "Plan of Distribution" attached hereto as Annex
      A.
      The
      Company shall cause such Registration Statement to be declared effective under
      the Securities Act as soon as possible but, in any event, by its Effectiveness
      Date, and shall use its reasonable best efforts to keep such Registration
      Statement continuously effective under the Securities Act during the entire
      Effectiveness Period. In the event that the amount of securities which may
      be
      included in any such Registration Statement filed pursuant to this section
      is
      limited due to Commission Comments, the number of securities being registered
      for resale by each selling stockholder on such Registration Statement shall
      be
      cut back pro rata in relation to the aggregate number of securities of the
      Company being cut back and removed from such Registration Statement. By 5:00
      p.m. (New York City time) on the Business Day immediately following the
      Effective Date of such Registration Statement, the Company shall file with
      the
      Commission in accordance with Rule 424 under the Securities Act the final
      prospectus to be used in connection with sales pursuant to such Registration
      Statement (whether or not such filing is technically required under such
      Rule).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) Promptly
      following any date on which the Company becomes eligible to use a registration
      statement on Form S-3 to register the Registrable Securities for resale, the
      Company shall file a registration statement on Form S-3 covering the Registrable
      Securities (or a post-effective amendment on Form S-3 to the then effective
      Registration Statement) and shall cause such Registration Statement to
      filed by the Filing Date for such Registration Statement and declared effective
      as soon as possible thereafter, but in any event prior to the Effectiveness
      Date
      therefor. Such Registration Statement shall contain (except if otherwise
      required pursuant to written comments received from the Commission upon a review
      of such Registration Statement) the "Plan of Distribution" attached hereto
      as
Annex
      A.
      The
      Company shall use its reasonable best efforts to keep such Registration
      Statement continuously effective under the Securities Act during the entire
      Effectiveness Period. By 5:00 p.m. (New York City time) on the Business Day
      immediately following the Effective Date of such Registration Statement, the
      Company shall file with the Commission in accordance with Rule 424 under the
      Securities Act the final prospectus to be used in connection with sales pursuant
      to such Registration Statement (whether or not such filing is technically
      required under such Rule).

     

    (d) If:
      (i) a
      Registration Statement is not filed on or prior to its Filing Date covering
      the
      Registrable Securities required under this Agreement to
      be
      included therein (if the Company files a Registration Statement without
      affording the Holders the opportunity to review and comment on the same as
      required by Section 3(a) hereof, the Company shall not be deemed to have
      satisfied this clause (i)), or (ii) a Registration Statement is not declared
      effective by the Commission on or prior to its required Effectiveness Date,
      or
      if by the Business Day immediately following the Effective Date the Company
      shall not have filed a “final” prospectus for the Registration Statement with
      the Commission under Rule 424(b) in accordance with Section 2(a), 2(b) or 2(c)
      herein, as the case may be (whether or not such a prospectus is technically
      required by such Rule), or (iii) after its Effective Date, without regard for
      the reason thereunder or efforts therefor, such Registration Statement ceases
      for any reason to be effective and available to the Holders as to all
      Registrable Securities to which it is required to cover at any time prior to
      the
      expiration of its Effectiveness Period for more than an aggregate of 30 Trading
      Days (which need not be consecutive) (any such failure or breach being referred
      to as an “Event,”
      and for
      purposes of clauses (i) or (ii) the date on which such Event occurs, or for
      purposes of clause (iii) the date which such 30 Trading Day-period is exceeded,
      being referred to as “Event
      Date”),
      then
      in addition to any other rights the Holders may have hereunder or under
      applicable law: on such Event Date and on each monthly anniversary of each
      such
      Event Date (if the applicable Event shall not have been cured by such date)
      until
      the applicable Event is cured
      the
      Company shall pay to each Holder an amount in cash, as partial liquidated
      damages and not as a penalty, equal to 1.0% of the aggregate Investment Amount
      paid by such Holder for Shares pursuant to the Purchase Agreement. The parties
      agree that the Company will not be liable for liquidated damages under this
      Agreement with respect to any Placement Agent Warrant Shares. In no event will
      the Company be liable for liquidated damages under this Agreement in excess
      of
      1.0% of the aggregate Investment Amount of the Holders in any 30-day period
      and
      the maximum aggregate liquidated damages payable to a Holder under this
      Agreement shall be six percent (6%) of the aggregate Investment Amount paid
      by
      such Holder pursuant to the Purchase Agreement. The partial liquidated damages
      pursuant to the terms hereof shall apply on a daily pro-rata basis for any
      portion of a month prior to the cure of an Event, except in the case of the
      first Event Date. The Company shall not be liable for liquidated damages under
      this Agreement as to any Registrable Securities which are not permitted by
      the
      Commission to be included in a Registration Statement due solely to Commission
      Comments from the time that it is determined that such Registrable Securities
      are not permitted to be registered solely due to Commission Comments until
      such
      time as the provisions of this Agreement as to the next applicable Registration
      Statement required to be filed hereunder are triggered, in which case the
      provisions of this Section 2(d) shall once again apply, if
      applicable.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (e) Each
      Holder agrees to furnish to the Company a completed Questionnaire in the form
      attached to this Agreement as Annex
      B
      (a
“Selling
      Holder Questionnaire”).
      The
      Company shall not be required to include the Registrable Securities of a Holder
      in a Registration Statement and shall not be required to pay any liquidated
      or
      other damages under Section 2(d) to any Holder who fails to furnish to the
      Company a fully completed Selling Holder Questionnaire at least two Trading
      Days
      prior to the Filing Date (subject to the requirements set forth in Section
      3(a)). 

     

    3. Registration
      Procedures.

     

    In
      connection with the Company's registration obligations hereunder, the Company
      shall:

     

    (a) Not
      less
      than four Trading Days prior to the filing of a Registration Statement or any
      related Prospectus or any amendment or supplement thereto, the Company shall
      furnish to each Holder copies of the “Selling Stockholders” section of such
      document, the “Plan of Distribution” and any risk factor contained in such
      document that addresses specifically this transaction or the Selling
      Stockholders, as proposed to be filed which documents will be subject to the
      review of such Holder. The Company shall not file a Registration Statement,
      any
      Prospectus or any amendments or supplements thereto in which the “Selling
      Stockholder” section thereof differs from the disclosure received from a Holder
      in its Selling Holder Questionnaire (as amended or supplemented). The Company
      shall not file a Registration Statement, any Prospectus or any amendments or
      supplements thereto in which it (i) characterizes any Holder as an
      underwriter, (ii) excludes a particular Holder due to such Holder refusing
      to be named as an underwriter, or (iii) reduces the number of Registrable
      Securities being registered on behalf of a Holder except in accordance with
      Article 2 of this Agreement, without such Holder’s express written
      authorization.

     

    (b) (i)
      Prepare and file with the Commission such amendments, including post-effective
      amendments, to each Registration Statement and the Prospectus used in connection
      therewith as may be necessary to keep such Registration Statement continuously
      effective as to the applicable Registrable Securities for its Effectiveness
      Period and prepare and file with the Commission such additional Registration
      Statements in order to register for resale under the Securities Act all of
      the
      Registrable Securities; (ii) cause the related Prospectus to be amended or
      supplemented by any required Prospectus supplement, and as so supplemented
      or
      amended to be filed pursuant to Rule 424; (iii) respond as promptly as
      reasonably possible to any comments received from the Commission with respect
      to
      each Registration Statement or any amendment thereto and, as promptly as
      reasonably possible provide the Holders true and complete copies of all
      correspondence from and to the Commission relating to such Registration
      Statement that would not result in the disclosure to the Holders of material
      and
      non-public information concerning the Company; and (iv) comply in all material
      respects with the provisions of the Securities Act and the Exchange Act with
      respect to the Registration Statements and the disposition of all Registrable
      Securities covered by each Registration Statement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) Notify
      the Holders as promptly as reasonably possible (and, in the case of (i)(A)
      below, not less than three Trading Days prior to such filing and, in the case
      of
      (v) below, not less than three Trading Days prior to the financial statements
      in
      any Registration Statement becoming ineligible for inclusion therein) and (if
      requested by any such Person) confirm such notice in writing no later than
      one
      Trading Day following the day (i)(A) when a Prospectus or any Prospectus
      supplement or post-effective amendment to a Registration Statement is proposed
      to be filed; (B) when the Commission notifies the Company whether there will
      be
      a "review" of such Registration Statement and whenever the Commission comments
      in writing on such Registration Statement (the Company shall provide true and
      complete copies thereof and all written responses thereto to each of the Holders
      that pertain to the Holders as a Selling Stockholder or to the Plan of
      Distribution, but not information which the Company believes would constitute
      material and non-public information); and (C) with respect to each Registration
      Statement or any post-effective amendment, when the same has become effective;
      (ii) of any request by the Commission or any other Federal or state governmental
      authority for amendments or supplements to a Registration Statement or
      Prospectus or for additional information; (iii) of the issuance by the
      Commission of any stop order suspending the effectiveness of a Registration
      Statement covering any or all of the Registrable Securities or the initiation
      of
      any Proceedings for that purpose; (iv) of the receipt by the Company of any
      notification with respect to the suspension of the qualification or exemption
      from qualification of any of the Registrable Securities for sale in any
      jurisdiction, or the initiation or threatening of any Proceeding for such
      purpose; and (v) of the occurrence of any event or passage of time that makes
      the financial statements included in a Registration Statement ineligible for
      inclusion therein or any statement made in such Registration Statement or
      Prospectus or any document incorporated or deemed to be incorporated therein
      by
      reference untrue in any material respect or that requires any revisions to
      such
      Registration Statement, Prospectus or other documents so that, in the case
      of
      such Registration Statement or the Prospectus, as the case may be, it will
      not
      contain any untrue statement of a material fact or omit to state any material
      fact required to be stated therein or necessary to make the statements therein,
      in light of the circumstances under which they were made, not
      misleading.

     

    (d) Use
      its
      reasonable best efforts to avoid the issuance of, or, if issued, obtain the
      withdrawal of (i) any order suspending the effectiveness of a Registration
      Statement, or (ii) any suspension of the qualification (or exemption from
      qualification) of any of the Registrable Securities for sale in any
      jurisdiction, at the earliest practicable moment.

     

    (e) Furnish
      to each Holder, without charge, at least one conformed copy of each Registration
      Statement and each amendment thereto and all exhibits to the extent requested
      by
      such Person (including those previously furnished) promptly after the filing
      of
      such documents with the Commission.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (f) Promptly
      deliver to each Holder, without charge, as many copies of each Prospectus or
      Prospectuses (including each form of prospectus) and each amendment or
      supplement thereto as such Persons may reasonably request. The Company hereby
      consents to the use of such Prospectus and each amendment or supplement thereto
      by each of the selling Holders in connection with the offering and sale of
      the
      Registrable Securities covered by such Prospectus and any amendment or
      supplement thereto.

     

    (g) Prior
      to
      any public offering of Registrable Securities, register or qualify such
      Registrable Securities for offer and sale under the securities or Blue Sky
      laws
      of all jurisdictions within the United States as any Holder may request, to
      keep
      each such registration or qualification (or exemption therefrom) effective
      during the Effectiveness Period and to do any and all other acts or things
      necessary or advisable to enable the disposition in such jurisdictions of the
      Registrable Securities covered by the Registration Statements.

     

    (h) Cooperate
      with the Holders to facilitate the timely preparation and delivery of
      certificates representing Registrable Securities to be delivered to a transferee
      pursuant to the Registration Statements, which certificates shall be free,
      to
      the extent permitted by the Purchase Agreement, of all restrictive legends,
      and
      to enable such Registrable Securities to be in such denominations and registered
      in such names as any such Holders may request.

     

    (i) Upon
      the
      occurrence of any event contemplated by Section 3(c)(v), as promptly as
      reasonably possible, prepare a supplement or amendment, including a
      post-effective amendment, to the affected Registration Statements or a
      supplement to the related Prospectus or any document incorporated or deemed
      to
      be incorporated therein by reference, and file any other required document
      so
      that, as thereafter delivered, no Registration Statement nor any Prospectus
      will
      contain an untrue statement of a material fact or omit to state a material
      fact
      required to be stated therein or necessary to make the statements therein,
      in
      light of the circumstances under which they were made, not
      misleading.

     

    4. Registration
      Expenses.
      All
      fees and expenses incident to the performance of or compliance with this
      Agreement by the Company shall be borne by the Company whether or not any
      Registrable Securities are sold pursuant to a Registration Statement. The fees
      and expenses referred to in the foregoing sentence shall include, without
      limitation, (i) all registration and filing fees (including, without limitation,
      fees and expenses (A) with respect to filings required to be made with any
      Trading Market on which the Common Stock is then listed for trading, and (B)
      in
      compliance with applicable state securities or Blue Sky laws), (ii) printing
      expenses (including, without limitation, expenses of printing certificates
      for
      Registrable Securities and of printing prospectuses if the printing of
      prospectuses is reasonably requested by the holders of a majority of the
      Registrable Securities included in the Registration Statement), (iii) messenger,
      telephone and delivery expenses, (iv) fees and disbursements of counsel for
      the
      Company, (v) Securities Act liability insurance, if the Company so desires
      such
      insurance, and (vi) fees and expenses of all other Persons retained by the
      Company in connection with the consummation of the transactions contemplated
      by
      this Agreement. In addition, the Company shall be responsible for all of its
      internal expenses incurred in connection with the consummation of the
      transactions contemplated by this Agreement (including, without limitation,
      all
      salaries and expenses of its officers and employees performing legal or
      accounting duties), the expense of any annual audit and the fees and expenses
      incurred in connection with the listing of the Registrable Securities on any
      securities exchange as required hereunder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5. Indemnification.

     

    (a) Indemnification
      by the Company.
      The
      Company shall, notwithstanding any termination of this Agreement, indemnify
      and
      hold harmless each Holder, the officers, directors, agents, investment advisors,
      partners, members and employees of each of them, each Person who controls any
      such Holder (within the meaning of Section 15 of the Securities Act or Section
      20 of the Exchange Act) and the officers, directors, agents and employees of
      each such controlling Person, to the fullest extent permitted by applicable
      law,
      from and against any and all losses, claims, damages, liabilities, costs
      (including, without limitation, reasonable costs of preparation and reasonable
      attorneys' fees) and expenses (collectively, "Losses"),
      as
      incurred, arising out of or relating to any untrue or alleged untrue statement
      of a material fact contained in any Registration Statement, any Prospectus
      or
      any form of prospectus or in any amendment or supplement thereto or in any
      preliminary prospectus, or arising out of or relating to any omission or alleged
      omission of a material fact required to be stated therein or necessary to make
      the statements therein (in the case of any Prospectus or form of prospectus
      or
      supplement thereto, in light of the circumstances under which they were made)
      not misleading, except to the extent, but only to the extent, that (1) such
      untrue statements or omissions are based solely upon information regarding
      such
      Holder furnished in writing to the Company by such Holder expressly for use
      therein, or to the extent that such information relates to such Holder or such
      Holder's proposed method of distribution of Registrable Securities and was
      reviewed and expressly approved in writing by such Holder expressly for use
      in
      the Registration Statement, such Prospectus or such form of Prospectus or in
      any
      amendment or supplement thereto (it being understood that the Holder has
      approved Annex A hereto for this purpose) or (2) in the case of an occurrence
      of
      an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder
      of an outdated or defective Prospectus after the Company has notified such
      Holder in writing that the Prospectus is outdated or defective and prior to
      the
      receipt by such Holder of an Advice or an amended or supplemented Prospectus,
      but only if and to the extent that following the receipt of the Advice or the
      amended or supplemented Prospectus the misstatement or omission giving rise
      to
      such Loss would have been corrected. The Company shall notify the Holders
      promptly of the institution, threat or assertion of any Proceeding of which
      the
      Company is aware in connection with the transactions contemplated by this
      Agreement.

     

    (b) Indemnification
      by Holders.
      Each
      Holder shall, severally and not jointly, indemnify and hold harmless the
      Company, its directors, officers, agents and employees, each Person who controls
      the Company (within the meaning of Section 15 of the Securities Act and Section
      20 of the Exchange Act), and the directors, officers, agents or employees of
      such controlling Persons, to the fullest extent permitted by applicable law,
      from and against all Losses, as incurred, arising solely out of or based solely
      upon: (x) such Holder's failure to comply with the prospectus delivery
      requirements of the Securities Act or (y) any untrue statement of a material
      fact contained in any Registration Statement, any Prospectus, or any form of
      prospectus, or in any amendment or supplement thereto, or arising solely out
      of
      or based solely upon any omission of a material fact required to be stated
      therein or necessary to make the statements therein not misleading to the
      extent, but only to the extent that, (1) such untrue statements or omissions
      are
      based solely upon information regarding such Holder furnished in 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    writing
      to the Company by such Holder expressly for use therein, or to the extent that
      such information relates to such Holder or such Holder's proposed method of
      distribution of Registrable Securities and was reviewed and expressly approved
      in writing by such Holder expressly for use in the Registration Statement (it
      being understood that the Holder has approved Annex A hereto for this purpose),
      such Prospectus or such form of Prospectus or in any amendment or supplement
      thereto or (2) in the case of an occurrence of an event of the type specified
      in
      Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
      Prospectus after the Company has notified such Holder in writing that the
      Prospectus is outdated or defective and prior to the receipt by such Holder
      of
      an Advice or an amended or supplemented Prospectus, but only if and to the
      extent that following the receipt of the Advice or the amended or supplemented
      Prospectus the misstatement or omission giving rise to such Loss would have
      been
      corrected. In no event shall the liability of any selling Holder hereunder
      be
      greater in amount than the dollar amount of the net proceeds received by such
      Holder upon the sale of the Registrable Securities giving rise to such
      indemnification obligation.

     

    (c) Conduct
      of Indemnification Proceedings.
      If any
      Proceeding shall be brought or asserted against any Person entitled to indemnity
      hereunder (an "Indemnified
      Party"),
      such
      Indemnified Party shall promptly notify the Person from whom indemnity is sought
      (the "Indemnifying
      Party")
      in
      writing, and the Indemnifying Party shall assume the defense thereof, including
      the employment of counsel reasonably satisfactory to the Indemnified Party
      and
      the payment of all fees and expenses incurred in connection with defense
      thereof; provided, that the failure of any Indemnified Party to give such notice
      shall not relieve the Indemnifying Party of its obligations or liabilities
      pursuant to this Agreement, except (and only) to the extent that it shall be
      finally determined by a court of competent jurisdiction (which determination
      is
      not subject to appeal or further review) that such failure shall have
      proximately and materially adversely prejudiced the Indemnifying
      Party.

     

    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of such Indemnified Party or Parties
      unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
      expenses; (2) the Indemnifying Party shall have failed promptly to assume the
      defense of such Proceeding and to employ counsel reasonably satisfactory to
      such
      Indemnified Party in any such Proceeding; or (3) the named parties to any such
      Proceeding (including any impleaded parties) include both such Indemnified
      Party
      and the Indemnifying Party, and such Indemnified Party shall have been advised
      by counsel that a conflict of interest is likely to exist if the same counsel
      were to represent such Indemnified Party and the Indemnifying Party (in which
      case, if such Indemnified Party notifies the Indemnifying Party in writing
      that
      it elects to employ separate counsel at the expense of the Indemnifying Party,
      the Indemnifying Party shall not have the right to assume the defense thereof
      and such counsel shall be at the expense of the Indemnifying Party). The
      Indemnifying Party shall not be liable for any settlement of any such Proceeding
      effected without its written consent, which consent shall not be unreasonably
      withheld. No Indemnifying Party shall, without the prior written consent of
      the
      Indemnified Party, effect any settlement of any pending Proceeding in respect
      of
      which any Indemnified Party is a party, unless such settlement includes an
      unconditional release of such Indemnified Party from all liability on claims
      that are the subject matter of such Proceeding.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    All
      fees
      and expenses of the Indemnified Party (including reasonable fees and expenses
      to
      the extent incurred in connection with investigating or preparing to defend
      such
      Proceeding in a manner not inconsistent with this Section) shall be paid to
      the
      Indemnified Party, as incurred, within ten Trading Days of written notice
      thereof to the Indemnifying Party (regardless of whether it is ultimately
      determined that an Indemnified Party is not entitled to indemnification
      hereunder; provided, that the Indemnifying Party may require such Indemnified
      Party to undertake to reimburse all such fees and expenses to the extent it
      is
      finally judicially determined that such Indemnified Party is not entitled to
      indemnification hereunder).

     

    (d) Contribution.
      If a
      claim for indemnification under Section 5(a) or 5(b) is unavailable to an
      Indemnified Party (by reason of public policy or otherwise), then each
      Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
      contribute to the amount paid or payable by such Indemnified Party as a result
      of such Losses, in such proportion as is appropriate to reflect the relative
      fault of the Indemnifying Party and Indemnified Party in connection with the
      actions, statements or omissions that resulted in such Losses as well as any
      other relevant equitable considerations. The relative fault of such Indemnifying
      Party and Indemnified Party shall be determined by reference to, among other
      things, whether any action in question, including any untrue or alleged untrue
      statement of a material fact or omission or alleged omission of a material
      fact,
      has been taken or made by, or relates to information supplied by, such
      Indemnifying Party or Indemnified Party, and the parties' relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      action, statement or omission. The amount paid or payable by a party as a result
      of any Losses shall be deemed to include, subject to the limitations set forth
      in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
      incurred by such party in connection with any Proceeding to the extent such
      party would have been indemnified for such fees or expenses if the
      indemnification provided for in this Section was available to such party in
      accordance with its terms.

     

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 5(d) were determined by pro rata allocation or by
      any
      other method of allocation that does not take into account the equitable
      considerations referred to in the immediately preceding paragraph.
      Notwithstanding the provisions of this Section 5(d), no Holder shall be required
      to contribute, in the aggregate, any amount in excess of the amount by which
      the
      proceeds actually received by such Holder from the sale of the Registrable
      Securities subject to the Proceeding exceeds the amount of any damages that
      such
      Holder has otherwise been required to pay by reason of such untrue or alleged
      untrue statement or omission or alleged omission.

     

    The
      indemnity and contribution agreements contained in this Section are in addition
      to any liability that the Indemnifying Parties may have to the Indemnified
      Parties.

     

    6. Miscellaneous.

     

    (a) Remedies.
      In the
      event of a breach by the Company or by a Holder, of any of their obligations
      under this Agreement, each Holder or the Company, as the case may be, in
      addition to being entitled to exercise all rights granted by law and under
      this
      Agreement, including recovery of damages, will be entitled to specific
      performance of its rights under this Agreement. The Company and each Holder
      agree that monetary damages would not provide adequate compensation for any
      losses incurred by reason of a breach by it of any of the provisions of this
      Agreement and hereby further agrees that, in the event of any action for
      specific performance in respect of such breach, it shall, to the fullest extent
      permitted by law, waive the defense that a remedy at law would be
      adequate.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) No
      Piggyback on Registrations.
      Except
      as and to the extent specified in Schedule
      3.1(v)
      to the
      Purchase Agreement, neither the Company nor any of its security holders (other
      than the Holders in such capacity pursuant hereto) may include securities of
      the
      Company in a Registration Statement other than the Registrable Securities,
      and
      the Company shall not during the Effectiveness Period enter into any agreement
      providing any such right to any of its security holders.

     

    (c) Compliance.
      Each
      Holder covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it in connection with sales
      of Registrable Securities pursuant to the Registration Statement.

     

    (d) Discontinued
      Disposition.
      Each
      Holder agrees by its acquisition of such Registrable Securities that, upon
      receipt of a notice from the Company of the occurrence of any event of the
      kind
      described in Section 3(c), such Holder will forthwith discontinue disposition
      of
      such Registrable Securities under the Registration Statement until such Holder's
      receipt of the copies of the supplemented Prospectus and/or amended Registration
      Statement or until it is advised in writing (the "Advice")
      by the
      Company that the use of the applicable Prospectus may be resumed, and, in either
      case, has received copies of any additional or supplemental filings that are
      incorporated or deemed to be incorporated by reference in such Prospectus or
      Registration Statement. The Company may provide appropriate stop orders to
      enforce the provisions of this paragraph.

     

    (e) Piggy-Back
      Registrations.
      If at
      any time during the Effectiveness Period there is not an effective Registration
      Statement covering all of the Registrable Securities and the Company shall
      determine to prepare and file with the Commission a registration statement
      relating to an offering for its own account or the account of others under
      the
      Securities Act of any of its equity securities, other than on Form S-4 or Form
      S-8 (each as promulgated under the Securities Act) or their then equivalents
      relating to equity securities to be issued solely in connection with any
      acquisition of any entity or business or equity securities issuable in
      connection with stock option or other employee benefit plans, then the Company
      shall send to each Holder written notice of such determination and, if within
      fifteen calendar days after receipt of such notice, any such Holder shall so
      request in writing, the Company shall include in such registration statement
      all
      or any part of such Registrable Securities such holder requests to be
      registered, subject to customary underwriter cutbacks applicable to all holders
      of registration rights.

     

    (f) Amendments
      and Waivers.
      The
      provisions of this Agreement, including the provisions of this Section 6(f),
      may
      not be amended, modified or supplemented, and waivers or consents to departures
      from the provisions hereof may not be given, unless the same shall be in writing
      and signed by the Company and the Holders of no less than a majority in interest
      of the then outstanding Registrable Securities. Notwithstanding the foregoing,
      a
      waiver or consent to depart from the provisions hereof with respect to a matter
      that relates exclusively to the rights of certain Holders and that does not
      directly or indirectly affect the rights of other Holders may be given by
      Holders of at least a majority of the Registrable Securities to which such
      waiver or consent relates; provided,
      further
      that no amendment or waiver to any provision of this Agreement relating to
      naming any Holder or requiring the naming of any Holder as an underwriter may
      be
      effected in any manner without such Holder’s prior written consent. Section 2(a)
      may not be amended or waived except by written consent of each Holder affected
      by such amendment or waiver.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (g) Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile (provided the sender receives a machine-generated
      confirmation of successful transmission) at the facsimile number specified
      in
      this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b)
      the
      next Trading Day after the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile number specified in this Section
      on
      a day that is not a Trading Day or later than 6:30 p.m. (New York City time)
      on
      any Trading Day, (c) the Trading Day following the date of mailing, if sent
      by
      U.S. nationally recognized overnight courier service, or (d) upon actual receipt
      by the party to whom such notice is required to be given. The address for such
      notices and communications shall be as follows:

     

    If
      to the
      Company:  China
      Agritech, Inc.

    A#
      Room
      0706-0707, The Spaces International Center

    No.
      8,
      Dongdaqiao Road 

    Chaoyang
      District, Beijing 100020 

    People's
      Republic of China

    Facsimile:
      [ ]

    Attention:
      President

    

    With
      a
      copy to:       Thelen
      Reid Brown Raysman & Steiner LLP

    701
      8th
      Street
      NW

    Washington,
      D.C. 20001

    Facsimile:
      (202) 508-4321

    Attn.:
      Joseph R. Tiano, Jr., Esq. 

     

    If
      to a
      Investor:        To
      the
      address set forth under such Investor's name on the signature pages
      hereto.

     

    If
      to any
      other Person who is then the registered Holder:

     

    To
      the
      address of such Holder as it appears in the stock transfer books of the
      Company

     

    or
      such
      other address as may be designated in writing hereafter, in the same manner,
      by
      such Person.

     

    (h) Successors
      and Assigns.
      This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      permitted assigns of each of the parties and shall inure to the benefit of
      each
      Holder. The Company may not assign its rights or obligations hereunder without
      the prior written consent of each Holder. Each Holder may assign their
      respective rights hereunder in the manner and to the Persons as permitted under
      the Purchase Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (i) Execution
      and Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

     

    (j) Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each party agrees that all Proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement (whether brought against a party hereto or its
      respective Affiliates, employees or agents) will be commenced in the New York
      Courts. Each party hereto hereby irrevocably submits to the exclusive
      jurisdiction of the New York Courts for the adjudication of any dispute
      hereunder or in connection herewith or with any transaction contemplated hereby
      or discussed herein, and hereby irrevocably waives, and agrees not to assert
      in
      any Proceeding, any claim that it is not personally subject to the jurisdiction
      of any New York Court, or that such Proceeding has been commenced in an improper
      or inconvenient forum. Each party hereto hereby irrevocably waives personal
      service of process and consents to process being served in any such Proceeding
      by mailing a copy thereof via registered or certified mail or overnight delivery
      (with evidence of delivery) to such party at the address in effect for notices
      to it under this Agreement and agrees that such service shall constitute good
      and sufficient service of process and notice thereof. Nothing contained herein
      shall be deemed to limit in any way any right to serve process in any manner
      permitted by law. Each party hereto hereby irrevocably waives, to the fullest
      extent permitted by applicable law, any and all right to trial by jury in any
      Proceeding arising out of or relating to this Agreement or the transactions
      contemplated hereby. If either party shall commence a Proceeding to enforce
      any
      provisions of this Agreement, then the prevailing party in such Proceeding
      shall
      be reimbursed by the other party for its attorney’s fees and other costs and
      expenses incurred with the investigation, preparation and prosecution of such
      Proceeding.

     

    (k) Cumulative
      Remedies.
      The
      remedies provided herein are cumulative and not exclusive of any remedies
      provided by law.

     

    (l) Severability.
      If any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their reasonable efforts to
      find and employ an alternative means to achieve the same or substantially the
      same result as that contemplated by such term, provision, covenant or
      restriction. It is hereby stipulated and declared to be the intention of the
      parties that they would have executed the remaining terms, provisions, covenants
      and restrictions without including any of such that may be hereafter declared
      invalid, illegal, void or unenforceable.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (m) Headings.
      The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    (n) Independent
      Nature of Investors' Obligations and Rights.
      The
      obligations of each Investor under this Agreement are several and not joint
      with
      the obligations of each other Investor, and no Investor shall be responsible
      in
      any way for the performance of the obligations of any other Investor under
      this
      Agreement. Nothing contained herein or in any Transaction Document, and no
      action taken by any Investor pursuant thereto, shall be deemed to constitute
      the
      Investors as a partnership, an association, a joint venture or any other kind
      of
      entity, or create a presumption that the Investors are in any way acting in
      concert or as a group with respect to such obligations or the transactions
      contemplated by this Agreement or any other Transaction Document. Each Investor
      acknowledges that no other Investor will be acting as agent of such Investor
      in
      enforcing its rights under this Agreement. Each Investor shall be entitled
      to
      independently protect and enforce its rights, including without limitation
      the
      rights arising out of this Agreement, and it shall not be necessary for any
      other Investor to be joined as an additional party in any Proceeding for such
      purpose. The Company acknowledges that each of the Investors has been provided
      with the same Registration Rights Agreement for the purpose of closing a
      transaction with multiple Investors and not because it was required or requested
      to do so by any Investor.

     

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    SIGNATURE
      PAGES TO FOLLOW]

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    CHINA
      AGRITECH, INC.

     

     

    By:______________________________

    Name:
      Yu
      Chang

    Title:
      Chief Executive Officer

     

     

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES OF INVESTORS TO FOLLOW]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    

    NAME
      OF INVESTING ENTITY

     

    __________________________________

     

    By:
      ____________________________________

    Name:
      

    Title:

     

    ADDRESS
      FOR NOTICE

     

    c/o:
      ____________________________________

     

    Street:
      __________________________________

     

    City/State/Zip:
      ____________________________

     

    Attention:
      _______________________________

     

    Tel:
      ____________________________________

     

    Fax:
      ____________________________________

     

    Email:
      ___________________________________

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